As drought-stricken businesses across the country are in direneed of assistance, the Obama administration asked the regulatorsto find ways to provide aid. The NCUA responded by informing 1,003credit unions of their eligibility for low-income designation andallowing them to opt-in rather than slogging through paperwork.

The significance is that LICUs are not bound to the 12.25% ofassets cap on member business lending.

Naturally, the community banks are crying foul. For fun, let's pick apart whatthe Independent Community Bankers Association said about the NCUA'smove.

“The NCUA's decree granting unlimited member business lendingauthority to more than 1,000 tax-exempt credit unions goes againstthe will of Congress and any rational regulatory policy authority.Lawmakers set reasonable statutory caps on business lending bycredit unions because these tax-subsidized institutions wereestablished to serve people of modest means with a commonbond.”

First, the NCUA did not decree unlimited authority on these1,003 credit unions as common business sense would not permitunlimited business lending. Second, doing away with regulatorybusywork is not irrational; it's the exact opposite of irrational.Third, no matter how many times the bank trades say it, creditunions are not “tax-subsidized institutions established to servepeople of modest means with a common bond.” Credit unions wereintended to serve their FOMs, including those of modest means.

The credit unions included average $92.5 million in assets(median $19.3 million). These aren't credit unions targetingmassive corporate farms. These are precisely the credit unions toserve the rural family farmers and farmers' markets theadministration intended, which are shunned by many banks. An SBAstudy that found 80 cents of every dollar of credit union businesslending is new funding.

It is pathetic that the bankers are worried about a small numberof small credit unions possibly lending where most banks aren'tanyway. Of the credit unions notified, only about 24% (239 CUs)already make business loans. The other 764 eligible credit unionscan't set up business lending programs overnight if they are evenwilling or able.

The maximum benefit the NCUA estimates would total about $500million in new loans. It's too bad that more credit unions couldn'tassist those affected by the drought (literal and credit-wise)because the bankers continue to stall the business lending legislation.

Next, the ICBA asserts in its press statement, “Outrageously,the NCUA has unilaterally acted to designate credit unions aslow-income, which could automatically double the number of creditunions with that designation. The administration and NCUA appear tobe exploiting the nation's drought conditions to rationalize thesedesignations–despite the fact that less than half of these creditunions are in states with extreme drought conditions.”

The administration may very well be exploiting the droughtconditions. Necessity is the only thing that gets Washingtonmoving. However, no rationalization is taking place. These creditunions were already eligible for LICU status, and the NCUA has not“unilaterally acted to designate credit unions” as LICUs. Thecredit unions have to opt-in and the program is at the behest ofthe president of the United States, not to mention to the benefitof hard-working, tax-paying Americans. From the ICBA's point ofview, shouldn't the taxpayers be taking advantage of their taxdollars hard at work in tax-exempt credit unions?

“Highly controversial legislation to expand business-lendingauthority has failed to advance in Congress for a decade, but thecredit union regulator has thumbed its nose at the legislativebranch in favor of its own aggressive actions to dramaticallyexpand the tax-exempt credit unions' powers.”

Again, the NCUA expanded nothing. The agency simply let creditunions know they were eligible based on low-income thresholds asdefined by the U.S. Census Bureau. Nothing unilateral aboutthat.

ICBA blathers on about tax subsidies leading to increased riskto the financial system “as evidenced by a January GovernmentAccountability Office report that found that failed credit unionshad more member business loans as a percentage of assets thanothers in the industry.” Blah, blah, Telesis. Seriously? The bankscan only play the Telesis card so many times. Statistics from GlattConsulting actually show that credit unions in business lending aremore financially stable than the credit union communityoverall.

“No wonder several credit union executives have expressedopposition to expanding the industry's business-lending authority,”ICBA states. On a microsite administered by the group, StoptheCUGrab.org,“several” amounts to three letters from credit union CEOs.

The ICBA statement concluded with more drivel about taxation andCommunity Reinvestment Act compliance.

The NCUA deserves a kudos for its efforts and should continue inthis direction to eliminate unnecessary paperwork that eases theburden not only on its regulated credit unions but also on theNCUA.