Federal deficit hawks, the banking industry has your back.
The American Bankers Association and the Independent Community Bankers of America have drafted a letter to Congress warning that an increase to credit unions’ business lending limit “would reduce tax revenues to the federal government and state governments and increase the deficit at the very time Congress is looking for ways to reduce it.”
Following a by-now well-traveled path, in bill H.R. 1418 credit unions are asking for the cap on credit union-originated business lending to be raised to 27.5 percent of total assets from the current 12.25 percent.
The ABA and the ICBA, which tend to differ on the impacts of regulations on their respective members, have nevertheless found common ground in opposing the effort. Raising the cap, they say, is the work of “a new breed of large credit unions” that wish to “abandon their tax-subsidized mission of serving people of modest means.”
“They portray this legislation and previous bills as an effort to help both small businesses and the entire credit union industry,” the letter continues.
What bothers the ABA and the ICBA most, though, is that an increased cap “would simply exacerbate an already un-level playing field by increasing the ability of large, tax-subsidized credit unions to seize small business lending from taxpaying banks – the bread and butter of community banks across the country.”
Same’Ol Same’Ol
But locally, credit unions – including representatives from the same large institutions singled out by the banking groups – said they don’t sense strength and menace in the bankers’ letter. Rather, they said, banks are mistakenly lashing out at credit unions when their wounds are actually self-inflicted.
“The only people opposed [to the changes] are the bankers and their trade groups who are once again trying to use Congress to further their own narrow business interests,” Massachusetts Credit Union League President Dan Egan said in an email to Banker & Tradesman. “They pulled back from small business lending when it was needed most, and have taken taxpayer money intended for lending and used it to repay TARP funds borrowed from the Treasury.”
Likewise, Tim Garner, senior vice president for marketing and strategy at Marlborough-based Digital Federal Credit Union (DCU), said the cap itself is an arbitrary concession to the banking industry that keeps credit unions from doing as much business as they’d like.
“Before the passage of the Credit Union Membership Access Act in August 1998, there was no cap on business lending by credit unions in America. Congress inserted the arbitrary cap into the law to quiet bank opponents,” Garner said. “The first credit union formed in the world in Germany was formed to serve businesses who could not obtain credit from banks. Credit unions had a long history of prudent business lending before the cap was placed.”
“We’ve been told that businesses across the country have said the lack of available credit is preventing them from expanding their operations,” Garner continued. “Credit unions have money and can make it available without any cost to American taxpayers. On the other hand, the federal government made $30 billion available to banks to lend to businesses – something we didn’t protest or receive.”
