MADISON, Wis. (4/27/12)--As they continue to press the U.S. Congress to pass legislation to extend their members business lending (MBL) authority, credit unions are receiving positive media coverage about their efforts to help small businesses and improve the economy.
Bills in the House and Senate would increase the MBL cap to 27.5% of a credit union's assets, up from 12.25%, under certain conditions.
Within the first year of enactment, the increased MBL authority would help to inject $13 billion in loans into the economy and create as many as 140,000 new jobs, with no cost to taxpayers, Credit Union National Association (CUNA) estimates show.
Patrick Keefe, CUNA vice president of communications and media, was quoted in a April 26 article in The Tennessean
assessing the bills' chances in Congress.
"The game is really on in the Senate," Keefe told The Tennessean
. "We feel that we have a real good case in the House. We just have to get through the Senate. I'm not saying it's adone deal in the House, but the Senate is key."
The April 26 edition of The Baltimore Sun
featured an opinion editorial article written by Rod Staatz, president/CEO of SECU of Maryland.
Staatz cited a recent nationwide survey, in which 9 out of 10 small businesses indicated that availability of credit was impeding their ability to hire. Nearly two-thirds said it had become significantly harder to get loans today than just a few years ago. Similarly, a National Federation of Independent Business survey found a nearly 10% increase in the number of small businesses trying to borrow but no change in the number of small businesses actually obtaining credit.
"Business lending is consistent with the mission of credit unions," Staatz said. "Credit unions were founded to 'promote thrift and make loans for provident purposes' through a not-for-profit cooperative structure focused on member-owners, not profit margins. Meeting the credit needs of their members--including business credit--is why credit unions exist."
The San Antonio News Express
published an opinion editorial from Bill Hammond, Texas Association of Business CEO, touting the willingness of credit unions to make loans to small businesses, in contrast to banks.
"A government program designed to provide loans to small businesses was only 14% loaned-out a year after its implementation. But there has been one bright spot in the tough lending picture--credit unions," Hammond wrote.
"Credit union lending to small businesses went up 44% over the last four years after small business entrepreneurs gave up on banks and looked elsewhere for loans," he continued. "The average credit union loan is almost $220,000, making credit unions the perfect partner for small businesses."
An April 8 article that appeared in in the Winston-Salem Journal
cited Credit Union National Association statistics that indicate credit unions hold less than 6% of all small-business loans, or a combined value of about $40 billion.
Credit unions would provide loans that banks have chosen not to offer, according to credit union sources quoted in the article.
"If just four credit unions in North Carolina that are at or above 65% of their member business lending cap are unable to continue lending, over 2,200 jobs and $200 million in credit will likely be lost in the next year," Marcus Schaefer, Truliant CU president/CEO tols the Winston-Salem Journal.
Jeff Hardin, communications director for the North Carolina Credit Union League, said MBL bills are not a bank-versus-credit union issue.
"Over the past several years, small-business owners have had a particularly hard time getting access to that capital, Hardin said. "Credit unions have dollars to lend and the expertise to help these small businesses."
Eli Lehrer, vice president of the Heartland Institute wrote an opinion editorial supporting MBL legislation in the Californail business and political journal Fox & Hound. "
Anyone who favors a freer, less regulated economy, should take victories where they can find them," Lehrer wrote. "And it's why conservatives should flock to support an effort to deregulate credit union lending. It's one of the best things Congress can do to create jobs and help small business in the short term."
The Heartland Institute and 10 other free-market organizations sent a joint letter to Senate Majority Leader Harry Reid, (D-Nev.), and Senate Minority Leader Mitch McConnell, ( R-Ky.), asking that they take up legislation that would loosen regulatory constraints on the amount of loans credit unions can make to business members.
"Doing away with these regulations would inject over $13 billion into the economy and foster the creation of up to 140,000 new jobs in its first year, all at no cost to taxpayers," the groups wrote. "As the economy is struggling to kick-start, this bill would give businesses much-needed capital to expand by simply raising the arbitrarily low lending cap."
In an 18-page policy document, Katherine E. Howell-Best of the North Carolina Banking Institute examined whether credit unions could effectively serve the small business market through their member business lending products.
"Banks allege that credit unions are creeping into the banking industry's share of the business lending market. The empirical evidence, however, does not support this allegation," Howell-Best wrote. She cited a U.S. Department of Treasury report that showed credit union member business lending almost doubled in seven years, from $2 billion in 1993 to $3.9 billion in 1999. During the same time, banks increased commercial and industrial lending by almost 85%, to to $824.7 billion in 1999 from $447.8 billion in 1993.
"Credit unions whose business lending goal is to allow members who need business lending services to make credit unions their primary financial institution should devise business lending and business services strategies," Howell-Best concluded.
"This includes offering business accounts, gaining experience that will enable the development of ancillary services, and, ultimately, mastering member business lending. Perhaps most importantly, though, credit unions must make their services and product lines known to their members in order to tap their unmet financial services needs."
The La Crosse Tribune
published a letter from Brett Thompson, CEO of the Wisconsin Credit Union League, in response to a letter from the Wisconsin Bankers Association:
Thompson made the following points about MBL legislation:
- Raising the lending cap won't increase deficits and will increase revenue.
- Banks hold 95% of U.S. business loans; MBL legislation won't dent their market share.
- More than 30 conservative and progressive groups support the legislation, as do 84% of voters recently polled.
- Small businesses say there's a credit gap; research supports them.
- The cap doesn't hamper just a few credit unions. Almost all credit unions must either deny business loans because of the cap or not offer them at all because the cap prevents cost recovery.
- Credit unions pay all taxes except corporate income taxes.
On Bloomberg TV
, Dale Kluga, head of Cobra Capital, LLC, addressed how big banks are not extending credit to small businesses. The housing market cannot make a full recovery until small businesses begin making more loans, Kluga said.
"My opinion is if the banks are not interested in supporting small businesses then they need to step aside and let the credit unions at least try," Kluga said.
Kluga suggested that small business lending is not currently a part of big banks' business model.
"Why should they preclude the credit unions from getting in the business?" Klug said.
To watch the video, use the link.