Pulling from a 2003 Government Accountability Office study, the Wisconsin Bankers Association offered what it considered evidence that most NCUA examiners do not have enough experience to effectively monitor commercial loans at credit unions.
The WBA said the GAO was "skeptical" that the NCUA was up to "the challenge of ensuring that it is adequately prepared to monitor" the expansion of the CU commercial lending. The banking group also noted that more than 270 of Wisconsin's state-chartered CUs already have the right to petition the state's Office of Credit Unions to exceed the 12.25% member business lending cap.
"The federal legislation would circumvent an important regulatory safeguard used to determine whether a credit union has the expertise and financial strength to manage more commercial loans," said Kurt Bauer, WBA president/CEO, in an April 9 statement.
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Referring to studies from the GAO and the National Community Reinvestment Coalition, Bauer also stated, "It doesn't make sense for federal lawmakers to reward the very largest and most profit-driven credit unions with more commercial lending authority when there is overwhelming evidence from independent and unbiased sources that CUs are not reaching out to underserved consumers."
The Wisconsin Credit Union League said the WBA "keeps repeating the same factual inaccuracies." The league said since the MBL cap was put in place in 1998, "there has been no evidence of systemic risk due to credit unions' business lending."
Bauer did not respond to calls from Credit Union Times to expand on MBL and commercial loan charge-off and delinquency rate comparisons between banks and credit unions. However, he did say in his statement that the recession "was caused by financial firms engaging in activities that neither they nor their regulators fully understood."
"Given that experience, it is beyond risky for Congress to ignore the legitimate regulatory safety and soundness concerns expressed by GAO and others that inherently go with expanding the credit union industry's commercial lending authority, especially in an unstable economy," Bauer said.
He also pointed out that out of the more than 7,600 credit unions nationwide, only 37-or less than a 0.5% -are at or near their congressionally mandated cap. He did not cite the source of those figures.
"That fact proves the CU lobby is carrying water for only the largest, most aggressive and nontraditional CUs that use their tax and regulatory advantages to poach business from taxpaying financial institutions," Bauer said. "If the largest CUs truly want to help speed an economic recovery, they can start by paying their fair share of the tax burden, just like other businesses in Wisconsin and across the nation."
The Wisconsin league said CU business lending in the state was not subject to any cap for credit unions' first 70 years of existence. In 2009, banks' loan losses were 2.36% compared to just 0.59% for credit unions.
"It's time we ask ourselves, who do we believe?" the league said. "It's either banks, that generate record profits when the economy is strong but turn their backs when working families struggle, or not-for-profit financial cooperatives that support working families regardless of the prevailing economic conditions."
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