MBL Hike in Legislative Limbo
The combination of election-year politics and the desire of lawmakers not to have to choose between credit unions and community bankers have helped erect a series of roadblocks to raising the cap on member business lending.
Senate leaders were, at press time, still negotiating what the terms of debate on the small business lending bill would be. It was unclear whether they would allow Sen. Mark Udall (D-Colo.) to offer his amendment that would raise credit unions' business lending cap from 12.25% of assets to as much as 27.5% assets.
Even though Senate Majority Leader Harry Reid (D-Nev.) is a co-sponsor of the amendment, he had told backers that he wouldn't bring it up unless they could guarantee at least 60 votes, from both Democrats and Republicans.
The Obama administration has said that passing the small business lending bill-which includes the creation of a $30 billion fund to help community banks make more small business loans-is one of its top priorities this summer in the wake of the high unemployment rate. While the administration submitted language on member business lending that became the basis for Udall's amendment, it's not clear how high a priority it is placing on including it in the final bill.
In a July 13 speech on the Senate floor, Udall told the stories of two Colorado women-a bakery owner and a beauty shop owner-who were turned down by banks for loans to expand their businesses but received loans from credit unions.
"Mr. President, some would have you believe this is about banks or about credit unions-but they are wrong-this is about small businesses," Udall said. "We have to do all we can to responsibly unlock credit markets for small businesses in Colorado and throughout the country."
Credit union lobbyists were working to find those votes but declined to predict the outcome.
"It's not over by a long shot," said CUNA Senior Vice President John Magill. "We have strong support among some senators, but it is always a challenge to get it on a short [legislative] calendar."
NAFCU Director of Legislative Affairs Brad Thaler said his group is trying to expand the "broad support" they already have for raising the cap and are tying the argument to concern about the sluggish economy. He added that in light of the sluggish economy, he hopes to change the reluctance of lawmakers to make a choice between credit unions and banks.
"There is pressure on members to show voters what they are doing to create jobs. We want them to think that excluding our amendment would put them in a bind when they face the electorate in November," he said.
NCUA Chairman Debbie Matz urged lawmakers to pass the MBL hike.
She called it a "zero dollar stimulus" and noted that credit unions "are well-positioned to provide small business with an important source of lending. However, credit unions are currently restricted in the overall amount of lending they can provide to members for business purposes."
Community banks are doing all they can do ensure that those restrictions stay in place.
In a letter to Congress, the Independent Community Bankers of America referred to credit unions as "taxpayer subsidized."
The trade group wrote that raising the cap would be "an unfair and ineffective means of increasing small business credit and would flout the tax subsidy given to credit unions to the detriments of community banks and the American taxpayer."
The ICBA said it would oppose the bill if the Udall amendment is a part of it.
The bankers have been using the credit unions' tax-exempt status-which could be under review as a way to reduce the federal deficit-as a key argument in their effort to kill the MBL hike.
In February, Federal Reserve Chairman Ben Bernanke made a similar point when testifying before the House Financial Services Committee.
"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," he said.