The Obama administration put its support for raising the cap on member business loans to as much as 27.5% assets in writing yesterday when Treasury Secretary Timothy Geithner wrote House Financial Services Committee Chairman Barney Frank that his department "could support proposals to increase credit union member business lending provided safety and soundness issues are addressed."

Geithner, who was providing details to a proposal outlined by Treasury Department Counselor Gene Sperling at a House Financial Services Committee hearing last week, said they favor an approach that would "maintain the current limit [12.25% of assets] for most credit unions but increase it for those that meet certain higher standards.

These include that the credit union has: Been at 80% or more of its MBL limit for four consecutive quarters; is well capitalized (above 7%); has at least five years experience of doing member business lending; has strong policies and experience in managing member business loans; and satisfies other standards by the NCUA.

In draft language the administration mandates that the NCUA implement a tiered approval process so that credit unions "gradually increase the amount of member business lending in a manner that is consistent with safe and sound operations." This process would be spelled out in proposed rules that the agency must issue within no more than six months after the bill is passed.

Frank (D-Mass.) said at last week's hearing that he would hold hearings on raising the cap on MBLs, which is also the subject of legislation introduced by Rep. Paul Kanjorski (D-Pa.) and Sen. Mark Udall (D-Colo.), but hasn't announced a timetable yet.

Geithner stressed the importance of working to implement these changes to the Federal Credit Union Act in a way that does not inappropriately cause "more risk to credit union members, the credit union system, the National Credit Union Share Insurance Fund, or the financial system as a whole."

NCUA Chairman Debbie Matz has urged her colleagues in the administration to support raising the MBL cap. She wrote Sperling last November that the agency has "reasonable regulatory standards" and promised strong additional enforcement.