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Will Raising Credit Union MBL Cap Prevent the Fiscal Cliff?

Will Raising Credit Union MBL Cap Prevent the Fiscal Cliff? By Gina Ragusa
Published November 30, 2012
Credit Unions Online
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Concerns on Capitol Hill about avoiding the fiscal cliff have credit union proponents pushing to have the member business loan cap raised before year’s end.

Kris Roglieri, president and founder of Prime Commercial Lending and Commercial Capital Training Group recently submitted a plea in the Washington Post to keep businesses front and center while lawmakers mull over how to avoid taking a financial plunge.

Roglieri writes, “Simply put, the economy does well when small businesses thrive and create jobs. And small businesses thrive when they are given access to capital for growth. But small business lending has dramatically decreased since the 2008 crash, and currently, banks are approving only 10 percent of applications. There are alternative lending solutions for small business capital, however, many business owners do not know about those options.”

Credit unions believe that a viable solution is to increase the 12.25% business loan cap on credit union assets to 27.5%, which would provide more small businesses access to much needed capital.

In a Hail Mary attempt to gain attention, Fred Becker, president of the National Association of Federal Credit Unions (NAFCU) sent a letter to top Senate lawmakers last week, urging them to not only pass the MBL cap raise but to also add a piece of legislation that would help community banks. He wrote that by doing so, “would not only be a win-win proposition for credit unions and banks, but also for the American people and our nation’s economy.”

The Wall Street Journal reports that bank lobbyists have been asking lawmakers to extend a Federal Deposit Insurance Corp. (FDIC) program that allows for unlimited guarantee of $1.4 trillion in deposits on 0% interest accounts meant for payroll and other transactions. This program was created during the 2008 recession and is set to expire in a matter of weeks.

Although Becker extended an olive branch to banks, James Ballentine, chief lobbyist for the American Bankers Association dug in his heels saying that his group is, “adamantly, strongly, definitely opposed” to partnering with credit unions on this piece of legislation.

Could Credit Union Business Loans Prevent Fiscal Cliff Diving?

Credit unions have long said that extending the member business loan cap would create thousands of jobs at no expense to taxpayers.

Recent reports point to the creation of 140,000 new jobs in the first year alone if up to $13 billion in capital is made available through credit union business loans.

A new study designed for the Independent Community Bankers of America by the Capital Policy Analytics Group suggests that credit unions are inflating these numbers and that raising the cap would have little to no influence on re-invigorating the economy.

However, Mike Harvey Veridian Credit Union's ($2.2 billion, Waterloo, IA) Chief Political Officer told Credit Unions Online that raising the member business loan cap is essential to a healthy economy. “Lifting the federal cap on Member Business Lending would allow credit unions to lend to more small businesses, creating more opportunities for them to hire, expand and operate. This strengthens our small businesses as a driving force for employment and economic improvement.”

Because time is of the essence, the Credit Union National Association (CUNA) and 500 credit union and small business representatives are meeting on Capitol Hill to urge lawmakers to act now.

Credit unions were optimistic the bill would have been heard earlier this week, but sources told The Hill that the legislation was re-prioritized for now.

On Tuesday, CUNA’s Pat Keefe said, “[W]e are hearing that the Senate will vote, this week, on the credit union business lending bill (S 2231), perhaps within 48 hours. You should also know that, beginning [today], hundreds of credit union and small business representatives will be in Washington to urge their senators to vote ‘yes’ on expanding authority for credit unions to make business loans.”

CUNA reports that several lawmakers are behind the bill quoting Sen. Mark Udall (D-Colo.) as saying, "Let's get this bill done!"

Others echoed Udall’s sentiment with CUNA reporting that Rep. Brad Sherman (D-Calif.) said there is "nothing more important" than lending to small businesses that are in need of capital. Rep. Paul Tonko (D-N.Y.) praised credit unions for their excellent track record. "You invest in communities. You make things happen," Tonko said.

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