Having covered this industry since 1998, I usually go into a story with a pretty strong sense of where I think it's going. It's not an agenda; rather an educated guess.
But sometimes I guess wrong.
When I conceived the idea for the member business lending story on page 12 of this issue, I was sure the data would show that only a tiny handful of credit unions are at — or even near — the cap. And indeed that is correct. According to NCUA's most recent data just 1.8% of federally insured credit unions are at or near the cap, and only one-third of CUs even make business loans. Yet they have spent significant time and resources over the last 18 years trying to get the cap changed.
I have long wondered why the industry has persisted for this long, given the small number of CUs affected. Yes, I know that even some lawmakers involved in the legislation that created the cap conceded that it may as well have been picked out of a hat and is designed to solve a problem that only exists in the minds of bankers. And I remember talking to Beltway pundits back in the early days of the cap battle telling me that sometimes the name of the game is to go for the fight you can win, not necessarily the one with the greatest impact or import. Of course, anyone who thought cap was going to be an easy battle probably aren't still around to see that the cap is…still around. I also know that it's not usual for legislation to take decades — and many iterations — before it gets passed.
But working on this story changed my perspective. I still don't think raising the cap should be CUs' top priority — and it hasn't been for some time — but neither should they back away from it entirely.
So what changed?
A credit union executive I recently met told me, "the thing about the cap is that it's actually counterproductive to a basic regulatory premise: that we should strive to have a balanced, diversified loan portfolio. But if you put a cap on one type of loan, you eliminate one of the tools in the toolshed that would allow us to do that."
More importantly, what if the reason so few CUs are bumping up against the cap is not due to a lack of interest in MBLs, but rather shows the cap is doing exactly what the bankers hoped it would do: have a chilling effect on CUs getting into this product line.
Editor in Chief Lisa Freeman can be reached at
