Barreto Steps Down as Head of SBA To Become Chair of Latino Coalition

WASHINGTON – In an unexpected move, Hector Barreto announced April 25 that he will resign as administrator of the Small Business Administration after nearly five years at the helm. Barreto said he is leaving the agency to become the national chairman of The Latino Coalition, a nonprofit organization formed to address policy issues that affect Hispanics. In his letter of resignation to President Bush, Barreto said “It has been a unique honor to serve as Administrator of the U.S. Small Business Administration and to help execute your vision to bring unprecedented opportunities to all entrepreneurs in every community as they seek to realize their dreams. I am proud that the agency has delivered strong results and achieved historic milestones on behalf of a vital component of our great economy, America’s small businesses.” Barreto has agreed to remain in his post during a transition period, the agency said. He has led SBA since July 2001. During his tenure, the agency said the number of loans made through the main SBA business loan programs have doubled. Through SBA’s disaster assistance program, more than $8.4 billion in low-interest disaster loans have been made to businesses and homeowners in the disaster area, more than double the next largest disaster response in the SBA’s history. On Feb. 14, 2003, SBA expanded its 7(a) loan guarantee program to all credit unions to allow greater access to capital for small businesses. At the time, the agency estimated that as many as 1,500 of the country’s credit unions were likely to join SBA’s network of lenders. Today, more than 250 credit unions have become lenders. Responses from all across credit union land have been pouring in on Barreto’s resignation. CUNA, which lobbied for more than a year to allow credit unions to join SBA’s lending network, said Barreto provided “consistent support” during his tenure. “He has recognized that credit unions can and do provide an affordable source of capital for the nation’s small business entrepreneurs,” CUNA said. “Under Mr. Barreto’s leadership, the SBA broadened eligibility for its flagship 7(a) loan guarantee program to include credit unions of all charter types, a move that has been beneficial not only for America’s credit unions and their 87 million members, but for the nation’s economy as a whole.” CUNA urged the Bush administration to “appoint a new SBA Administrator who shares Mr. Barreto’s understanding of credit unions.” At press time and shortly after Barreto’s resignation announcement, Bush had already nominated Steven Preston, executive vice president of strategic services at Downers Grove, Ill.-based The ServiceMaster Co. to take over the helm. The firm provides lawn care and landscape maintenance, termite and pest control, plumbing, heating and air conditioning maintenance and repair, appliance maintenance and repair to homes and businesses. NCUA Chairman JoAnn Johnson highlighted how its partnership with SBA has benefited credit unions under Barreto. “Under Administrator Barreto’s leadership, America’s credit unions gained access to the 7(a) loan guarantee program and helped assist victims of Hurricanes Katrina, Rita, and Wilma through the `Give a Lending Hand’ initiative,” Johnson said. “These programs empowered credit unions to harness America’s entrepreneurial spirit while helping many small businesses achieve their American Dream.” Johnson also pointed out SBA’s role in one of NCUA’s priorities of regulatory flexibility for member business lending. “I wish all the best in the future for Administrator Barreto and look forward to continuing a positive working relationship with his successor,” Johnson said. NAFCU President/CEO Fred Becker recalled Barreto’s numerous appearances at credit union meetings including at its annual conference last year. “Mr. Barreto was a tireless advocate for America’s small businesses and in seeking ways that credit unions could reach out to help more minorities and women to start their own businesses,” Becker said. In a 2005 story with Credit Union Times, Barreto said credit unions are the facilitators of the “oxygen” or capital for small businesses to start and expand. He continued to back the 7(a) zero subsidy saying it would prevent a shutdown of the program, which occurred for a few days in January 2004, after it ran out of funding to guarantee loans. According to several published reports, including the Los Angeles Times, there are rumblings that Barreto stepped down as the agency faced criticism on how it handled loan processing after last year’s hurricanes. Barreto told the Los Angeles Times his resignation was unrelated to that and he was not asked to leave. “This is something that I have been thinking about for some time now,” Barreto told the publication. “This was just the perfect time, now that we’re almost done with the disaster response.” SBA also made what some critics say was a controversial move when the agency’s 7(a) program moved to a zero subsidy, which means it operates on fees collected from borrowers and lenders rather than relying on any congressional funding. CUNA, NAFCU and other industry trade groups had continually urged Bush to return funding back to Congress concerned that further fee increases would force credit unions and other lenders to leave the program. As recently as March, Grace Mayo, CUNA Business/SEG Services Task Force chairperson and president/CEO of Telesis Community Credit Union, testified on behalf of CUNA that credit unions were growing concerned about SBA’s latest fee increase. On Barreto’s resignation, she said the news is sad but she wishes him well. “He’s been very supportive,” He’s got an awful lot of talent and clearly the (Latino Coalition) recognized that,” Mayo said. Should Preston, the SBA administrator nominee, take the helm, Mayo said it will be important for the industry to not only get to know him but educate him on the credit union model. House Small Business Committee Chairman Don Manzullo (R-Ill.), a staunch SBA supporter, has also opposed any further fee increases. Manzullo credits Barreto for “doing more with less” during his tenure. “Under Hector’s leadership, the SBA streamlined many functions and learned to do more with less while facing unparalleled challenges to the SBA’s disaster loan program from the 9/11 terrorist attacks and Hurricanes Katrina, Rita and Wilma,” Manzullo said. Manzullo also supported the 7(a) program’s zero subsidy saying it saved taxpayers nearly $100 million annually. Rep. Nydia Velazquez (D-N.Y.), the top Democrat on the House panel that oversees the SBA, criticized the zero subsidy and last December, called for Barreto’s resignation, accusing him of mismanaging the agency. Several publications reported her saying “unfortunately he was simply not up to the challenges of running this agency. Sen. Olympia Snowe (R-ME), who is also chairperson of the Senate Committee on Small Business and Entrepreneurship, said she looks forward “to working with Hector’s successor, who I hope will be someone who has a deep commitment to the success of small businesses and understands the vital role the SBA plays in that success.” Meanwhile, Barreto said he is proud of the changes that have taken place at SBA during his tenure. “Accountability, greater efficiencies and results-oriented management are now part of the SBA culture,” Barreto said. “I am confident that the foundation has been established for even better results in the future to the benefit of our small business clients as well as the U.S. taxpayer.” -