WASHINGTON (11/20/12)--There is no downside, just upside, to lifting the credit union member business lending (MBL) cap and letting small businesses grow, American Consumer Institute (ACI) Center for Citizen Research President Steve Pociask said in a Huffington Post column.
"Public policy needs to encourage competition, remove market entry barriers and stimulate private investment…Artificial barriers like lending caps are designed to protect big banks, not consumers and not small businesses," he added.
Pociask noted that banks rejected 60% of small business loan applications last year, and reduced their small business lending practices by 20% during the last recession. "Without capital, small businesses do not expand, entrepreneurial dreams are put on hold and jobs are not created."
Credit unions have tried to help small businesses expand, increasing their small business lending activities by 40% during the last recession, Pociask noted. However, he said, "the outdated cap on credit union lending is suppressing small business access to capital."
The MBL cap currently stands at 12.25% of a credit union's assets. U.S. House and Senate legislation that would increase the cap to 27.5% of assets has been introduced, and a Senate vote on credit union MBL legislation, S. 2231, has been promised during this session.
Advocacy for these MBL cap increase bills will be the main focus of a late-November National Hike the Hill being organized by the Credit Union National Association (CUNA) and the state credit union leagues.
CUNA has estimated that the proposed MBL cap increase could inject $13 billion in funds into the economy, creating as many as 140,000 new jobs in the first year following enactment.
These credit union investments would create a multiplier effect, Pociask said. He estimated that the knock-on impact of a credit union MBL cap increase could mean a $32.7 billion contribution to U.S. Gross Domestic Product, $8.2 billion in employment earnings and 188,000 new jobs.
An MBL cap increase could also mean more small business loans at lower market risk, he added. Credit union investment in small business could also lead to advancements in new technology, and a host of additional economic benefits "that make consumers and small businesses big winners.
"Whatever the actual benefits turn out to be, one thing we know--the resulting economic expansion will not put taxpayers on the hook, like the big bank bailouts have," Pociask said.
For the full HuffPost piece, use the resource link.