WASHINGTON – The Obama administration on Tuesday gave its long-sought endorsement to a proposal to raise the member business loan limit for credit unions as part of a plan that would funnel $30 billion of government funds to community banks for small business lending.
But the proposal, which one lawmaker labeled “TARP with lipstick,” during a congressional hearing, is not expected to pass Congress this year, according to observers. The bill, called the Small Business Lending Fund, has little chance of passing the Senate, even if it makes it out of the House, according to one credit union lobbyist.
Still, the White House endorsement, coming from a high Treasury Department official, is a significant boost for credit unions that have been working for several years to ease the limit on MBLs. In testimony before the House Financial Services Committee, Gene Sperling, counselor to the Treasury Secretary, said the department supports the credit union proposal to lift the current 12.25% of assets limit on MBLs to as high as 27%. “We do support a compromise expansion of the credit unions [MBL] program,” said Sperling.
The Treasury endorsement, something that has been lacking in all previous efforts on MBLs, is critical to financial legislation such as this because it means the Obama administration does not see it as a threat to credit unions.
“Credit unions want to be part of the solution,” CUNA President Dan Mica said during yesterday’s hearing.
NAFCU’s Chief Lobbyist Dan Berger said he was happy to finally get the Treasury endorsement, but said there are some details to be worked out.
The Treasury Department has signed off on a proposal that would approve higher MBL limits for two tiers of credit unions. Tier One credit unions would be eligible to increase their member business lending to 25% of assets. Tier Two credit unions, with the approval of NCUA, would be able to go even higher: 27.5% of assets. Those credit unions must be well-capitalized, show experience in business lending and be at or above 80% of the 25% cap for at least a year.
The inclusion into the bill of the credit union proposal was favored by several lawmakers at yesterday’s hearing who pointed out it would not cost the government any money, unlike the bank bill. With that plan, the Treasury would buy $30 billion of preferred shares in community banks at discounted rates to create new loan capital.
At least one lawmaker chided the Treasury’s Sperling for the exclusion of credit unions from the package. “I’m just surprised this wasn’t part of the plan,” said Rep. Bill Posey, R-Fla., who labeled the $30 billion program “TARP with lipstick,” referring to the $700 billion Troubled Asset Relief Program.
Rep. Jeb Hensarling, a Texas Republican who has emerged as one of the leaders of the minority on the Financial Services Committee, called the bill “TARP 3.0" and said it would do little to help the economy.
