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Wisconsin banks decline CUs increase biz loans
PEWAUKEE, Wis. (4/12/10)--Wisconsin credit unions experienced a 13% increase in business lending in 2009 while Wisconsin banks’ saw a 15% decrease over that same period. However, while the void for affordable business credit has shifted greater responsibility to credit unions to make the kind of loans the state needs to stimulate the economy and preserve jobs, credit unions can’t do more because of an arbitrary federal cap of 12.25% of total assets on their business lending, said the Wisconsin Credit Union League. The drop in lending by Wisconsin banks aligns with a national trend described by The Wall Street Journal as the largest since 1942. Credit unions have rushed to lend to firms turned down by banks because the requested loan was deemed “too small” and to entrepreneurs whose bank lines of credit were suddenly and inexplicably pulled. But credit unions are hard pressed to do more, the league said in a press release. Some credit unions are bumping up against a federal cap that limits how much they can lend to businesses; others can’t offer business loans at all because the cap prevents them from recovering the costs of doing so. Prior to 1998, when the cap was put in place, credit unions had no statutory limits on their business lending and had been making safe, secure business loans for more than 80 years. Credit unions’ business loan loss rate today is just one-ninth of that seen by Wisconsin banks. Credit unions have acted so responsibly that federal regulators have voiced support for increased credit union business lending, said the league. “If the current cap were lifted, credit unions could offer $362 million of new business credit and add 3,937 jobs in Wisconsin in the first year alone,” said Brett Thompson, league president/CEO. “Nationally, credit unions could offer $10 billion in new credit in the first year, creating 108,500 new jobs. And this can be done without expanding government and at no additional cost to taxpayers.” Bills in the U.S. House and U.S. Senate would raise the cap to 25% of total assets and raise to $250,000 the threshold for a loan to be considered a member business loan. Wisconsin U.S. Reps. Steve Kagen, Tammy Baldwin and Tom Petri are co-sponsors of the House bill. “Banks’ opposition to this effort is an affront to the average person on Main Street who has already paid dearly for the sins of those on Wall Street,” Thompson said. “Considering many credit unions’ business borrowers were denied by banks, it’s incredible that banks will stand in their way of receiving credit from a willing source--all to the detriment of job creation and our state economy as a whole.” Thompson also noted that Wisconsin credit unions’ average business loan is around $170,000 and most credit union business loans are to households with annual incomes below $50,000. “There’s no way banks can continue to distance themselves from the credit crisis when their actions--and the latest data citing banks’ failure to lend--prove otherwise,” Thompson added. “Banks aren’t competing with credit unions for the same loans, so they should get out of the way of the credit unions that are willing to help small businesses.”
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