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CUNA testifies as House lawmakers study MBL benefits
WASHINGTON (10/13/11)--National Credit Union Administration (NCUA) Chairman Debbie Matz and Jeff York, president/CEO of CoastHills FCU, Lompoc, Calif., testifying on behalf of the Credit Union National Association, discussed the benefits a higher credit union member business lending cap would have on the nation's economy and small businesses during a Wednesday hearing before the House Financial Services subcommittee on financial institutions and consumer credit.
Click to view larger image In her testimony and in response to questions from lawmakers, National Credit Union Administration Chairman Debbie Matz (shown center) detailed for the House Financial Services subcommittee on financial institutions and consumer credit three tangible benefits of increased MBL authority: more reasonably priced loans for small businesses, enhanced safety and soundness through diversification for credit union portfolios, and job growth. Shown behind Matz from left: CUNA Senior Vice President of Legislation Affairs Ryan Donovan, Jeff York, President/CEO of Coasthills FCU in Lompoc, Calif., who testified on behalf of CUNA after Matzs testimony, CUNA President/CEO Bill Cheney, and CUNA Executive Vice President for Government Affairs John Magill. (CUNA Photo)
Click to view larger image At the center of things, CUNA witness Jeff York, of Coasthills FCU, prepares to take his spot at the witness table during Wednesday hearing on increasing the MBL cap. York testified that large numbers of small business owners are telling policymakers that they are being turned away for credit by their banks, and are coming to credit unions for help. His testimony notes that, in the year ending June 2011, community bank commercial loans outstanding declined by 2.6%--in sharp contrast to the 4.4% increase in credit union business loans over the same period (CUNA Photo).
The hearing centered on H.R. 1418, the Small Business Lending Enhancement Act, which would increase the MBL cap to 27.5% of assets. The cap currently stands at 12.25% of assets. Testifying first, Matz said more than one in five credit unions making member business loans that are subject to the cap have reached 50% or more of this [12.25% of assets] ceiling. Later, as part of a panel of five witnesses, York said his $617 million-asset credit unions business loan portfolio currently stands at around 7% of assets, and added that his credit union could reach the upper limit of the 12.25% lending cap within six months. However, he explained, credit unions cannot simply lend up to the cap and then halt lending, as doing so could harm their ability to lend to current business-owning members. York said credit unions that consider getting into the business lending marketplace are also forced to examine whether there would be a benefit in business lending if cap concerns would force them to slow down or end this practice within a few months. His remarks were in accord with an earlier statement by Matz. Testifying bank representatives said that the demand for small business loans was not high at the moment. However, York in his testimony countered those statements, saying that small business owners are coming to credit unions for help after they are turned away for loans at banks. York noted that credit union business lending increased by 4.4% in the 12-month period ended June 2011, adding that small business lending by commercial banks declined by 2.6% during that same time period. Matz in her testimony said providing more reasonably priced loans for small businesses, enhancing safety and soundness through diversification for credit union portfolios, and creating new jobs are the three main benefits of the MBL cap increase. She added that her agency would promptly revise credit union regulations to protect safety and soundness if MBL cap increase legislation is enacted. NCUA would also remain vigilant in carrying out our supervisory authorities, she added. The NCUA in a release noted the legislation would allow experienced, well-capitalized and well-managed credit unions to gradually increase member business lending portfolios, by no more than 30% annually. Matz also called on Congress to expand credit union access to supplemental capital during her appearance. Rep. Ed Royce (R-Calif.), who is an original sponsor of the legislation, said his goal in introducing the legislation is to expand access to credit for creditworthy borrowers. Rep. Brad Sherman (D-Calif.), a co-sponsor, noted that H.R. 1418 is one of the few job creation measures that has bipartisan support. H.R. 1418 has 88 cosponsors. A similar Senate bill, S. 509, was introduced earlier this year by Sen. Mark Udall (D-Colo.) and has 20 cosponsors. CUNA has estimated that lifting the MBL cap would have a number of beneficial effects on the ailing economy, including infusing $13 billion in new credit for small businesses and adding 140,000 new jobs within the first year of enactment--all at no cost to the American taxpayer. Other testifying witnesses included:
*Sal Marranca, president/CEO of Cattaraugus County Bank, on behalf of the Independent Community Bankers of America; *Albert Kelly, Jr., president/CEO of SpiritBank and chairman-elect of the American Bankers Association; *Gary Grinnell, president/CEO of Corning FCU, on behalf of the National Association of Federal Credit Unions; and *Mike Hanson, president/CEO of the Massachusetts Credit Union Share Insurance Corporation.


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