Editorial: Let credit unions make more business loans
Small businesses have a hard time getting loans they need to operate and expand, limiting their ability to create jobs. Credit unions have capital, but the amount they can loan to businesses is limited by law. There's a coupling waiting to be made here and Sen. Kirsten Gillibrand (D-N.Y.) wants to be the matchmaker.
Her Small Business Lending Enhancement bill would raise the cap on the amount of a credit union's total assets that it can lend to businesses. Since the 1990s, that cap has been set by law at 12.25 percent. The bill would raise it to 27.5 percent. In the aftermath of Sandy, when many local businesses need help getting back on their feet, this reform is one Congress should embrace.
The change could boost lending to small businesses nationally by $10 billion in the first year, and in New York by $1 billion. In the Hudson Valley, where there are 39 credit unions, the estimated increase in lending potential would be $234 million.
The higher cap would be phased in for individual credit unions that demonstrate sound underwriting and business-loan servicing practices to the National Credit Union Administration, the agency that insures their deposits and oversees their lending.
Gillibrand's bill has bipartisan backing in both chambers, but previous attempts failed because of opposition from banks. They don't want increased competition from credit unions. As not-for-profit cooperatives, credit unions are tax exempt, which the American Bankers Association said gives them an unfair competitive advantage. But banks haven't been meeting the need for small business loans in the wake of the 2008 financial crisis.
Small businesses are a major engine of economic growth and job creation in the nation and in New York. But in addition to demand for their goods and services, small businesses need reliable access to credit to prosper. Freeing credit unions to provide more loans is a good way to stimulate the economy without spending tax dollars.
It's a marriage the deficit-burdened federal government should bless.