WASHINGTON – The moment the credit union lobby dreaded came Wednesday when one long-time lawmaker during a congressional hearing said if credit unions want to increase their member business loan limits they should have to accept some kind of diminution of their federal tax exemption.
“I want all those present and watching to know that I remain committed to requiring credit unions to be subject to federal taxation if they want to increase their commercial lending limit,” said Ruben Hinojosa, an eight-term Democrat from Texas, during a hearing on a regulatory relief bill for banks to which credit unions want to attach measure to increase the MBL limit.
Hinojosa’s position was no surprise to credit unions, as he alluded to the tax exemption in a less direct way during last month’s hearing on a bill to raise the MBL limit from its current 12.25% of assets to 27%.
But Wednesday’s direct attack lays bare the risks credit unions are running as they seek to expand powers in certain areas long dominated by local banks, that is, putting the tax exemption on the table. In fact, during last month’s hearing at least two other members of the House Financial Services Committee also expressed doubts to the credit union bid, an unusual public expression of opposition to the MBL bill at a hearing reserved for the credit union priority.
In fact, several banking lobbyists insisted last month the tax exemption should be discussed in exchange for an increase in the MBL limit. “If credit unions would like to have the discussion about exchanging their tax status for increased business lending privileges, we will be the first one at the table,” said Rose Oswald Poels, president of the Wisconsin Bankers Association, in conjunction with the hearing.
CUNA President Bill Cheney, who was testifying at Wednesday’s hearing in an effort to convince lawmakers to attach the MBL provision to the bank bill, tried to persuade the recalcitrant Congressman, explaining that credit unions could boost job growth by expanding access to credit for small businesses and have been making business loans for as long as 100 years.
But Hinojosa, a long-time ally of the community bankers in his home state, questioned whether there were enough credit unions near the MBL limit to warrant a doubling in the cap, something none of the credit union lobby groups or NCUA has been able to firmly identify. “Seeking an increase without providing data proving it is merited is not good public policy,” said the Texas Democrat.
“I’m not certain that performance and their assistance during the recent economic recession can serve as evidence they are even close to surpassing the existing commercial lending limit,” Hinojosa said. “Yes, they did provide liquidity during the crisis and some of that might have benefitted commercial entities. It is my understanding that very few credit unions are close to attaining much less surpassing the 12.5% commercial lending limit.”
NAFCU President Fred Becker, who also testified for the MBL provision at Wednesday’s hearing, said a regulatory relief bill for banks is a proper vehicle to expand credit union powers, particularly for MBLs. “We were disappointed that Representative Hinojosa’s comments reiterated some of the same old banker’s talking points that have been refuted, especially in a hearing on a bill that provides banks new powers and tax relief,” said Becker. “NAFCU will continue to try to educate him and his staff on the important role that credit unions play for our nation’s small businesses and how a tax on credit unions would effectively be a tax increase on the over 100,000 credit union members in his district.”
