Credit Unions Seek to Lift Small Biz Lending Cap

Even as bank lending to small businesses decreased in the last three years, lending by credit unions increased. Now, credit unions want congress to loosen the limits on how much the nonprofit financial institutions can lend to businesses.

A bill introduced by Sen. Mark Udall (D-Colo.) on March 8 would let credit unions increase their small business lending, now capped at 12 percent of assets, to 27 percent.

Credit unions had about $39 billion in outstanding loans to small businesses last year, up from $24 billion in 2006, says Bill Hampel, chief economist at the trade group Credit Union National Association, citing data credit unions report to regulators. The equivalent lending by commercial banks peaked in 2008 at nearly $700 billion and declined to $626 billion in 2010, according to bank regulatory filings. (Both measure loans under $1 million, which the government uses as a proxy for lending to small businesses.)

About two-thirds of the nation's 7,000 credit unions don't do any business lending at all, Hampel says. Of those that do, about 350 are near the cap, meaning business loans constitute between 7.5 percent and 12.5 percent of their assets, he says. Even at 7.5 percent, a credit union will start "tapping the brakes" on business lending and might reach the cap in three years, he says.

Banks oppose lifting the limit, saying that business lending takes tax-exempt credit unions away from their nonprofit mission of serving members. "Credit unions were granted tax-free status to help them serve individuals of modest means, not to get into business and commercial lending," Camden Fine, head of the Independent Community Bankers of America trade group, wrote in a March 3 letter to congressional leaders.

Hampel says lending goes to businesses owned by credit union members, and the average loan size is about $200,000. The 12 percent limit was created in 1998, and it doesn't apply to about 100 credit unions that were major business lenders before then and were grandfathered in. In addition, loans under $50,000 and loans guaranteed by the Small Business Administration don't count toward the cap. Attempts to pass a version of the bill last year in the Small Business Jobs Act failed.

JAGNote by The Wall Street Journal

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Statements From L.A. Mayor Villaraigosa and Council President Garcetti on Ratification of Pension and Healthcare Agreement by a Majority of Coalition

Statements From L.A. Mayor Villaraigosa and Council President Garcetti on Ratification of Pension and Healthcare Agreement by a Majority of Coalition Employees

Los Angeles, Calif. /California Newswire/ — Mayor Antonio Villaraigosa and Council President Eric Garcetti issued the following statements today on the ratification of the pension and healthcare agreement by a majority of employees represented by the Coalition of LA City Unions:

Statement from Mayor Villaraigosa:

“States and cities across the country are grappling with burgeoning budget deficits and struggling to find solutions. Stalemate often stands in the way of resolution and core services are often cut without considering the long-term impact.

Here in Los Angeles, we have a different story to tell. Workers and city leaders have come together to negotiate a structural solution. Our compromise protects core services while saving hundreds of millions of taxpayer dollars. It provides workers with the economic stability of a guaranteed paycheck protected from furloughs, as well as the peace of mind that comes with health care they can count on when they retire.

I appreciate the willingness of our City employees to work with us to find long-term solutions and put posturing aside for the good of the people and the City of Los Angeles.”

Statement from Council President Garcetti:

“The City and the Coalition put politics aside and focused on problem solving to achieve structural reform, lower budget costs and increased service delivery from thousands of workers. As for the rest, we are moving forward immediately with furloughs and a retiree benefits freeze. We created clear alternatives to ensure the budget is balanced under any scenario and those plans are now being implemented.”

ABOUT THE EDITOR: Valerie Gotten (aka Valerie G) is an abstract painter, former movie stand-in, and volunteers for "green events" to help raise awareness about global warming, and help preserve california's wilderness and natural beauty.