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Washington
Free-market think tank backs increased MBL power
WASHINGTON (9/3/09)--Existing restrictions on credit union business lending should be lifted through legislative action, the pro-free market, Washington, D.C.-based Competitive Enterprise Institute (CEI) advocated in a letter sent to Senate offices early this week. Though his organization promotes the complete removal of any rules that place caps on a credit union’s ability to provide loans to its members, CEI’s Director of the Center for Risk, Regulation, and Markets Eli Lehrer said that H.R. 3380, the Promoting Lending to America’s Small Businesses Act, is “a good start” that is “worthy” of “careful consideration.” The legislation, which was introduced in late July by co-sponsors Rep. Paul Kanjorski (D-Pa.) and Rep. Ed Royce (R-Calif.), would double the current statutory Member Business Lending (MBL) cap of 12.25%, and would exclude from the new 25% statutory cap loans of less than $250,000, business loans in underserved areas, and loans to non-profit religious institutions. Reiterating credit union claims that lifting the MBL cap could produce as much as $25 billion in new capital for investment, the letter added that the legislation would “expand credit where it is needed most” which could “presumably increase the level of prudential care taken with regard to credit-worthiness standards.” According to the letter, the smaller size and “narrowly-focused” lending standards of the “average credit union” result in the majority of available credit going to “smaller businesses that wish to use difficult-to-value assets,” businesses that can experience difficulties if they try to borrow from other financial institutions.
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