As Congress continues to search for the best strategies to jump-start a stalled economy, our elected officials need to fully recognize the significant potential of credit unions to serve as a catalyst in helping businesses and consumers regain financial momentum. And with more than 4,000 credit union leaders here in Washington for CUNA’s Government Affairs Conference, the timing could not be better for each of us to send a clear message to our respective federal legislators and their staffs: it’s time to quickly remove the unnecessary regulatory shackles that restrict credit unions from helping our nation’s economy move forward.
Let’s examine why credit unions are better positioned than other financial institutions to help resolve our nation’s financial woes.
Most economists agree that the mortgage lending crisis affecting millions of Americans is primary among the factors leading to the nation’s economic decline. Estimates are that the financial sector, including banks and investment firms, is exposed to losses totaling more than $300 billion as a result of subprime and exotic mortgage loans. News stories about the demise of lending institutions large and small dominate the headlines, and some financial experts say the worst losses are yet to come.
Most credit unions steered clear of subprime mortgage lending. But credit unions are not immune to economic crises, and certainly many credit union members have been impacted by rising rates on loans from other financial institutions which affect their ability to manage their credit union debt. Credit unions themselves for the most part have maintained secure and diverse lending portfolios. Nationwide, with few exceptions, credit unions have shown positive growth across the board. This is evident in California and Nevada, among the states hardest hit by the housing slump, where credit unions have demonstrated growth in assets, loans, and membership.
Why Congress Needs To Pass CURIA
So, as well-capitalized credit unions are poised to become part of the solution, we continue to face regulatory hurdles that prevent us from putting our members’ money to work for the good of the economy and consumers across the nation. Provisions in CURIA (Credit Union Regulatory Improvements Act, H.R. 1537) can remedy the situation if only Congress will give us the opportunity. We need to raise the member business lending cap from 12.25% of assets to at least 20% of assets, and increase the minimum threshold for a qualifying member business loan from $50,000 to $100,000, among other measures. CUNA and state leagues worked hard to build support for such regulatory relief to be included in the federal government’s economic stimulus plan, but more help from credit unions is needed to gain solid Congressional backing.
These relief measures certainly have sufficient appeal. Our estimates indicate that removing the reins from 8,400 credit unions nationwide has the potential to quickly inject billions into the marketplace. Estimates for exponentially stronger financial benefits to consumers and small businesses over the long term are staggering–and all at no cost to taxpayers.
Credit unions have always been there for businesses, and from the early 1900s were uncapped in business lending. And even with the 12.25% lending cap we’ve faced since 1998, interest in business lending is on the rise. Over the last three years, credit union business lending assets are up 109% nationally. Today, about one in four credit unions offer member business loans, amounting to $21.8 billion in total funding. Relaxing the cap could bring thousands more credit unions into the fold and inject hundreds of thousands of dollars in capital into local communities. Small businesses have demonstrated strong demand for member business loans from credit unions, especially as banks and other financial institutions have shown little interest in providing loans on a smaller scale.
Credit unions can be a major contributing factor toward achieving a solution for re-energizing the economy–if Congress will clear a path and let us go to work for businesses and consumers across the country. Already, 34 members of Congress from California and Nevada have indicated their support for CURIA, following the lead of Rep. Paul Kanjorski and our own Rep. Ed Royce. Let’s work together to make sure they get this message.
Bill Cheney is president and CEO of the California and Nevada Credit Union Leagues.
