Give me that credit union business lending

Bill Cheney President and CEO, National Credit Union
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If I told you I had a plan that would help create hundreds of thousands of new jobs, inject billions into the economy, is supported by conservative, liberal and business groups, and wouldn’t cost the taxpayers a nickel, what would your response be?

Depending on who you are (and probably most of you), your response would likely be: “Give me that — now!”

Congress has the chance to “give you that,” and right now. Legislation pending in the Senate would increase the ability of credit unions to make small business loans to their members — which would pump as much as $10 billion into the economy and help create at least 100,000 new jobs, just in the first year after the new law goes into effect.

The key is allowing credit unions to allocate more of their overall assets to business loans, which is the goal of legislation offered by Sen. Mark Udall (D-Colo.). Under current law, credit unions’ total business loans are capped at 12.25 percent of their total assets. Sen. Udall would raise the cap — under certain regulatory conditions, crafted to ensure on-going safety and soundness — so credit unions could allocate up to 27.5 percent of their assets to loans to their members for business purposes.

There’s no cost to taxpayers for allowing credit unions to make more credit available to small business; not a single taxpayer nickel would go toward this effort. And, there’s no expansion of government in any way — just credit unions, owned by their members and serving only their members, across the nation extending more credit to small business.

Importantly, this is not a red or blue issue: Groups such as the League of United Latin American Citizens (LULAC) and Americans for Tax Reform (ATR) have stood up for the credit union bill. Business groups, including the National Association of REALTORs and the National Association of Manufacturers have voiced their support for the measure.

As Sen. Udall said when he introduced this common-sense measure: “It’s a no-brainer.”

Well, for just about everybody. There are some who just cannot seem to get their brains wrapped around Senate passage of this proposal to open up a lending channel that would create new jobs at no taxpayer expense.

Who are they? The bankers, natch.

Why? As Eli Lehrer of the Heartland Institute wrote recently, it’s because the bankers don’t want the additional competition. Right now, they have about 95 percent of the small business loan market. If the credit union proposal is enacted, they would still have about 90 percent.

But, as Lehrer also points out, giving credit unions this expanded ability would be good for the economy.

Banks have sharply curtailed their own lending to small business since the economy collapsed. More than one congressional hearing over the last year has focused on this development.

Credit unions, on the other hand, have seen strong demand from their members for business loans, which they have fulfilled. For the past several years, these loans have been the fastest-growing component of credit union lending, rising at an annual pace of 25.1 percent from 2000 to 2009.

But that growth is now slowing as more and more credit unions — nearly 350 — approach the current cap. These lenders have been the major contributors to credit union business lending growth over the past few years. Over the next few years, their business lending growth will dry up if the cap is not raised. Meanwhile, others will be discouraged from getting into business lending at all, given the sizeable up-front investment necessary, as long as the lower cap remains in place.

Giving credit unions the room to make more business loans isn’t the only answer for the nation’s economic woes. But it is something that can be done now, won’t add to the federal deficit, is favored by (almost) everybody, and has a measurable and sustainable impact.

Agree? Call your senator, and tell him or her — about the credit union business lending amendment — “Give me that, now!”

Bill Cheney is the president and CEO of the Credit Union National Association (CUNA).