WASHINGTON – The White House said yesterday it will finally support credit unions’ efforts to increase the limits on members business loans for healthy credit unions.
U.S. Treasury Secretary Timothy Geithner said in a letter yesterday to Barney Frank, chairman of the House Financial Services Committee, that was obtained by the Credit Union Journal, the Obama administration will support an increase in the MBL cap from the current 12.25% of assets to as much as 27.5% of assets under certain conditions. Those conditions are that the credit union: has been near the current limit for four straight quarters; is well-capitalized; has at least five years experience of underwriting and servicing MBLs; has strong policies and experience managing MBLs and satisfies any other conditions set by NCUA.
The Treasury Secretary suggested other safeguards, including a limit on MBL growth for eligible credit unions of 30% a year.
“Moreover,” said Geithner, “if a credit union becomes less than well-capitalized, it should be required to cease member business lending and only resume such lending upon its return to a well capitalized position after regulatory approval.”
“We are willing to continue to work with the Congress on legislation that would meet these objectives,” Geithner told Frank.
The Treasury letter is a big boon for credit unions who have been lobbying for an increase in the MBL cap for the past decade without support from the Treasury or the White House. The Treasury support comes as Frank’s committee is preparing legislation that would increase the MBL cap as part of an effort to aid small businesses.
