RESPONSE TO FED CHAIRMAN BERNANKE’S COMMENT ON RAISING THE CAP ON MEMBER BUSINESS LENDING (MBL)
FROM CREDIT UNION TIMES (March 3, 2010): (Fed Board Chairman Ben) Bernanke told the House Financial Services Committee last Wednesday that because credit unions are tax exempt, they need to accept certain restriction on their activities, including a limit on how much members business lending they can do.
He told the panel that credit unions enjoy a “tax-favored” status and that gives them certain competitive advantages over banks. Lawmakers should keep that in mind before granting credit unions other privileges, including raising the cap on member business lending, he said in response to a question from Rep. Brad Sherman (D-Calif.).
The banks would complain, obviously, that if credit unions are allowed to do everything banks can do, why are they tax favored? I think that’s the trade off Congress has to consider,” Bernanke said.
CUNA RESPONSE: Chairman Bernanke is gravely misinformed. Credit unions have been making member business loans (MBLs) since their inception in the early 1900’s. In the first 90 years of credit unions’ existence in the United States, there was no MBL cap at CUs. The current 12.25% of assets cap was an arbitrary limit imposed by Congress in the CU Membership Access Act in 1998 (CUMAA). As for the credit union tax exemption: It arises from credit unions’ structure as not-for-profit, democratically-controlled cooperatives – and that structure is unchanged over the past 100 years. The tax exemption has nothing to do with the breadth or volume of CU product and service offerings – a fact clearly spelled-out by Congress in the CUMAA.
