The NCUA's new program that would allow 1,003 credit unions to opt in tolow-income credit union designation drew mixed reactions from tradeassociations, which focused on the most politically charged benefitof LICU status: no cap on member business loans.

CUNA President/CEO Bill Cheney said he appreciates the NCUABoard's effort to expand business lending authority, but pointedout that “thousands of credit unions cannot win the LICUdesignation, for one reason or another.”

Without changes in the law, those credit unions can go no further in helping their members help their localeconomies or grow to match member needs, Cheney said in referenceto CUNA-supported legislation that would increase the businesslending cap from 12.25% of assets to 27.5%.

Brad Thaler, NAFCU vice president of legislative affairs, saidhis organization is “pleased to see continued administrationsupport for credit union member business lending.”

Thaler also plugged NAFCU-supported S. 2231 and its companionbill H.R. 1418, adding “the Administration, Treasury SecretaryGeithner, the NCUA and a large bipartisan contingent on CapitolHill all recognize the fact that the bankers don't want people toknow – allowing credit unions to make more member business loanswill create jobs and help the economy.”

Including low-income credit unions and their cap-free businesslending benefit in the Obama Administration's drought reliefpackage ruffled the feathers of the Independent Community Bankers of America, which called theNCUA's proactive move to pre-approve credit unions eligible forlow-income status “outrageous” and said the action defied the willof Congress and “any rational regulatory policy authority.”

“The administration and NCUA appear to be exploiting thenation's drought conditions to rationalize thesedesignations—despite the fact that less than half of these creditunions are in states with extreme drought conditions,” the ICBAsaid in a release.

Of the LICU-eligible institutions, the NCUA said 470 are federalcredit unions, which represent 47% of potential new LICUs, 52% ofpotential new assets and 54% of potential new members, which areheadquartered in states the federal government has identified asbeing in “extreme” drought conditions.

Because Congress has failed to pass MBL legislation for adecade, the NCUA “has thumbed its nose at the legislative branch infavor of its own aggressive actions to dramatically expand thetax-exempt credit unions' powers,” the ICBA said.

Increasing low-income credit union business lending willaggravate the federal budget deficit and reduce federal revenues byfavoring tax-subsidized credit unions over taxpaying community banks,the trade association said.

The ICBA reasoned that the MBL cap was set by Congress becausecredit unions serve people of modest means, and said if creditunions do more commercial lending, they should pay taxes.

However, the trade association's release omitted the fact thatthe program only allows credit unions that serve low-incomepopulations to make business loans in excess of the statutorycap.