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Bankers Should Support Lifting the CU Lending Cap

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Re "Why Lift Lending Cap? Credit Unions Can Skirt It Anyway," June 26:

Tsk, tsk, Cam Fine. As our nation's unemployed continue to struggle and our economy fails to gain any significant impetus toward a recovery, it would seem U.S. community bankers would welcome any and all legislation that promotes job growth and helps our country find solid economic footing.

Instead, the Independent Community Bankers of America head and his community bankers have proven, yet again, that their self-protective interests supplant those of the nation, while small businesses and the unemployed pay dearly.

The federal government has made several attempts to boost business lending through the 2009 stimulus bill, the 2010 Small Business Jobs Act and "credit enhancements." But none of these vehicles have improved small businesses' access to capital. Of the $30 billion apportioned in the Small Business Lending Fund, only $4.8 billion was actually disbursed.

Yet, Mr. Fine continues to be disingenuous and ignore the facts as he trots out hackneyed arguments to challenge legislation that would lift what is an arbitrary and outdated cap on credit unions' ability to make business loans to their members. It is also curious that he forgot to mention credit unions have been engaged in member business lending since 1934 or that member business lending has nothing to do with the federal income tax exemption codified that same year. I guess he also conveniently forgot that no cap existed until 1998 and that a congressionally mandated Treasury study found credit union business lending posed no threat to community banks. Finally, what about the follow-up studies from the Government Accountability Office, the Small Business Administration and others that show credit union business lending fills a critical gap banks simply don't even want to fill?

According to a recent NAFCU survey, credit unions said 44 percent of their portfolio was made up of loans of less than $100,000 compared with banks that only have eight percent of their lending in this size category. In addition, credit unions said their lending for loans between $100,000 and $250,000 made up 20 percent of their portfolio, compared with six percent for banks. Alternatively, business loans over $1 million make up 68 percent of the banks portfolios, but only 16 percent for credit unions. Obviously, the bankers are only interested in making loans that will generate the most profit, while credit unions strive to fill a need.

The Small Business Lending Enhancement Act is a bipartisan, common-sense approach, endorsed by the Treasury Department and the National Credit Union Administration. It would allow credit unions to help America's small businesses and our country's economy without costing taxpayers a dime. And the reality is, whether lifting the cap creates one job or 1,000, it would be a success.  

Cam, I suggest you explain your position to those unemployed Americans whose unemployment benefits are about to run out. I'll bet they are thinking "Enough, already!"

Fred R. Becker Jr. is the president and CEO of the National Association of Federal Credit Unions (NAFCU).

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Comments (3)
Mr. Becker tacks in an interesting direction in his latest defense of his misguided MBL policy. Instead of stating facts about community bank small business lending--like the fact that community banks under $10 billion provide nearly 60 percent of small business loans between $100,000 and $1 million--he demonizes Main Street community banks and the work they have done for generations to build their communities and put American's to work through local small businesses.

I'd like to remind Mr. Becker that ICBA would welcome the discussion of credit union member business lending if credit unions across the country would agree to pay taxes. Community banks pay taxes, which support local schools, municipal offices, libraries, fire and police departments--the list goes on. The same cannot be said for tax-exempt credit unions. But are credit unions willing to pay taxes in exchange for greatly expanded banking services? No--they simply want to have their cake and eat it, too. So, until the day when credit unions pay taxes like the more than 7,000 community banks across this great nation, I say no way. This is yet another example of credit union mission creep, and ICBA will not stand for it.

In fact, ICBA past chairman, Sal Marranca, said it best in his February 8 BankThink piece entitled, "Stop New Forms of Credit Union Mission Creep." In the op-ed, Marranca says, "if [credit unions] want to take more than their fair share, they need to give a little. And giving in the form of taxes would be a good place to start."

Furthermore, it's important to note that H.R. 1418 and S. 2231, which would expand credit union member business lending, would help only a minute number of aggressive credit unions since the overwhelming majority of credit unions are not even at or near the current member business lending cap. The fact is that only 29 credit unions, of more than 8,000 or about 2 percent of all credit unions, are near the current cap. There is ample capacity for the remaining 98 percent of credit unions to expand their member business lending today without any new legislation.

Camden R. Fine
President and CEO
Independent Community Bankers of America
Posted by Camden_Fine | Thursday, August 02 2012 at 12:54PM ET
Under the heading "Torture Numbers and They'll Confess To Anything", let's consider just one of the numerous stilted contentions in Mr. Becker's argument:

"...credit unions said their lending for loans between $100,000 and $250,000 made up 20 percent of their portfolio, compared with six percent for banks."

What is the data set of banks used for comparison here? Of the 7,300+ commercial banks and thrifts in existance, the 50th percentile holds roughly $160MM in total assets--which mean's 49% of these FI's hold
Posted by RDKoncerak | Thursday, August 02 2012 at 3:41PM ET
Mr. Fine: Under your premise, banks should give up their ability to have Subchapter S status which eliminates the corporate income tax on those banks. If credit unions were to pay taxes, then credit unions MUST have all the same authorities and rights that the "tax-paying" community banks have. Full taxations without full authority is a recipe for disaster. Ask your neighborhood savings and loan.
Posted by no political hacks preferred | Monday, August 06 2012 at 6:33PM ET
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