There is no good public policy reason to deny credit unions greater capacity for making business loans to their members,
while at the same time giving community banks a subsidy to do so, CUNA has told each member of Congress.

“Credit unions do not need the taxpayer assistance to do more business lending because, unlike some banks, credit unions remain generally well capitalized,” CUNA President and CEO Dan Mica wrote in the letter. “Credit unions’ impediment to additional small business lending is not the need for more capital but an arbitrary statutory limit on business loans of 12.25% of their total assets.”

The Obama Administration Tuesday proposed a plan to give community banks $30 billion of taxpayer money in an attempt to spur lending to small business. Mica made a point of noting credit unions do not oppose the subsidy for the banks out of hand
– but they do question not including credit unions in proposals to foster more business lending.

Mica added that pending legislation in the Senate and House, which would raise the cap on credit union business lending to 25 percent of total assets “could provide up to $10 billion in new loans to small businesses and create as many as 108,000 jobs – without costing the taxpayers a dime, or increasing the size of government.”

The complete text of Mica’s letter to each member of Congress follows:

- - - - - - - - - - - - - - -

February 3, 2010

Dear Senator/Representative:

On behalf of the Credit Union National Association (CUNA), I am writing to express concern with the Administration’s proposal to give community banks $30 billion of taxpayer money in an attempt to spur lending to small businesses. CUNA represents nearly 90 percent of America’s 7,800 credit unions and their 93 million members.

I want to be very clear that CUNA does not want to oppose this subsidy for the community banks out of hand; however, there is no good public policy reason why the Administration should choose to target banks for such favorable treatment, and not also increase the statutory cap on credit union business lending.

Most credit unions would not be eligible for the capital infusions that the administration has proposed giving to the community banks because the Federal Credit Union Act defines capital as only the retained earnings of the credit union.
While we hope that Congress will consider credit union capital reform in the future, credit unions do not need the taxpayer assistance to do more business lending because, unlike some banks, credit unions remain generally well capitalized. Credit unions’ impediment to additional small business lending is not the need for more capital but an arbitrary statutory limit on business loans of 12.25% of their total assets.

Credit unions throughout the country have continued to make business loans despite the economic crisis and want to do even more to help small businesses in their communities. These loans are made very prudently by credit unions, and have low charge-off and delinquency rates, compared to banks. Legislation has been introduced in both the House and the Senate to increase the credit union business lending cap from 12.25% to 25% of total assets (H.R. 3380 / S. 2919). Enactment of these bills could provide up to $10 billion in new loans to small businesses and create as many as 108,000 jobs – without costing the taxpayers a dime, or increasing the size of government.

As Congress puts together job creation legislation, we hope you will not forget the important role credit unions can play in helping their small business-owning members. Increasing the credit union member business lending cap is a “no cost to the taxpayers” proposal that should be included in a comprehensive job creation package.

On behalf of the 93 million members of America’s credit unions, thank you very much for your consideration.

Sincerely,
Daniel A. Mica
President & CEO
Credit Union Natl. Assn.
Washington, DC