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Joint letter opposing credit union expansion sent to Geithner


 March 30, 2010
The Honorable Timothy F. Geithner
Secretary of Treasury
U.S. Department of the Treasury
1500 Pennsylvania Ave., N.W.
Washington, D.C. 20220
Dear Mr. Secretary:
Legislation has been introduced in Congress that would increase the credit union member business lending cap from 12.25 percent of a credit union's total assets to 25 percent, raise to $250,000 the de minimus level of a credit union business loan, and exclude other loans from the cap.  The American Bankers Association (ABA) and the undersigned trade associations strongly urge the Administration to oppose this unnecessary and unsafe expansion of credit union lending authority, and we encourage the Administration not to include this proposal in any job-creation package. 
Eliminating the business lending cap and expanding credit unions' already broad authority would substantially increase the risk exposure of credit unions and result in credit unions straying further from their traditional mission of serving consumers, especially those of modest means.  Most importantly, changes sought by the credit union industry would benefit only a handful of credit unions. In fact, only 37 of the nearly 7,600 credit unions, or about one-half of one percent of all credit unions, would directly benefit because they are at or near their Congressionally mandated 12.25 percent lending cap.
In other words, 99.5 percent of credit unions have the authority and lending capacity to make additional loans to small businesses today. Furthermore, the National Credit Union Administration reported that the number of credit unions offering any business loans fell by 11.9 percent since the beginning of the year, to 1,721 credit unions.
Raising the cap would have very little impact on lending to businesses. Congress recognized that business lending is fundamentally different from consumer lending. When Congress passed the Credit Union Membership Access Act of 1998 (CUMAA) to protect consumers served by credit unions, it imposed a limit of 12.25 percent of total assets on business lending. Congress made its intent clear.

The legislative history for CUMAA explained that the business lending restrictions    “ . . . are intended to ensure that credit unions continue to fulfill their specified mission of meeting the credit and savings needs of consumers, especially persons of modest means, through the emphasis on consumer rather than business loans. The Committee action will prevent significant amounts of credit union resources from being allocated to large commercial loans that may present additional safety and soundness concerns for credit unions and that could potentially increase the risk of taxpayer losses through the National Credit Union Share Insurance Fund.” (Senate Report 105-193, May 21, 1998, pp. 9-10)
The current law aggregate business loan limitation also helps to prevent the tax-subsidy from being used to support large business loans. Business loans that are less than $50,000 or that have a governmental guarantee, such as Small Business Administration loans, are excluded from this calculation. Raising the threshold to $250,000 would exempt even more credit union business loans from the aggregate business loan cap and reduce transparency.
The substantial tax and regulatory / statutory benefits that credit unions currently enjoy are meant to be an incentive for credit unions to make credit available to consumers of modest means. Instead of furthering this goal, an increase in the business lending cap will simply allow credit unions to stray further from their traditional mission.
The banking industry supports efforts to serve the small businesses in our communities. We are strongly opposed, however, to any efforts that would expand the already broad authority of large, aggressive, growth-oriented credit unions that have abandoned their mission of serving people of small means.
American Bankers Association            Alabama Bankers Association
Alaska Bankers Association                Arizona Bankers Association
Arkansas Bankers Association            California Bankers Association
Colorado Bankers Association            Community Bankers Association of Ohio
Connecticut Bankers Association        Delaware Bankers Association
Florida Bankers Association                Georgia Bankers Association
Hawaii Bankers Association                Heartland Community Bankers Association
Idaho Bankers Association                 Illinois Bankers Association
Illinois League of Financial Inst.           Indiana Bankers Association
Iowa Bankers Association                  Kansas Bankers Association
Kentucky Bankers Association            Louisiana Bankers Association
Maine Association of Comm. Banks    Maryland Bankers Association
Massachusetts Bankers Association    Michigan Bankers Association
Minnesota Bankers Association                  Mississippi Bankers Association
Missouri Bankers Association              Montana Bankers Association
Nebraska Bankers Association            Nevada Bankers Association
New Hampshire Bankers Association   New Jersey Bankers Association
New Mexico Bankers Association        New York Bankers Association
North Carolina Bankers Association     North Dakota Bankers Association
Ohio Bankers League                          Oklahoma Bankers Association
Oregon Bankers Association                Pennsylvania Bankers Association
Puerto Rico Bankers Association          Rhode Island Bankers Association
South Carolina Bankers Association    South Dakota Bankers Association
Tennessee Bankers Association                Texas Bankers Association
Utah Bankers Association                   Vermont Bankers Association
Virginia Bankers Association               Washington Bankers Association
Washington Financial League              West Virginia Bankers Association
Wisconsin Bankers Association           Wyoming Bankers Association
Cc: Banking Committee Chairman Christopher Dodd
Banking Committee Ranking Member Richard Shelby
Members of the U.S. Senate

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