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SBA Critics Chide Schwarzennegger for Adding Barreto to Team

August 11, 2006

Following news stories critical of the U.S. Small Business Administration under Hector Barreto, California Governor Arnold Schwarzennegger has been criticized for adding one of the highest-ranking Hispanics to serve in the Bush Administration to his re-election team.

Mr. Barreto was named one Mr. Schwarzennegger's chairmen for his statewide leadership team on July 20, approximately three months after he announced plans to step down as head of the SBA. His decision to accept the chairmanship of the Washington, D.C.-based lobbying group the Latino Coalition came amid growing criticism of the SBA's response to Hurricane Katrina recovery.

One of his harshest critics on that matter and other SBA actions had been Rep. Nydia Velazquez, a Brooklyn Democrat and the ranking member of the House Small Business Committee, who claimed he was "running the agency into the ground."

In announcing Mr. Barreto role in the re-election effort in July, the Schwarzennegger campaign did not note his SBA role, although it did extol his acumen. "Hector understands the important role government can play in helping create an economic climate where businesses thrive," said Steve Schmidt, Californians for Schwarzennegger campaign manager.

But Wednesday, after a series of stories detailing how small business set-asides at the SBA sometimes go to not-so-small businesses like Lockheed and Wal-Mart, the activist American Small Business League came out swinging. The league, founded in 2002 specifically in response to seeing big companies get federal contracts that had been set aside for small businesses, has been critical of the SBA and by extension Mr. Barreto. (The group has been equally critical of Mr. Barreto's replacement, Steven C. Preston. "I'm afraid that it's going to be business as usual at the SBA with Preston at the helm," says Lloyd Chapman, president of the league.)

"If Governor Schwarzennegger wants someone on his leadership team that has helped to force thousands of small businesses into bankruptcy to enrich the coffers of Fortune 500 corporations, then Hector Barreto is an excellent choice," says Mr. Chapman.

When Mr. Barreto took the SBA post in 2001 he was widely acclaimed as having the experience necessary to thrive in the job. He ran a financial services company in Southern California, was vice chairman of the board for the U.S. Hispanic Chamber of Commerce and had served as chairman of the board for the Latin Business Association in Los Angeles.

On leaving the SBA, he noted the positive achievements of his tenure. "Accountability, greater efficiencies and results-oriented management are now part of the SBA culture," Mr. Barreto wrote in his resignation letter to the president. "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."

In a statement, the American Small Business League also suggested that Barreto's appointment was designed to increase Mr. Schwarzennegger's support in the Hispanic community. The Austrian-born actor-turned-governor has taken some lumps of late in that area. Last month, a state legislator who had been one the governor's allies in the state Senate criticized the governor for "a lack of respect" toward Latinos.

Abel Maldonado, a successful Santa Maria, Calif. businessman who is one of the highest-profile Hispanics in California's Republican politics, was apparently irked that Mr. Schwarzennegger had not supported him in a bid for statewide office. Mr. Maldonado lost his quest for the state controller's job in a June primary.

Although Mr. Maldonado later apologized after his comments were printed in the Los Angeles Times, Mr. Schwarzennegger has been at a disadvantage in the mostly "blue" state where the Hispanic vote traditionally skews Democratic. He also follows Republican leaders such as former Gov. Pete Wilson, who alienated some when he championed ballot Proposition 187, which would have taken away many social services from illegal immigrants had it ever been fully enacted.

But California's Hispanic vote may be more in play than usually acknowledged. Studies by the William C. Velasquez Institute find that the while a majority of the state's Hispanics are registered Democrats, more than one in five are registered as independents, and that figure is higher among the youngest voters. The institute has also reported that the Democratic Party's share of voter registration has declined since Prop 187, while the GOP's has not moved.

Mr. Barreto has been a high-profile Hispanic addition to the Schwarzennegger campaign, and along with Inner-City Games founder Daniel Hernandez is one of two members of the 17-membr leadership team which includes former governor Wilson. Mr. Barreto is also one of the chairs of the Hispanic Families for Arnold, a business-heavy group that debuted July 11.

At that debut, Mr. Barreto told the Efe news agency that Hispanics 44 percent of whom voted for President George W. Bush were not interested in political parties but in " a leader who talks about the things that interest them and their families. And that's the reason that Gov. Schwarzennegger is seeking this support."



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