Member Business Lending Editorial The word “bailout” has been one of the most active words in the English language the past two years. Consumers have a strong opinion of the word “bailout” when it comes to financial institutions. They don’t like it and they’ve made their voice heard loud and clear. Many financial institutions are cutting back their lending causing some small businesses to look elsewhere for much needed capital and lines of credit to make payroll. In his State of the Union address, President Obama advocated a new government program that would make available to community banks $30 billion that would then be lent to small businesses. The money would come from repaid TARP funds and again have “bailout” attached to it. However, there is another way to infuse capital into the marketplace and it wouldn’t cost taxpayers a penny. Credit unions are asking Congress to lift their statutory limit on small business lending. Currently a credit union can only lend 12.25 percent of its assets. They are seeking to increase this cap to 25 percent. Since their inception, credit unions have made small business loans to their members. In 1998 the Federal Credit Union Act was amended by Congress to expand credit union powers. During that debate, the bankers successfully lobbied to impose an arbitrary 12.25- percent cap on credit union member business lending. It seems ironic today, given many of those same banks are now not lending to consumers and small businesses while credit unions are. If the cap were increased, credit unions across the country would be able to infuse an additional $10 billion to assist struggling small businesses in the first year alone. The Credit Union National Association (CUNA), based in Washington D.C., estimates this additional capital would create 108,000 jobs by helping small businesses grow. By raising the cap, credit unions’ share of small business lending would double to 10 percent nationally. That means banks would still control 90 percent of the commercial loan market. In early March, a bi-partisan group of legislators sent House Speaker Nancy Pelosi (D-CA) and House Minority Leader John Boehner (R-OH) a letter asking them to "do more to support America's small businesses by modifying the statutory limitations that have currently prevented many credit unions from doing more to advance the economic recovery." The letter was signed by 58 members of the House. However, an amendment to raise the cap is not attached to any current job-creation legislation. There are stand-alone bills to raise the cap that currently has 100 co-sponsors in the House and 11 in the Senate. Six of Florida’s House members are currently co-sponsors of HR 3380. It’s OK to use an active word with our financial situation. I think the word “grow” would be perfect. With credit unions’ help, small businesses will continue to “grow” and the economy will begin to “grow” out of this downturn. All it will take is
active thinking from Congress to raise the credit union member business lending cap.