9/11 Loan Money Missed Targets

Loans Far And Wide To Some Businesses That Didn't Need Relief

(AP)  Most loans were well below market rates — as low as 4 percent, documents show.

SBA officials acknowledged the second program, the Supplementary Terrorism Activity Relief (STAR), left banks on an honor system to determine worthy loan recipients.

"One lender could have been really strict and specific about the borrower providing the documentation to prove that they were affected by the Sept. 11 attacks, and another banker may not have, or may have had ulterior motives for approving loans," said SBA spokeswoman Carol Chastang.

SBA documents obtained by AP show banks had a strong incentive to approve as many loans as possible from the terror program. The banks profited from the interest while incurring little risk because the government guaranteed 75 percent to 85 percent of each loan.

And the annual fee the lenders paid to SBA to get the government guarantee was slashed from 0.5 percent to 0.25 percent — meaning lenders saved an additional $5,000 a year for every $2 million they loaned under STAR.

"There was definitely an advantage to the lender to get that reduced fee," said Christopher Chavez, an SBA official in Colorado. He said he suspects lenders might not always have talked to businesses about damage from Sept. 11 before moving loans into STAR.

While SBA officials expressed surprise at AP's findings, banking officials said the agency encouraged the industry to use the post-Sept. 11 programs liberally, especially when its normal guaranteed lending program was hit by steep budget cuts in 2002.

"They had personnel at our conference stand up and say if you cannot find a reason to move the loan over to the STAR program, contact us and we'll help you find a reason to move it over," recalled Tony Wilkinson, president of the National Association of Government Guaranteed Lenders.

Major lenders like Wachovia and Wells Fargo declined to say how many loans they shifted into the terror relief program, saying only that they followed the law.

Wells Fargo, the nation's second largest SBA lender, said the STAR program enabled lenders "to provide funds to new and mature businesses impacted by 9/11" and the bank "continues to strictly adhere to SBA operational standards for all SBA loan originations."

Many loans went to local outlets of some of America's most famous and lucrative companies. For instance, 55 Dunkin' Donuts shops across the country, 14 Quiznos sandwich shops and 52 Subway sandwich shops got loans. Fourteen Dairy Queens — part of the ice cream franchise partly owned by Wall Street billionaire Warren Buffett — won more than $5 million in loans.

"I just applied for the loan at the bank. I had no idea where the funds came from," said Tom Mayl, who got two SBA Sept. 11 loans totaling more than $800,000 to open a Subway shop in suburban Dayton, Ohio, and a Buffalo Wild Wings restaurant in Sidney, Ohio.

"It doesn't seem right, just on the surface, but I really don't know the details," Mayl said.

Don Robinson said he too didn't need or ask for terrorism relief when he got a $765,000 government-backed loan in 2003 — drawn without his knowledge from the Sept. 11 program — to start a motorcycle shop in Brigham City, Utah.