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Mica in iAmerican Bankeri MBLs are CU tradition
WASHINGTON (3/19/09)—Credit Union National Association (CUNA) President/CEO Dan Mica Wednesday took on a myth he said is being spread by some bankers: that member business lending (MBL) is separate from credit unions’ traditional mission. In a letter to the editor of American Banker, Mica noted that a New Jersey banker recently wrote in that space that the federal tax exemption for credit unions should be revoked in exchange for passage of a bill lifting the cap on credit unions' MBLs. Barry Zadworny had argued that for credit unions, there should not be a "free lunch." “Aside from the fact that talk of a ‘free lunch’ rings extremely hollow from an industry whose institutions big and small have required unprecedented amounts of government assistance, Mr. Zadworny's point is premised on the false notion that credit unions stray from their traditional mission when engaging in member business lending,” Mica wrote. He noted that credit unions' traditional mission included member business lending without portfolio restrictions for almost 100 years, until 1998. "Credit unions are staying true to their mission. Lifting the arbitrary cap that now exists on member business lending, as Sen. (Charles) Schumer (D-N.Y.) proposes, will help credit unions further that mission,” Mica said. He was referring to Schumer’s announced plans to introduce legislation to lift the MBL cap because “banks are not lending to small businesses and credit unions will." He added that the senator’s point is buttressed by the Federal Reserve Board's Senior Loan Officer Survey, which shows a majority of banks have cut back on small-business lending (75% in the October '08 survey). Also, a recent white paper by the Competitive Enterprise Institute further concludes that expanding credit union small-business lending would yield much-needed economic stimulus. The CUNA letter also noted that the credit union federal tax exemption is premised on credit unions' structure as not-for-profit, member-owned financial cooperatives. That structure, Mica pointed out, does not change with the decision to offer member business loans.
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