Taking limits off credit unions will aid economy

5/18/2010

TWO pressing economic concerns in northwest Ohio are the need to create jobs and the lack of credit available to small business. Congress has the power to provide as much as $225 million in loan capital to small businesses in Ohio, which could create more than 2,450 jobs - and it won't cost taxpayers a cent.

Yet legislation that would increase the lending authority of credit unions sits idle on Capitol Hill, while small businesses that are desperate for capital must deal with the sharpest decline in lending since 1942. As a matter of urgency and good public policy, lawmakers should move swiftly to pass this legislation.

Credit unions are well-capitalized, not-for-profit financial cooperatives that have withstood difficult financial times because of smart stewardship and responsible lending. Best of all, they have money to lend.

During the heart of this recession, Ohio credit unions increased lending to their member businesses by 11.2 percent. They have more than $330 million in business loans on the books.

Credit unions can do even more if Congress acts. Current law restricts a credit union's lending to small businesses to 12.25 percent of its assets. That arbitrary level, imposed in 1998, caps the amount of money available to help community businesses.

The legislation before Congress would raise the cap to 25 percent. That would give credit unions the authority to invest more in small business across the country, including northwest Ohio. Most important, enhancing the ability of credit unions to stimulate the economy costs taxpayers nothing.

Opponents of increasing the business lending cap argue that credit unions do not have the sophistication or expertise to make small-business loans. This assertion could not be more incorrect.

Credit unions have managed loans of all types for more than 100 years. During the Great Depression, they gave struggling Americans access to needed credit. Credit unions routinely have lower charge-off and delinquency rates than banks.

Others argue that giving credit unions more capacity to make loans to their member businesses will hurt banks. As of last December, credit unions held $36 billion nationally in loans to small businesses. This figure represented 4.5 percent of all small-business loans at depository institutions. And it took credit unions a century to reach this market share.

Even if credit unions were to double their share, banks still would hold an overwhelming 91 percent share. The institutions that are really hurting are our nation's small businesses, which have seen their access to credit dry up.

Credit unions want to help small businesses in Toledo that are looking for credit, but current law limits their ability.

It is time to allow credit unions to expand their commitment to "people helping people." Doing so will cost taxpayers nothing and help put northwest Ohio's economy on the path to recovery.

Beth Carpenter is president of the Northwest Chapter of the Ohio Credit Union League.