CUNA, NCUA Testify on Behalf of Increased MBL (Misc News: October 13, 2011)
NCUA Chair Debbie Matz and Jeff York, president/CEO of Coasthills FCU in Lompoc, Calif., told a U.S. House panel that raising the cap on credit union member business lending would help the nation’s economy and small businesses.
Testifying before the House Financial Services subcommittee on financial institutions and consumer credit on Wednesday, Matz said more than one in five credit unions making member business loans have reached 50 percent of the current ceiling, according to CUNA News Now.
York told the panel that his $617 million credit union’s business loan portfolio stands at 7 percent of assets and added that his credit union could reach the current 12.25 percent cap within six months.
However, he explained, credit unions "cannot simply lend up to the cap and then halt lending," as doing so could harm their ability to lend to current business-owning members.
York said credit unions that consider getting into the business lending marketplace currently must examine whether there would be a benefit in business lending if cap concerns would force them to slow down or end this practice within a few months. Matz made similar remarks as well.
Those testifying on behalf of banks said that the demand for small business loans was not high at the moment. However, York countered those remarks, saying that small business owners are coming to credit unions for help after they are turned away for loans at banks.
York noted that credit union business lending increased by 4.4 percent in the 12-month period ended June 2011, adding that small business lending by commercial banks declined by 2.6 percent during that same time period.
CUNA President/CEO Bill Cheney said some of the congressmen asked difficult questions of both sides. One of those questions came from Rep. Bill Huizenga, R-Zeeland, who asked if banks weren't seeing demand for loans, what would be the harm in increasing the cap. So far, the Michigan Republican has not offered a position on the MBL legislation.
Matz said increasing the MBL cap would have three positive effects. First, credit unions could provide more reasonably priced loans for small businesses, it would enhance the safety and soundness through diversification for credit union portfolios and it would lead to the creation of more jobs.
CUNA has estimated that the MBL proposal, which was written by the NCUA and the U.S. Treasury Department, would pump about $13 billion into the economy, leading to the creation of 140,000 jobs. The proposal would increase the MBL to 27.5 percent of assets, but also includes safeguards to make sure credit unions remain safe and sound.
Matz added that her agency would "promptly revise" credit union regulations to protect safety and soundness if MBL cap is increased. "NCUA would also remain vigilant in carrying out our supervisory authorities," she added.
The NCUA in a release noted the legislation would allow "experienced, well-capitalized and well-managed credit unions" to "gradually increase member business lending portfolios, by no more than 30 percent annually."
Matz also called on Congress to expand credit union access to supplemental capital during her appearance.
Rep. Ed Royce, R-Calif., who is an original sponsor of the legislation, said his goal in introducing the legislation is to expand access to credit for creditworthy borrowers. Rep. Brad Sherman, D-Calif., a co-sponsor, noted that H.R. 1418 is one of the few job creation measures that has bipartisan support.
H.R. 1418 has 88 cosponsors, including seven from Michigan. House Republicans Fred Upton, Thaddeus McCotter and Candice Miller have all signed on as co-sponsors, as have Democrats John Conyers, Hansen Clarke, Dale Kildee and Gary Peters.
McCotter and Huizenga are Michigan's congressmen on the subcommittee.
A similar Senate bill, S. 509, was introduced earlier this year by Sen. Mark Udall, D-Colo., and has 20 cosponsors, including both of Michigan’s senators, Democrats Carl Levin and Debbie Stabenow.
The MCUL urges credit unions to take action on our MBL Action Alert supporting H.R. 1418 by clicking here.