WASHINGTON -- Credit unions last week received a ray of good news on their goal of raising the cap on member business loans when Treasury Department Counselor Gene Sperling and House Financial Services Committee Chairman Barney Frank promised action.
Sperling, in response to a question from Frank at a May 18 hearing on expanding small business lending, said the Obama administration supports raising the cap in some instances and would send Congress a proposal that would accomplish that soon. He said it endorses a plan to lift the cap up to 27.5% if the credit union is well-capitalized, has done member business lending for at least five years and shows that it has done sound underwriting and servicing.
The proposal contains more restrictions, yet allows more leeway, than the language of the legislation currently pending on Capitol Hill, sponsored by Rep. Paul Kanjorski (D-Pa.) in the House and Sen. Mark Udall (D-Colo.) in the Senate.
Frank (D-Mass.) said while lawmakers "hate to have a feud" between our friends, his committee will be holding hearings on raising the cap, even though community bankers have expressed strong opposition to it. The Independent Community Bankers of America have long opposed raising the cap on member business loans, although they didn't mention it at the hearing.
But the good news for credit unions was tempered by the fact that nobody made firm promises about a timetable.
Sperling didn't say when the administration would send up its proposal, which will be combined with existing legislation. Frank didn't say when there would be a hearing on the issue, and he declined the opportunity to consider the measure at the same time his panel was marking up legislation that would create a fund for lending money to community banks that is intended to spur business lending. On May 19, Frank's committee marked up the bank lending bill, which would make $30 billion in loans available to community banks.
At the hearing on May 18, CUNA President/CEO Dan Mica endorsed the fund for banks and noted that credit unions want to lend more of their own money and don't want any taxpayer assistance.
"Credit unions aren't asking for government money. We want the cap lifted so we can put $10 billion into the economy and create jobs and do it with safety and soundness," he said. "The only group that opposes it is the group that is about to get $30 billion."
When asked if he expects the banks' opposition will be a major problem during the subsequent weeks, CUNA Vice President of Legislative Affairs Ryan Donovan said, "It shouldn't and doesn't have to and probably will."
NAFCU Executive Vice President Dan Berger said the proposal is "a good first step, though more limiting than we'd like" and assessed the chances of getting enacted as "pretty good."
The path to a higher cap on business loans could be blocked by comments made by Federal Reserve Board Chairman Ben Bernanke and by the NCUA.
In February, Bernanke told Frank's committee 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
While NCUA Chairman Debbie Matz has endorsed raising or lifting the cap, the agency's inspector general has faulted its oversight of member business lending at some credit unions. Matz wrote lawmakers and the Treasury Department earlier this year that if the cap were lifted, her agency would strengthen its regulations to prevent "unintended safety and soundness concerns." --firstname.lastname@example.org