Was bound to happen. People want loans they can

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A Texas golf course, a Nevada tanning salon and an Illinois candy shop were among small businesses that may have improperly received U.S. subsidized loans intended for firms hurt by the September 11 attacks, an internal government watchdog has found.

The Small Business Administration's inspector general said in a report made public on Wednesday that in 85 percent of the sample of loans it reviewed, a company's eligibility to receive the money through the program could not be verified.

A leading Senate Republican called for further investigation, but the Small Business Administration said the program was properly implemented.

The one-year, $4.5 billion Supplemental Terrorist Activity Relief, or STAR, program offered loan guarantees to small businesses adversely affected by the September 11 attacks.

However, the Small Business Administration had failed to properly oversee lenders to make sure that only eligible borrowers obtained STAR loans, the watchdog's report found.

Money may have gone to businesses that were not adversely impacted by the terrorist attacks of September 11th or their aftermath, wrote Robert Seabrooks, assistant inspector general for auditing.

Congress authorized the program in January 2002, and set aside $75 million to cover potential defaults. The program was operated through the Small Business Administration's main loan-guarantee program and the loans were made by participating banks. In all, 8,201 loans were approved totaling $3.7 billion, but only 7,058 were actually paid out.

Of 42 STAR-loan recipients interviewed by the inspector general's office, just two said they were aware they had obtained a such a loan. In cases where eligibility could not be established, 25 of 34 borrowers interviewed stated they were not adversely affected by the attacks, the report said.

The report's examples included the Texas golf course, whose owner was cited by a lender as saying people were more interested in staying home and watching the attack on television than playing golf. However, the course was owned by someone else when the attacks took place and the justification for the $480,000 in loan guarantees did not apply to the new owner, the report said.

The tanning salon's lender blamed the September 11 attacks for hurting the Las Vegas casino industry which employed many of the salon's customers.

However, the inspector general found the salon's business had grown by 52 percent in 2001 and 32 percent in 2002 and said there was no evidence the owner could not borrow outside of the program. The SBA guaranteed $437,000 in loans to the salon, which were used to expand.

The Illinois candy shop received $21,250 in guarantees but could not back up its claim that the attacks had delayed the shop's opening, the report said.

Senate Small Business Committee Chairwoman Olympia Snowe, a Maine Republican, said her panel would look into the program.

If abuses are discovered, many questions must be answered by the parties involved, beginning with how and why was this allowed to happen, she said in a statement.

SBA said it has told lenders it will not honor guarantees on defaulted loans that fail to document the September 11 link.

SBA implemented the STAR program as Congress intended, Administrator Hector Barreto said in a statement.

The inspector general said it appeared qualified borrowers were not shut out of STAR loans.

House OKs budget bill cutting $50 billion in aid
Medicaid, food stamps, student loans take a hit

Washington -- House Republicans, after weeks of negotiations, narrowly passed a budget bill early Friday to cut $50 billion from Medicaid, food stamps, student loans and other programs over the complaints of Democrats that Congress is squeezing students, the elderly and the poor to pay for tax cuts for the rich.

The House approved the bill 217-215, after GOP leaders agreed to demands from moderate Republicans to jettison a measure to drill in the Arctic National Wildlife Refuge in Alaska and to slightly reduce proposed cuts to food stamps.

Still, the vote was so politically sensitive that House leaders didn't begin debate until 10 p.m. Thursday and didn't pass the measure until nearly 2 a.m. -- when most news reporters gone and only a few C-SPAN junkies could witness the fiery floor action. No Democrats voted for the bill, and 14 Republicans opposed it.

House Democratic leader Nancy Pelosi of San Francisco said in a floor speech that cutting money for Medicaid, child support enforcement and foster care as the House prepares to vote on $70 billion in tax cuts was a sin.

Republicans are launching an attack on America's children, on America's families, Pelosi said. They are also launching an attack on America's middle class, all of this to give tax cuts to the wealthiest people in our country.

But House Speaker Dennis Hastert, R-Ill., responded that the proposed cuts were needed to rein in the growth of federal spending on health care and other programs.

Medicaid is growing at a 7.3 percent growth rate per year, Hastert said. It has been growing for years. Is there a better way to do it? Is there a more efficient way to do it? Should we find some reforms to make it better? Yes, we should.

The House bill also would split the Ninth Circuit Court of Appeals in San Francisco, a goal of conservatives who have long complained the court is too liberal. But the breakup of the appellate court, which covers the country's Western region including federal cases that arise in California, is not part of the Senate budget bill. Sen. Dianne Feinstein, D-Calif., and senior members of the Senate Judiciary Committee are seeking to strip it from the final package.

The battle over the budget reconciliation bill now moves to a joint House-Senate conference committee, where lawmakers will have to make several critical decisions, including:

-- Will the final budget bill allow oil drilling in the Arctic National Wildlife Refuge?

The Senate version would allow drilling, but a group of House Republican moderates has pledged to oppose any final bill that would open the Alaskan wildlife refuge for development.

-- How deeply will lawmakers cut student loans?

The House bill would cut student loan programs by $14.3 billion, while the Senate version cuts them by $8.8 billion. The Congressional Budget Office has estimated the House bill would cause a typical college student with the average of $17,000 in student loans to pay an additional $5,800 in interest and fees over the length of the loans.

-- Will some legal immigrants lose their food stamps?

The House bill would cut off 220,000 people from food stamps by allowing legal immigrants to qualify for the food aid after seven years, instead of the current five years. The Senate bill does not cut food stamps, and moderate lawmakers are urging that it be dropped from the final budget package.

-- How will the cuts affect Medicaid recipients?

The House bill calls for $11.4 billion in cuts to Medicaid, while the Senate bill trims spending by only $4.3 billion. The House bill also would allow co-payments to rise over time with inflation and would deny Medicaid nursing home benefits to people with $750,000 in home equity.

-- Will child support enforcement be cut?

The House bill would slash funding for child support enforcement by $4.9 billion. The Senate did not include any cuts to child support enforcement.

-- Will Medicare be cut?

The Senate voted to eliminate $5.4 billion in subsidies for some regional insurance companies that agreed to participate in President Bush's Medicare prescription drug program. The House bill does not cut the subsidies.

Congress watchers expect that lawmakers are likely to split the difference between the House's $50 billion in cuts over five years and the Senate's $35 billion in trims. But the negotiations will be difficult for GOP leaders. Conservatives, especially in the House, have been pushing for deeper cuts. Republican moderates plan to lobby to restore funding for some programs.

House Republicans argue the heated rhetoric over the budget bill's effects is overblown because many cuts are simply limiting the growth rate of certain federal programs. For example, the proposed cuts to Medicaid would lower the annual growth rate in spending on the program from 7.3 percent to 7 percent.

But Democrats complained the cuts hit the wrong targets, including students struggling to pay for college. The Congressional Budget Office estimates the bill would increase costs to students and families by $8 billion, including nearly $5.5 billion in costs when students consolidate loans.

You're hurting the students of this nation, Rep. George Miller, D-Martinez, told Republicans in an angry floor speech. You're putting their families in debt. You're piling on the interest rates. You ought to be ashamed of it.

E-mail Zachary Coile at zcoile@sfchronicle.com.

So, let's see. I know that I have been known to lapse into a coma from time to time, but haven't we been here before - making subprime loans in order to stimulate sales and to hell with what happens next?

Someone correct me if I'm wrong, please, but I'm having such a strange sense of deja vu here.

is that she will get elected anyway, and to many's surprise be one of the most effective president's yet. What I like about her is that she is energetic, is a workaholic, very very smart, has political clout, and even since her high school and college days has always tried looking out for the underprivileged. Obama has too always looked out for the underprivileged.

unless they outlawed the two parties which, we all know, will never happen. People will always vote for one or the other and not give independents a chance. Heck, one year a long time ago, I even voted for the Libertarian (sp) party cause I didn't like who was running on the dem or pub ticket and there was no indpendent candidate.

I agree, there should not be any "party" (whoever thought of that terminology must have had a great sense of humor). We are not getting anywhere with the 2 parties we have now. Bush had his goofball cabinet and O has his. Some of O's are worse IMHO. They open their mouths and stocks fall. The press secretary doesn't know how to answer a straight question. He looks very uncomfortable when asked a question he doesn't know how to answer. It doesn't help matters.

Why they really don't include the forerunner of every party to debate in public forums isn't fair or right. The "minor" parties don't really get their message out because of financing and a debate would be great for them, but it's always dems and pubs.

I think if things don't turn around in the next 4 years, an independent might have a better chance.

if he is unable to give away enough stuff and make enough concessions. Or, if like the whole Palestinian conflict, the stated disagreement (we want our own homeland) is not the actualy purpose of the conflict (we all really want to wipe Israel off the map.)

It's like the schoolyard bully. He wants your money, so you give it to him. Now he wants your lunch, so you give him that. Then he likes your jacket, so that becomes his as well. Pretty soon you've run out of stuff to buy him off with and it dawns on you.....he was only looking for a way to puff himself up and reason to pound on you. The other stuff he gained was just icing on the cake.

PHILADELPHIA Even though Hurricane Katrina has moved well north of the city, the waters may still keep rising in New Orleans late on Tuesday. That's because Lake Pontchartrain continues to pour through a two-block-long break in the main levee, near the city's 17th Street Canal. With much of the Crescent City some 10 feet below sea level, the rising tide may not stop until it's level with the massive lake.

New Orleans had long known it was highly vulnerable to flooding and a direct hit from a hurricane. In fact, the federal government has been working with state and local officials in the region since the late 1960s on major hurricane and flood relief efforts. When flooding from a massive rainstorm in May 1995 killed six people, Congress authorized the Southeast Louisiana Urban Flood Control Project, or SELA.

Over the next 10 years, the Army Corps of Engineers, tasked with carrying out SELA, spent $430 million on shoring up levees and building pumping stations, with $50 million in local aid. But at least $250 million in crucial projects remained, even as hurricane activity in the Atlantic Basin increased dramatically and the levees surrounding New Orleans continued to subside.

Was bound to happen. People want loans they can

House OKs budget bill cutting $50 billion in aid Medicaid, food stamps, student loans take a hit

House OKs budget bill cutting $50 billion in aid
Medicaid, food stamps, student loans take a hit