Charles L. Heatherly is one of the few people in government who is able to describe his job by paraphrasing Shakespeare: He has come to bury the Small Business Administration, not to praise it.
On Heatherly's first day as acting administrator of the SBA, he ordered his personnel director to fire the agency's regional administrators in Boston, Philadelphia, Dallas, Denver and San Francisco, and to order them out by nightfall. The Chicago director was in Indianapolis at a conference and didn't get the ax until the next day.
Suddenly, business organizations and SBA supporters on Capitol Hill began to take Chuck Heatherly and his plans seriously.
"I can see how it might be seen as cold and insensitive," Heatherly said. "But these are political appointees. I felt we had to make a dramatic change on the first day, to send a signal that this was a new administration, a new agenda, that we would bring in a new team totally committed to the president's program." The president's program is to eliminate the SBA as an independent agency.
President Reagan proposed in his 1986 and 1987 budgets to terminate SBA lending, sell off its loans and transfer most of its remaining functions to the Commerce Department.
The chances of such legislation emerging from the House or Senate committees on small business are roughly equivalent to those of, say, the Interior Commmittee voting to close the national parks.
But the president's intentions are genuine, and the pressure of the deficit sometimes touches the untouchable.
Former Office of Management and Budget director David A. Stockman testified last year that 19 percent of SBA loans went to businesses such as bars, liquor stores, dance studios, bowling alleys and country clubs -- areas in which there is no shortage of unsubsidized competition -- rather than to marginal industries. SBA loans "help an infinitesimal fraction of small business in each sector compete with other small businesses in the same trade," Stockman added.
According to OMB, the eventual default rate in one guaranteed loan program was 52 percent. The rate for programs overall is 19 percent. SBA applicants in large cities must have been turned down for loans by two banks before they are eligible for credit. An SBA official once described the agency as helping "the cream of the crap."
Still, it has fiercely loyal supporters. It awarded $1 billion in new direct loans to businesses and homeowners and made $2.5 billion in new loan guarantees last year. It gave out 7,800 disaster loans at interest rates of 4 percent and 8 percent. It has counseled or trained more than 3 million entrepreneurs, and according to the Senate Small Business Committee staff, "Companies which have stimulated the economy and provided thousands of jobs, such as Apple Computer and Federal Express, would not have have started without SBA financing."
Perhaps most important, the independent SBA is a badge of respectability for its clients. Small business, the fastest growing sector of the economy, accounts for 97 percent of all new businesses and creates more than 80 percent of all net new jobs, the Senate committee staff said last year.
"It is unthinkable to eliminate the agency and make it a forgotten stepchild in Commerce," said Wilson S. Johnson, chairman of the board of the National Federation of Independent Business. "The executive branch has never given small business quite the same consideration as big labor and big business."
Heatherly succeeds James C. Sanders in the top SBA job. Sanders, a former small business owner and life insurance executive, is something of a hero in the small business community for his defense of the SBA in last year's wars with OMB.
Heatherly, by contrast, is often described as a quiet intellectual. He was born at home in Elizabethton, Tenn., and grew up in Arizona, where his father was a teamster and his mother worked for the Bureau of Land Management.
After graduating from the University of Arizona and Claremont Graduate School and University Center -- the first in his family to graduate from college -- he was involved in the Goldwater-for-president movement. Next he worked full time as an organizer for the Intercollegiate Studies Institute, an "old right" organization founded by William F. Buckley, coordinating conservative philosophical groups on West Coast campuses.
Later, he ran the education program for the National Federation of Independent Business, the nation's largest small business group and his present adversary in efforts to eliminate the SBA.
Johnson, the federation chairman, today distances himself from the man he hired. He is adamant that Heatherly's views on the SBA could not have been incubated at the federation. "If Chuck Heatherly had an appreciable contact with the SBA while he was here I'm not aware of it," Johnson said.
In 1980 Heatherly edited the Heritage Foundation's "Mandate for Leadership," the conservative think tank's effort to evaluate Big Government item-by-item and offer an alternative plan. Heatherly is credited with great management skills for working with more than 300 authors and collaborators to finish the book in 11 months. It did not have a chapter on the SBA.
About the same time, newly appointed Education Secretary Terrel H. Bell was pressured by the administration to hire Heatherly. At the time, the White House personnel office wouldn't force a Cabinet secretary to accept a political appointee he strongly objected to, but also wouldn't appoint the secretary's choices if they didn't pass political muster.
The ground rules led to a six-month standoff. "It came down to a trade," said one official. "Bell would take Heatherly and he would get his choice as assistant secretary for adult and vocational education."
Heatherly was made deputy undersecretary for management -- a position deliberately chosen, according to a former education official, to give him little direct authority over programs.
William L. Smith, who was a Heatherly's subordinate as U.S. commissioner of education, said, "He was an ideologue, but he was a man I would work for anytime.
"He reorganized the department and a number of people were downgraded. He agonized over decisions that affected people. I think he is a sensitive, humane man."
Heatherly left the Education Department to run the White House Fellows program in 1984, an interlude he described as "a nice program . . . and a respite."
When Sanders resigned from the SBA, the White House made a last request: that he appoint Heatherly deputy administrator of the agency before he left. On March 31, Heatherly automatically took over as acting director.
Heatherly's name was never sent to Capitol Hill. Sens. Lowell P. Weicker Jr. (R-Conn) and Dale L. Bumpers (D-Ark.) complained in an April 8 letter to the president: "It seems improper for an individual who has not been considered by this committee or the Senate to embark on radical personnel and management changes. If a nomination for the position of administrator is not forthcoming, the Senate Small Business Committee will be compelled to hold hearings on the acting administrator's execution of his legal responsibilities."
Heatherly sees no impropriety in his appointment. "The administration accepted as a fact of life that it had to choose between two courses: It had to choose to make a serious effort under an acting administrator to eliminate the agency or to give up and have an administrator," he said. "There is precedent for having an unconfirmed acting administrator , as long as the president's proposal is serious and pending before Congress."
Heatherly said the only thing keeping the SBA alive, with its 4,900 employes and quarter-of-a-billion-dollar-a-year bureaucracy, is the "iron triangle of congressional committees, agency self-interest and trade associations comfortable with the status quo. No one cares whether the SBA is an independent agency or part of Commerce so long as the government adopts tax, regulatory and trade policies that benefit small business."