To the editor:
On behalf of the Independent Bankers Association of New York State, I am writing to express our strong opposition to legislation pending before Congress that would have a negative impact on the economy and the ability of local, independently owned community banks throughout New York state to serve their customers and communities.
The misleadingly named Small Business Lending Enhancement Act would dramatically and unnecessarily expand the powers of taxpayer-subsidized credit unions by more than DOUBLING the legal cap on "member business loans" (MBLs) from the current 12.25 percent to 27.5 percent of a credit union's assets.
The credit union industry is using the fragile economy to justify increasing their business lending authority. Yet the fact is, only about 2 percent of all credit unions are at, or even NEAR, the current cap.
This controversial proposal would benefit only a handful of overly aggressive, growth-at-all-cost credit unions and allow them to use their generous tax subsidy to unfairly compete with taxpaying local community banks, thereby severely hindering our ability to serve our communities.
An increase in credit union business lending would also harm taxpayers. Lending by tax-exempt credit unions displaces lending by taxpaying community banks, thereby reducing tax revenues and increasing the deficit - not only for the federal government but for struggling state and local governments as well.
Most of the local small businesses I speak to say they need a stronger economy with more demand for their products and services, not access to more credit.
The existing MBL cap DOES NOT prevent robust credit union business lending. It contains several exemptions. For instance, loans under $50,000, SBA loans up to $5.5 million and loans secured by the borrower's primary residence are ALL exempt from the current loan cap. The bottom line: There is ample capacity for the remaining 98 percent of credit unions to expand their member business lending today without any new legislation if they choose to do so.
It is important to remember that the credit union charter was granted by Congress to serve the needs of individuals of modest means, those who share a common bond. Credit unions should demonstrate they are meeting the basic statutory mission for which they were created before attempting to expand their powers into more complex and specialized fields.
This proposal would only serve to further exacerbate the already unfair marketplace and provide tax-exempt credit unions an even greater competitive advantage over local community banks that pay their fair share of taxes. We vigorously oppose this unnecessary expansion of credit union powers and do not believe this proposal should be pushed through Congress in these closing days of its lame-duck session.
Frank J. Capaldo
President and CEO
Independent Bankers Association of New York State