WASHINGTON (4/17/12)--A bill to broaden credit unions' ability to build capital would simply fix a flaw in current law that unfairly punishes healthy credit unions for growing to meet the needs of their members and their communities, writes Rep. Brad Sherman (D-Calif.) in an op-ed in the Monday issue of Roll Call.
Sherman and Rep. Pete King (R-N.Y.) introduced the Capital Access for Small Businesses and Jobs Act (H.R. 3993) in February to allow credit unions additional sources of capital. Currently capital can only be built from retained earnings.
"This bipartisan legislation simply gets the government out of the way, allowing credit unions to expand consumer access to their affordable financial services while improving the overall safety and soundness of the credit union system.
"The bill makes a simple fix to current law to boost economic growth without spending a dime of taxpayer dollars or adding to the deficit," the Sherman op-ed says.
Sherman says the result of the current law's inflexibility on capital for credit unions results in credit unions of all sizes being forced to turn away deposits and scale back on lending to limit their growth.
"(The current) capital-based standards were never intended to discourage manageable asset growth by well-managed, financially healthy credit unions, yet that is exactly what is happening in every part of the country.
"As consumers and small-business owners will tell you, this is a real problem that harms everyone looking for reasonably priced financial services," Sherman writes.
Sherman notes that H.R. 3993 ensures adequate safeguards. It gives the National Credit Union Administration the flexibility to adjust capital requirements in response to changes in economic conditions. That flexibility, Sherman adds, is something the U.S. Congress has already provided to every other financial regulator.
"Credit union access to supplemental capital does not cost the taxpayer a dime and would not disturb the cooperative and mutual structure fundamental to the credit union model, and it has no bearing on the federal tax status of credit unions. By definition, our bill excludes any form of supplemental capital that would alter the cooperative nature of the credit union.
"Best of all, unlike other financial institutions, no credit union ever accepted a taxpayer bailout or Troubled Asset Relief Program money, and today we are eager to put more of their capital to work to help sustain the recovery," Sherman writes.
Roll Call is a widely read publication covering Capitol Hill.