Congress should raise the lend­ing cap hin­der­ing the nation’s credit unions

Austin American-Statesman - - OPINION -

Whether it is the flower shop around the corner or the parts man­u­fac­turer down the block, small busi­nesses are the heart­beat of Amer­i­can com­merce. Yet they’re find­ing them­selves shut out from the bank loans they need to sur­vive.

So the House did what Congress too of­ten does: It passed a $30 bil­lion tax­payer-fi­nanced mea­sure crammed with in­cen­tives to en­cour­age com­mu­nity banks to in­crease small-busi­ness loans. The bill now moves to the Se­nate, which plans to de­bate it later this month.

While it might seem a log­i­cal way to stim­u­late the econ­omy and ease a se­ri­ous credit crunch, it’s symp­to­matic of Washington’s pen­chant for com­plex, ex­pen­sive so­lu­tions over sim­ple, cost­ef­fec­tive ones. In­stead of cre­at­ing a tax­payer­funded pro­gram to coax bankers to open their vaults, Congress would be wiser to give credit unions broader author­ity to make the small­busi­ness loans that banks aren’t mak­ing.

Credit unions want Congress to raise the cap on loans to small busi­nesses from 12.25 per­cent to 25 per­cent of a credit union’s as­sets. The higher cap would free the in­sti­tu­tions to gen­er­ate $10 bil­lion in new loans in the first year and add more than 100,000 jobs na­tion­ally. In Texas, the change could pro­duce $700 mil­lion in small-busi- ness loans and about 7,600 jobs. And, best of all, tax­pay­ers would not be on the hook.

Pre­dictably, bankers op­pose the change, which they con­tend would en­cour­age ill-ad­vised loans and give the tax-ad­van­taged, mem­ber­based credit unions an un­fair ad­van­tage. Not only is the ar­gu­ment disin­gen­u­ous, com­ing from an in­dus­try still reel­ing from its own bad lend­ing de­ci­sions, but it also threat­ens to stymie a valu­able al­ter­na­tive for cash-starved small busi­nesses. In the ab­sence of bank lend­ing, more credit unions are mak­ing small-busi­ness loans and, thus, inch­ing closer to the cap. Un­less it is raised, small busi­nesses and the U.S. econ­omy will be losers in this fi­nan­cial turf bat­tle.

De­spite bankers’ claims, credit unions aren’t a threat to their pros­per­ity. Last year, credit unions held $36 bil­lion in small-busi­ness loans, less than 5 per­cent of all such loans. Even if most credit unions reached the 25 per­cent cap, banks would still have more than 90 per­cent of the small-busi­ness mar­ket.

Small busi­nesses cre­ate two of ev­ery three pri­vate-sec­tor jobs and need credit to buy equip­ment, hire work­ers, make pay­roll and keep their doors open. If bankers aren’t will­ing to be a big­ger part of the so­lu­tion, Congress must al­low credit unions to fill the void.

Olivier Douliery

Thou­sands protested on the sev­enth an­niver­sary of the in­va­sion of Iraq and Pres­i­dent Barack Obama’s de­ci­sion to send more troops to Afghanistan on March 20 in Washington.

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