ABA Vows to Sink JOBS Bill if MBL Hike Included
If a House bill backed by the American Bankers Association in a new package of legislation designed to help small businesses create more jobs gives credit unions expanded lending authority, the banking trade group has vowed to pull back its support.
House Majority Leader Eric Cantor (R-Va.) recently introduced the Jumpstart Our Business Startups or JOBS Act. The bipartisan measure aims to increase capital formation and pave the way for small businesses to go public, among other initiatives.
The JOBS package includes a 500-shareholders bill (H.R. 4088), introduced by Rep. Ben Quayle (R-Ariz.), that is similar to the ABA-supported legislation (H.R. 1965) the House passed, 420-2, in November 2011. It would require 2,000 banks and bank holding companies to register with the SEC once they cross the 500-shareholder threshold. The ABA said it proposed that change in 2005. The threshold was originally adopted in 1964 and has not been modernize since then.
The intent of the shareholder bill is to offer some relief to small businesses that want to grow but are limited by the threshold, according to the legislation. It would also make them less susceptible to acquisitions by larger firms, which could lead to fewer jobs and less innovation.
Despite its premise to create more jobs, ABA President/CEO Frank Keating said the banking group will do whatever it takes, including opposing the JOBS package with the favored shareholder threshold bill to keep credit unions from having access to a proposed raise in the member business lending cap.
Keating said he believes credit unions are thinking that if the JOBS bill moves forward in the Senate, their proposal to increase the MBL cap from 12.25% to 27.5% of assets should advance too.
“Now large credit unions are suggesting, in greedy and arrogant fashion, that if this clearly noncontroversial bill moves forward in the Senate, so should their very controversial proposal to increase credit unions’ business lending cap,” Keating wrote in a March 2 ABA newsletter. “One has nothing to do with the other, and it should stay that way.”
Keating said the credit union industry’s request to make more business loans in an effort to help turn the economy around is disingenuous and dangerous. Only 30 credit unions, mostly large ones, would stand to benefit from a higher MBL cap, he added.
“We need to tell Congress–plainly and firmly–no deal,” Keating said.
“This latest ploy by credit unions is emblematic of their continuous desire for more rights without responsibilities,” Keating wrote. “‘Don’t touch our special tax status–we’re different,’ they say. But let us offer the same products as banks and go after the same customers.”
Keating warned about the ABA’s possible next move.
“ABA will do what it takes–even if it means opposing a package with the SEC shareholder bill to make sure they can’t,” he said, referring to credit unions and the MBL cap proposal.
John McKechnie, the former NCUA director of congressional and public affairs, who is now a partner with Total Spectrum/Steve Gordon and Associates, a Washington consulting firm, said credit unions must continue to make their presence known to Congress despite the ABA’s threats.
“It’s important for credit unions to be in on the discussion,” McKechnie said. “As credit unions, we have to make sure Congress puts us in the context of helping small businesses.”
Keating said while most credit unions remain focused on their mission to serve individuals of modest means and are not near their commercial lending limits, those that are would pick up more small business loans if the MBL cap was raised but at the expense of banks that pay taxes. One consequence would be a net loss to the U.S. Treasury, he added.
“Some say they’ll make the loans that banks aren’t making. But if banks, which have years of commercial lending experience, are deeming a loan too risky, why would Congress want another federally insured depository institution to make that loan?” Keating asked in the ABA newsletter. “Better to listen to the GAO, which has warned that increasing credit unions’ commercial lending authority could affect their safety and soundness.”
McKechnie said the ABA’s stance to thwart the JOBS package to prevent credit unions from a higher MBL cap speaks volumes.
“It’s a pretty low road on their part. It doesn’t help the economy. Unfortunately, the bankers’ conduct speaks for itself.”
The JOBS package was scheduled to be heard on the floor in the House last week. The Senate Banking Committee held a hearing March 6 to discuss capital formation proposals to spur job creation and protect investors. Experts testified on the history and state of the IPO market, the needs of start-up and small businesses, why investors buy IPOs, the role of accounting and other disclosures, analyst conflicts of interest and other matters.