small busi admin SBA

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Linda McMahon served as the 25th Administrator of the U.S. Small Business Administration (SBA

Mar 29, 2019 — Linda McMahon is stepping down as head of Small Business Administration* to chair the pro-Trump super PAC America First Action.

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FUCKERY MEASUREMENT

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AN 10 26

I've got to hand it to Washington's Republican policymakers. They've come up with a truly remarkable way that, they promise, will vastly expand the number of small businesses in America. Great!

This is personal for me, for I grew up in a family that had a Main Street business in small-town Texas, so I know how hard it is for little guys to battle the raw monopoly power of corporate chains. Thus, I cheered the GOP ... until I learned that their small business proposal is just another big business scam.

Far from actually increasing the number of small enterprises, Trump bureaucrats are merely redefining "small" to include BIG. For example, the Small Business Administration has long categorized a business as small if it had less than $25 million in yearly sales. But they've now jacked that definition up by 1,000%! Indeed, even some billion-dollar giants can now -- HOCUS POCUS -- qualify as small.

This is much worse than a statistical ruse, for it means that very large outfits with Wall Street backing, Washington lobbyists and slick corporate lawyers will suddenly take the grants, contracts and other government benefits intended to advance genuine Main Street innovators and competitors. In short, the GOP's cynical scheme is using the small business label to overpower those very enterprises. It's a deliberate rigging of the rules by today's right-wing government officials to help big business grab public money -- increasing the power of corporate elites to eliminate competitors... and further monopolize our economy.

Remember this deceit when Republican congress critters run corporate-financed election ads this fall claiming to "looove" small business. Yeah ... love it to death.

TWO-LEGGED HOGS TRYING TO RULE AG POLICY

Warning: This is a sob story that might bring you to tears. Or make you upchuck in disgust.

It's about hogs -- both the four-legged species and the more piggish, two-legged breed of agribusiness executives. The latter have long profited from cruel abuse of millions of hogs caged in their monopolistic system and now the agbiz giants have launched a lobbying campaign called SOB -- "Save Our Bacon." It's not a plea to save the abused animals, but to save the abusers' profits!

It turns out that most consumers don't like animal abuse, so states are passing laws to prevent such corporate practices. This has led to a vibrant new market for humanely raised pork, already gaining more than a fourth of national pork sales.

"Ouch," squealed the factory farm giants, feeling the pinch of real competition. Rather than clean up their methods, though, the monopolists have raced to Washington, demanding that Congress "save their bacon" by artificially and autocratically rigging the market. Their Save Our Bacon act would usurp states' rights to set their own standards for animal welfare.

This is not an "academic free market issue." In recent state ballot initiatives, voters have overwhelmingly endorsed ethical standards for animal agriculture. Moreover, responsible family-farm producers have quickly responded to this growing new market, upgrading their facilities to meet the new state standards of humane production.

Yet, rather than embracing this success for animals, farmers and consumers -- here come tiny cliques of corporate profiteers like the National Pork Producers Council. They're wielding their Big Money lobbying muscle, trying to overrule the public interest ... and the political will of America's majority.

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Everybody Hates the SBA - The American Prospect

...Over the next 20 years, the SBA limped along, brutally underendowed, a frequent target for elimination by Congress, showing up in the public consciousness only as a scandal generator. As part of George W. Bush’s contemptible Hurricane Katrina response effort, the administration deputized the SBA’s Office of Disaster Assistance to disgorge more than $6 billion in loans to Gulf Coast disaster victims. Investigations later found that more than half of the loans were issued with shoddy paperwork, hundreds of millions of dollars went missing, and a significant percentage of borrowers fell into default without making a single payment. An alleged botched cover-up, according to journalist Keith Girard, “was a cynical, contrived campaign to clear a backlog of Katrina loans from the SBA books—at any cost—simply to help the Bush administration save political face.”

For the beleaguered agency, scandals became commonplace. In 2008, Congress created three new disaster relief programs, designed to get needy businesses funds within 36 hours. The SBA only piloted one of the programs, and it issued zero loans in seven years. A 2008 inspector general report found a quarter of SBA loans involved improper payments; a 2010 audit by the Government Accountability Office found 61 of the top 100 small-business contractors were in reality large businesses. In 2018, a review of the preceding decade found a glut of objectionable lending: funding to 74 yacht clubs, plastic-surgery clinics, $280 million to private country clubs, $12.2 billion to highly capitalized venture capital firms, and more.

Perhaps most important, the agency had done little to inconvenience a rapid, accelerating, and uninterrupted consolidation of the American economy. Born as an anti-monopoly tool, the SBA became as ineffective as the rest of the federal government to prevent the Second Gilded Age.

Despite that battery of indictments, despite enduring dysfunction, despite being so overlooked that President Trump initially appointed the first lady of professional wrestling Linda McMahon as its head, the SBA, up through this March, still offered an essential service. The vestiges of its mission can be seen in the professional development it gives to minority entrepreneurs, in the way it helps to a limited degree mitigate some of the obvious racial biases in the banking world. “It’s a relatively tiny sliver of the whole, but it’s critically important,” said Mitchell, of the Institute for Local Self-Reliance. “SBA loans have heavily gone to small businesses, women-owned businesses, people of color, people who don’t quite meet the underwriting criteria but are close. Bottom line, this is an agency that does important stuff but doesn’t function as well as it should.”

And then, the coronavirus hit.

IN 2019, THE SBA GUARANTEEDabout $30 billion in loans, not even 5 percent of all small-business lending from banks and credit unions. In the $2.2 trillion CARES Act pandemic response package passed on March 27, it was suddenly tapped to disburse $349 billion in emergency Paycheck Protection Program funding, more than 11 times its annual loan book, in a matter of days. “It was good policy to tie this notion of a forgivable loan to you holding on to your employees, that was a good feature,” Sarah Bloom Raskin, former Treasury official and Fed governor, told the Prospect. “But the SBA’s website is notoriously the most crashable website out there. Even pre-pandemic, businesses could barely rely on that website.”

The leader of this uncertain project would be Jovita Carranza, approved by the Senate in January 2020, just weeks before the crisis unfolded. Carranza had served as an adviser to Treasury Secretary Steve Mnuchin on the Opportunity Zones program in the Trump tax cuts, which within months had been revealed as a shallow and often openly corrupt ploy to help investors skirt the capital gains tax. At least she had experience at the agency, serving as the SBA’s deputy administrator from 2006 to 2009.

Carranza’s initial few weeks in office followed the time-honored tradition of Republicans in government advocating for the demise of the very agencies they direct. Her first proposed budget sported an 18 percent cut overall and a 36 percent cut to entrepreneurial development, despite the fact that the SBA, for all its limitations, essentially costs taxpayers nothing. This attempted hit on the budget came while coronavirus clusters raged in Washington and New York state.

By the time shutdown orders crested in April, at least 43 percent of businesses had temporarily closed, and employee counts fell to 40 percent of the level in January. Small business, which accounts for an estimated 44 percent of gross domestic product, was facing an extinction-level event, and would need a herculean intervention to have any shot at salvation.

It wasn’t a foregone conclusion that the SBA would head up this program. For many, it made more sense to have the Treasury, which is better staffed, more capable, and already in possession of the relevant documentation through the IRS, do such a task. But Congress tapped the SBA, an agency with just 4,000 employees. If there’s any bureaucratic muscle left in the atrophied Trump administration, the SBA isn’t it.

PPP loans, furnished as an expansion of the administration’s usual 7(a) lending program, would offer either $10 million or 2.5 times a small business’s average monthly payroll, whichever was less, at an interest rate of 0.5 percent (a rate that doubled after banks groused). The loan would be forgiven entirely so long as at least 75 percent of it was spent on payroll, and all employees were retained, or rehired. There was also a separate program for Economic Injury Disaster Loans, with an advance of up to $10,000, also forgivable.

Even in a normal year, the SBA is in no position to handle its own 7(a) lending. So it followed its familiar model: contracting lending out to private banks and financial firms (including upstart financial-technology companies, which earned new validation as vital lenders despite sitting outside the regulatory perimeter). The agency didn’t release guidelines for the program until the night before it was supposed to begin. Some banks were so flummoxed by the vagaries of the rules that they didn’t open lending for days, a real problem for business owners reliant on their long-standing banks, since the program was first come, first served. When the money ran out, the loans closed.

The PPP loan application opened on April 3, and the mad dash began, although it was more maddening for some than others. The SBA’s “E-Tran” system, which took in the loan applications for authorization, crashed repeatedly. The chair of the Independent Community Bankers of America claimed on April 7 that one-third of community banks were locked out of the system.

By April 16, less than two full weeks after the PPP’s kickoff, it was already out of money. In some sense, against all odds, that was a huge success. The SBA was tasked primarily with getting money out as fast as possible. Despite widespread confusion, and given its limitations, two weeks wasn’t bad. The paucity of funding, which pitted businesses against one another, wasn’t the SBA’s fault. “I think the program was relatively successful,” said Shaoul Sussman, legal fellow at the Institute for Local Self-Reliance and litigation clerk at Pearl Cohen.

But as recent history has shown, an inadequate bailout, in a moment of acute crisis, presided over by private financial entities with their own set of aims, breeds certain outrage. And even though money got out the door, the initial returns on where that money went were less rosy.

Due to shutdown orders, small business, which accounts for an estimated 44 percent of gross domestic product, was facing an extinction-level event.

The first scandal wave came from the restaurant industry. That should have come as no surprise, given the SBA’s unique subservience to fast food. But in many cases, it wasn’t franchisees, but the corporate headquarters directly, that reaped the benefits. Ruth’s Chris Steak House, applying as two separate legal entities, secured $20 million in loans, circumventing the $10 million cap. Shake Shack, which trades publicly on the New York Stock Exchange with a multibillion-dollar market cap, secured $10 million, and Potbelly sandwiches and Taco Cabana maxed out as well. None has fewer than 500 employees.

This was no accident, but a direct function of program design. Tucked deep in the 900-page bailout was a clause specifying that, while applicants were limited to businesses with fewer than 500 employees, large restaurant chains needed just fewer than 500 employees “per physical location” to be eligible. This enabled AutoNation, a Fortune 500 giant with $21 billion in revenues, to grab at least $77 million through 81 separate dealership locations.

As The New York Times reported, that loophole was lobbied for by the National Restaurant Association and the same International Franchise Association that captured the SBA in the 1960s. Sen. Marco Rubio, head of the Small Business Committee, with help from Chuck Schumer, ferried it through. AutoNation, Shake Shack, Potbelly, Taco Cabana, and Ruth’s Chris were all later shamed into returning the loans.

In addition to franchises, over 200 publicly traded companies received PPP loans, despite having access to the capital markets for short-term assistance. This includes the two-decade-old tech veteran RealNetworks, traded on the NASDAQ. Another surprising PPP recipient was the Los Angeles Lakers, whose top employee LeBron James has a net worth of about $480 million, about 104 times the $4.6 million loan they received. (The Lakers, too, gave back the money.)

The second wave of scandal came from the banks. Congressional statute held banks com_{pletely harm}_less for any fraudulent activity within the loan applications. All they had to do was comply with anti–money laundering rules by confirming the borrowers were living, breathing human beings. For this, banks garnered outsized fees for processing the applications, as fixed percentages of the loan amounts. Though the percentages dropped from 5 percent for smaller loans to 1 percent for the largest, it still made bigger loans more lucrative, far outstripping the meager cost of processing.

Lenders did not need to wait for SBA confirmation of any sort, empowering them to do whatever they wanted. Large banks—JPMorgan Chase, Bank of America, and Wells Fargo, among others—predictably favored their own customers, because they could use their existing anti–money laundering compliance to cover those loans. They also, according to data and allegations in federal lawsuits, prioritized bigger loans to high-end clients, not only reaping bigger loan fees, but helping customers more likely to purchase other products.

More than 300,000 customers of JPMorgan’s business banking unit, which serves smaller firms, applied for loans; just 6 percent were approved. By comparison, some 5,500 high-dollar customers of the commercial banking business applied for funding, and nearly all of them got loans, according to the bank’s own data. The New York Timesreferred to that as “concierge service.” Within days, Wells Fargo, Bank of America, JPMorgan Chase, and US Bank were sued over alleged loan shuffling to prioritize high-dollar applications.

Despite this high-profile nefariousness, small banks seemed to navigate the program much better than their larger counterparts. An Institute for Local Self-Reliance study found that “three times as many PPP loans were made per capita in the ten states with the most community banks … compared to the ten states with the fewest.” Smaller banks, invested in the communities in which they lend, just worked harder to make the program succeed. Of course, those loans wound up being quite a bit smaller. Nearly 45 percent of the money in the first round of PPP went to just 4 percent of the firms that received loans.

In a cruel twist of fate, the PPP’s structure has resulted in the SBA presiding over a massive racial wealth transfer away from minority small-business owners. According to the Center for Responsible Lending, a galling 90 percent of women and minority business owners were shut out of the first round of the program, including 95 percent of black-owned businesses, 91 percent of Latino-owned businesses, and 91 percent of Native Hawaiian or Pacific Islander–owned businesses.

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At a Capitol Hill press conference Thursday, Kelly Loeffler, director of the Small Business Administration, laid out President Donald Trump’s carrot-and-stick strategy for returning manufacturing to the United States.

Loeffler joined Sen. Joni Ernst, R-Iowa, and Rep. Roger Williams, R-Texas, to promote the Made in America Act, which would increase to $10 million the limit on two different SBA loan programs to small manufacturers. Their limits are currently $5 million and $5.5 million.

Loeffler, a former senator from Georgia, presented a vision of an economy boosted by protecting American manufacturers with tariffs and removing burdensome regulations on them....

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Small Business Administration - Wikipedia

5 25

The United States Small Business Administration (SBA) is an independent agency of the United States government that provides support to entrepreneurs and small businesses. The mission of the Small Business Administration is "to maintain and strengthen the nation's economy by enabling the establishment and viability of small businesses and by assisting in the economic recovery of communities after disasters." The agency's activities have been summarized as the "3 Cs" of capital, contracts and counseling.^[3]

SBA loans are made through banks, credit unions and other lenders who partner with the SBA. The SBA provides a government-backed guarantee on part of the loan. Under the Recovery Act and the Small Business Jobs Act, SBA loans were enhanced to provide up to a 90 percent guarantee in order to strengthen access to capital for small businesses after credit froze in 2008. The agency had record lending volumes in late 2010.^[4]

SBA helps lead the federal government's efforts to deliver 23 percent of prime federal contracts to small businesses. Small business contracting programs include efforts to ensure that certain federal contracts reach woman-owned and service-disabled veteran-owned small businesses as well as businesses participating in programs such as the 8(a) Business Development Program and HUBZone.^[5] In March 2018 the SBA launched the SBA Franchise Directory, aiming to connect entrepreneurs to lines of credit and capital in order to grow their businesses.^[6]

SBA has at least one office in each U.S. state. In addition, the agency provides grants to support counseling partners, including approximately 900 Small Business Development Centers (often located at colleges and universities), 110 Women's Business Centers, and SCORE, a volunteer mentor corps of retired and experienced business leaders with approximately 350 chapters. These counseling services provide services to over 1 million entrepreneurs and small business owners annually. President Obama announced in January 2012 that he would elevate the SBA into the Cabinet, a position it last held during the Clinton administration,^[7] thus making the administrator of the Small Business Administration a cabinet-level position.

History

The SBA was created on July 30, 1953, by Republican President Eisenhower with the signing of the Small Business Act, currently codified at 15 U.S.C. ch. 14A. The Small Business Act was originally enacted as the "Small Business Act of 1953" in Title II (67 Stat. 232) of Pub. L. 83–163 (ch. 282, 67 Stat. 230, July 30, 1953); The "Reconstruction Finance Corporation Liquidation Act" was Title I, which abolished the Reconstruction Finance Corporation (RFC). The Small Business Act Amendments of 1958 (Pub. L. 85–536, 72 Stat. 384, enacted July 18, 1958) withdrew Title II as part of that act and made it a separate act to be known as the "Small Business Act". Its function was and is to "aid, counsel, assist and protect, insofar as is possible, the interests of small business concerns".

The SBA has survived a number of threats to its existence. In 1996, the Republican-controlled House of Representatives planned to eliminate the agency.^[8] It survived and went on to receive a record high budget in 2000.^[9] Renewed efforts by the Bush Administration to end the SBA loan program met congressional resistance, although the SBA's budget was repeatedly cut, and in 2004 certain expenditures were frozen. The Obama administration supported SBA budgets and strengthened it through The American Recovery and Reinvestment Act of 2009. SBA budgets were further strengthened by the Small Business Jobs Act of 2010, and in 2011, President Obama announced that the SBA would double its support of rural small businesses to $350 million in the next 5 years.

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Criticism

The Cato Institute has challenged the justification of the federal government in intervening in credit markets.^[38][39] Among other criticisms, Cato argues that "the SBA benefits a relatively tiny number of small businesses at the expense of the vast majority of small business that do not receive government assistance. SBA subsidies also represent a form of corporate welfare for the banking industry." Cato notes that the failure rate of all SBA loans from 2001 to 2010 is 19.4%,^[38] contributing to a cost to taxpayers of $6.2 billion in 2011.^[40]

In 2005, SBA Inspector General Report 5-15 stated, "One of the most important challenges facing the Small Business Administration and the entire Federal government today is that large businesses are receiving small business procurement awards and agencies are receiving credit for these awards."^[41]

In October 2009, the Government Accountability Office released Report 10-108 which stated, "By failing to hold firms accountable, SBA and contracting agencies have sent a message to the contracting community that there is no punishment or consequences for committing fraud."^[42]

Between 2009 and 2011, 7a Program guaranteed loans to Black-owned businesses declined by 47%.^[43] Black loans are 3% of 7a loans for fiscal years 2014-2019. The SBA report to Congress has minority loans at 23%.

On April 17, 2020, the SBA approved $20 million in forgivable loans to Ruth's Hospitality Group, a publicly traded company, as part of the Paycheck Protection Program.^[44] While accommodation and franchise businesses were allowed by legislation to participate in the Paycheck Protection Program per its qualification requirements, the loan made to Ruth's Hospitality Group represents a departure from the SBA's mission to serve small businesses.

On May 21, 2020, it was reported that Planned Parenthood improperly received Paycheck Protection Program fundings. In response, the SBA sent a demand letter to Planned Parenthood requesting that they return the improperly received funding.^[45]

In December 2020, according to data released after a federal lawsuit filed by several news organizations under the Freedom of Information Act challenging the SBA's refusal to release records on borrowers and loan amounts relating to the government's Paycheck Protection Program, it was revealed that more than half of the money from the Treasury Department's coronavirus emergency fund for small businesses actually went to bigger small businesses representing just 5 percent of the recipients. The CARES Act of 2020 generally classified a small business as a business with 500 employees or fewer.^[46]

The political independence of inspectors general — and thus their ability to act in the interest of the public, and not the president or agency heads — is crucial for their ability to safeguard government programs that affect millions of Americans. In 2018, the Environmental Protection Agency’s inspector general office found that the water contamination crisis in Flint, Mich., was worsened by the agency’s failure to respond quickly and decisively. In recent years, inspectors general have examined staffing shortages at air traffic control centers operated by the Federal Aviation Administration, investigated whether the Defense Department was properly accounting for funds used to support Ukraine, oversaw congressional Covid-19 relief spending, and uncovered massive pandemic-era fraud in the Small Business Administration.

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the hill

Pretending to register emotional support animals was a lucrative scheme for a Washington, D.C. man who fraudulently received more than $2.1 million in pandemic relief loans from the Small Business Administration in 2020.

He used the funds to purchase a 33-foot boat, a new car and a rowhouse in Northeast D.C. This perpetrator’s fraud was uncovered by investigators, including the SBA inspector general, and he was sentenced to 78 months in prison in 2022.

There are thousands of open investigations into pandemic-era fraud at the SBA, but on Jan. 24 President Trump removed the agency’s chief fraud investigator, Inspector General Hannibal “Mike” Ware, without cause — and likely in violation of the law — alongside 17 other agency inspectors general.

Lawmakers from both parties should be concerned that Ware’s firing is Trump’s attempt to avoid responsibility for his first administration’s ham-fisted delivery of pandemic relief programs, such as the Paycheck Protection Program, which enabled more than 86 percent of all pandemic fraud in the SBA’s $1.2 trillion relief programs.

Over the last three years, I had a front-row seat at SBA, where I led our congressional efforts, including cleaning up the fraud from the first Trump administration. Ware worked closely with SBA leadership and Congress, playing a critical role in recovering taxpayer dollars in partnership with agency leadership.

Our team did an intensive staff review to look for likely fraud with input from the lending community and tips from members of Congress. We shared that information with the inspector general, who then often partnered with other federal law enforcement agencies to investigate and advance justice. These investigations had bipartisan support, and former President Joe Biden signed into law a bipartisan bill to increase the statute of limitations for pandemic fraud from five years to 10 years — meaning that the inspector general could be investigating pandemic fraud throughout the next four years of the Trump administration.

The inspector general’s firing shows a shift in priorities for the new administration away from Republican talking points about getting tough on fraud. It will instead let fraudsters and criminals evade responsibility. For example, former Sen. and now Secretary of State Marco Rubio (R-Fla.), author of the legislation creating the pandemic programs, said fraudsters “should go to jail and pay restitution for what they stole.”

Ware testified before Congress that his office has “over 100-years’ worth of criminal investigative work” via the more than 250,000 tips received by the SBA’s fraud hotline, which generated 95,000 actionable leads. During my time at the SBA, our leadership team was not always aligned with the inspector general’s recommendations, but our direct lines of communication helped strengthen our fraud prevention efforts. Ware’s investigations were not viewed as overly partisan, and he won bipartisan praise from persistent SBA critics, including Rep. Beth Van Duyne (R-Texas), who said Ware has done a “commendable job” in fighting fraud.

The inspector general and Congress often acknowledged that the Biden administration inherited massive problems that SBA Administrator Isabel Guzman worked to correct. She directed the agency to operate with both speed and certainty — implementing standards to check tax returns and conduct automated fraud screenings before disbursing funds to prevent taxpayer dollars from going to tax cheats or criminals.

Under Guzman’s watch, SBA implemented a Fraud Risk Review Board — on which I was privileged to serve — to look at fraud risks across SBA programs. SBA also put into operation new technology to efficiently deploy future emergency programs with lower fraud risk and to strengthen the agency’s core disaster and business loan programs.

These reforms made a difference, but so did SBA’s partnership with our inspector general. Members of Congress brought concerns to my office daily about their constituents who were affected by fraud. We received tips about Paycheck Protection Program fraud, including employers who were ineligible for the loans they received. Elderly senior citizens and legitimate businesses had their identities stolen by fraudsters to obtain loans during the early days of the pandemic. All of these cases were investigated by the inspector general and law enforcement, and his office helped recover hundreds of millions in stolen funds.

Taxpayers stand to lose billions if fraudsters are allowed to evade investigation, and the decision to fire SBA’s inspector general is a green light to criminals and a blatant attempt to cover up the failures of Trump’s first term. If members of Congress are truly serious about recovering stolen taxpayer dollars and fighting fraud, they will push back and restore Ware and other fired inspectors general to their positions.

George Holman is the former associate administrator for congressional and legislative affairs at the Small Business Administration. He previously worked on Capitol Hill for Senate Majority Leader Harry Reid.*

Tags Donald Trump Inspector General Joe Biden Small Business Administration

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small busi admin SBA

History

Criticism

See also