Policy

Why the Long Wait for a New SBA Chief?


President Obama and former Small Business Administration chief Karen Mills in Cleveland in 2011

Photograph by Jim Watson/AFP via Getty Images

President Obama and former Small Business Administration chief Karen Mills in Cleveland in 2011

Karen Mills announced her resignation as administrator of the Small Business Administration in February, but didn’t leave the agency until August, when she decamped for a job at Harvard University. That same month, Mills’s deputy Jeanne Hulit was named acting administrator. President Obama has nominated more than 270 people to public office in the 10 months since Mills announced plans to leave the agency, the Washington Post pointed out last week. A permanent replacement for Mills wasn’t one of them.

What should small business owners and lenders who rely on the agency make of the delay?

There’s no clear reason why the lack of a permanent administrator would prevent the SBA from fulfilling its primary function of guaranteeing loans to small businesses. (To cite one example, the agency appeared to do a fine job managing the difficulties posed to its loan approval process by the recent partial shutdown of the federal government.)

That hasn’t kept Obama critics from blasting the president for the prolonged vacancy. Sam Graves, the Republican chairman of the House Small Business Committee, told the Post that the delay is “confirmation of how the president feels about small business.” American Small Business League founder Lloyd Chapman has argued that the absence of a nominee to replace Mills is evidence that the White House plans to disband the agency.

The White House didn’t respond to an e-mail seeking comment. It also hasn’t commented on past inquiries regarding the future leadership of the agency. In August, rumors circulated that one potential nominee had been disqualified by a background check. Conventional wisdom has also held that the White House would likely opt for a female, black, or Hispanic nominee, to emphasize the agency’s efforts to support woman- and minority-owned businesses.

Regardless of the reason for the delay, it’s unusual for the agency to go very long without a permanent administrator.

Since the SBA was formed in 1953, the agency has had 32 chiefs (PDF), including seven acting administrators. Of the temporary heads, Charles Heatherly had the longest tenure, taking over for James Sanders in April 1986 before passing the torch to former Senator James Abdnor in March 1987.

Heatherly may have held the acting title for so long because he helmed the agency at a time when then-President Reagan was trying to disband the SBA. On his first day in office, Heatherly fired six of the agency’s 10 regional directors because they disagreed with his plan to phase out the agency, the New York Times reported at the time. (Closing the SBA was a hard sell with members of Congress, who, then as now, like to tout their small business bona fides.)

There have been two other times when the agency lacked a permanent head for comparable periods, according to the SBA’s list. Sandy Baruah was acting administrator from July 2008 to January 2009, when Obama took office. That month, Baruah was replaced by Darryl Hairston, another acting administrator who led the agency until Mills was confirmed in April.

There was also an eight-month gap between SBA heads Eugene Foley, who left the agency in September 1965, and Bernard Boutin, who took over in May 1966. The historical record is light on details explaining the lag in replacing Foley, who is credited with piloting the agency’s Service Corps of Retired Executives (SCORE) program (PDF), as well as a program to support lending to black business owners.

Quantifying the president’s delay in naming a new administrator depends on how you do the math. It’s been almost 10 months since Mills announced she was leaving. On the other hand, it’s only been three months since Mills left and Hulit took over as acting administrator.

Clark is a reporter for Bloomberg Businessweek covering small business and entrepreneurship.

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