Happy New Year! We hope that 2012 will usher in a turning point for our economy to show signs of solid improvement. A welcomed indicator would be an increase in real jobs that would decrease the numbers of both the unemployed and underemployed.
May this year also lead Congress to finally and appropriately deal with the misguided efforts of the credit union industry to increase its ability to make business loans. House Bill 1418 would permit credit unions within 80 percent of the current business lending cap of 12.25 percent of assets to apply for approval to increase to 27.5 percent of assets—more than doubling the current level. To make matters worse, credit unions are not required to count loans of less than $50,000 to a borrower or the portion of a loan that has a government guarantee, such as Small Business Administration loans.
And here is the rest of the story, as broadcasting legend Paul Harvey used to say. As of Dec. 31, 2010, fewer than 100 of the nearly 7,300 credit unions nationwide were within the level of 80 percent of 12.25 percent of assets. Will the credit union industry really fall on the sword for these giant, growth-oriented credit unions that bear little resemblance to the original credit union, serving “especially people of modest means”?
Fortunately, there is an easy solution. Those credit unions that want to breach the current limitations should convert to a mutual savings bank charter, pay federal taxes, and be subject to the same rules and regulations as banks and thrifts.
Unfortunately, we have to hope that Congress figures it out. If so, Congress could protect both the banking industry from further unfair competition and the traditional credit union industry from the potential harm of overreaching its mandate. And that would be a happy ending.