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MBLs spotlighted as CUNA testifies on reg restructure
WASHINGTON (3/25/09)—Credit union member business lending (MBL) was
Click to view larger image CUNA President/CEO Dan Mica (foreground) faces Senate Banking Committee members at a hearing on financial regulatory restructuring, which also broached removing the member business lending cap for credit unions. Panel members include (from left) Sens. Mark Warner (D-Va.), Jon Tester (D-Mont.), Tim Johnson (D-S.D), Christopher Dodd (D-Conn.), chairman, Richard Shelby (R-Ala.), ranking member, and Robert Bennet (R-Utah). Seated to Mica's left: William Atridge, of the Independent COmmunity Bankers of America. (CUNA photo)
spotlighted during a Senate Banking Committee hearing Tuesday on modernizing the structure of financial regulations, at which the Credit Union National Association (CUNA) represented credit union views. In opening remarks, Sen. Charles Schumer encouraged CUNA President/CEO Dan Mica to address the issue of the cap that restrains credit union loans to small businesses, which Mica did in both testimony and remarks. Mica, testifying, reminded the Senate lawmakers that credit unions stand ready to add as much as $10 billion in credit if the cap is removed. On the regulatory issues, Mica told the Senate panel that credit unions need an independent regulator, one that understands the many-layered nuances that so distinctly separate not-for-profit credit unions from their for-profit counterparts. That regulator should be strong, tough, fair and competent, Mica said, but should not be dually responsible for credit unions and banks. He pointed out candidly that, with the history of banking industry attacks on credit unions, putting credit unions under the same regulator as banks would be like “throwing a chicken into the fox’s lair.” Mica, setting aside written remarks, made his points candidly to the Senate Banking Committee at its hearing addressing modernization of the financial regulatory structure. Among structural changes being considered is creation of a new and over-arching systemic risk regulator to be more fully attuned to risks that could arise across the markets. Proponents of such an overseer also argue it would prevent the growth of institutions deemed "too-big-to-fail," which threaten those markets. Mica, in his written testimony, urged Congress to keep credit unions, and other smaller institutions “that have shunned undue risk, out of this new regulatory scheme." In notable exchanges concerning the current 12.25%-of-assets MBL cap, Schumer pushed banking representatives on the witness panel for legitimate reasons not to—even temporarily—remove that limit. In a Q-and-A session, the New York Democrat asked banking representatives to give a good reason why, at a time when there’s “a failure of people being able to get new credit, and existing lines of credit are being pulled” from small businesses, credit unions should be restricted. When the question went largely unanswered, Schumer said he believed history shows the cap was not pushed by regulators but rather by credit unions’ competitors, the banks. Schumer said lawmakers are being flooded with calls from small businesses in good financial standing that have lost their lines of credit at banks that are tightening their lending to cope with financial losses. "We have to find new ways of lending," Schumer said. Schumer has announced his intentions to introduce a bill that would free up credit unions to provide more loans to member businesses, to help ease the credit crunch that Schumer says is caused in part by shrinking bank lending.
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