LSCU COOP / Communication & Press Room / News Feed / Top Stories / Credit unions aim to raise lending cap, say banks aren't doing enough

Credit unions aim to raise lending cap, say banks aren't doing enough

Banks have requested less than $12 billion of the $30 billion made available by the by last year's Small Business Jobs Act, the Treasury Department has said. The government program offered low-interest funds to community banks so that they could boost small-business lending.

Lobbying groups for the credit-union industry are now requesting a House hearing on proposed legislation that would increase to 27.5 percent the amount of total assets a credit union can lend to businesses. Current law curtails credit-union lending to 12.25 percent of total assets.

The higher ceiling could result in an additional $13 billion in small-business loans in the first year, estimates the Credit Union National Association, the credit-union industry's largest lobbying group.

The banking industry, long opposed to the raised cap, is fighting the legislation. Community banks, in particular, argue that the move would allow tax-exempt credit unions to swipe market share from them, at a time when the federal government needs more sources of revenue.

But credit unions, which are member-based organizations, point to small-business lending figures as signs that the banks aren't doing enough. "Congress last year gave the banks $30 billion to make small business loans, but the banks' response has been tepid at best," says Bill Cheney, president and chief executive of CUNA. "Credit unions don't need $30 billion in government assistance; we're just trying to raise a lending cap in the law that's arbitrary and outdated."

At banks, small-business lending has fallen to $609 billion, an 8.6% drop from a year ago, according to the most recent data from the Federal Deposit Insurance Corp.

Some banks attribute the drop to lower loan demand from business owners, while others say federal regulators are holding them back from lending as much as they'd like to.

Community banks, meanwhile, are concerned that the legislation is gaining momentum in Congress. "The pressure has been building," says Paul Merski, senior vice president of the Independent Community Bankers of America...

To read the complete Wall Street Journal story, click here.