Credit unions wanting to make more business loans received another glimmer of hope last week when Sen. Mark Udall (D-Colo.) introduced an amendment to the jobs bill moving through the Senate to raise the statutory cap on those loans from 12.25% of assets to 27.5% of assets.
Udall has said that raising the cap will help "unlock the credit market so businesses on Main Street can make payroll, buy inventory and expand. By increasing access to credit union loans, small businesses across the country will be able to expand and create thousands of jobs."
The amendment would be added to a bill aimed at stimulating job creation that the Senate is expected to continue debating during the week of July 11. That bill, which passed the House last month, sets up a program in which the government can inject funds into community banks with assets of $10 billion or less. In return, the banks would pay the government a dividend. But as the bank's lending increases the dividend would get smaller.
Even though community banks would benefit from the bill, they have vowed to fight any effort to help credit unions and are making the claim that by doing more business lending credit unions are straying from their original mission.
The Obama administration has said it could support legislation raising the cap on MBLs if there are certain regulatory safeguards and if the NCUA takes a gradual approach. The administration wants to keep the current limit 12.25% for most credit unions, but increase it for those that meet certain higher standards.
CUNA and NAFCU praised Udall's amendment. CUNA has estimated that raising the cap could create 100,000 new jobs and inject $10 billion into the economy.
"About 350 credit unions are at or near the statutory lending cap, and that doesn't take into account others that want to start up a program but haven't because the current ceiling has a chilling effect on their entry into business lending," outgoing CUNA President/CEO Dan Mica said.
NAFCU President/CEO Fred Becker noted that the amendment "puts into place significant safeguards to address safety and soundness concerns," and the amendment is a "positive first step in assisting American small business owners during these difficult economic times."