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WASHINGTON — Credit unions appear to be facing an uphill battle in their ongoing effort to pass legislation that would double their cap on business lending.
October 12 -
WASHINGTON — Banks are again urging policymakers to reject proposals that would allow credit unions to make more business loans.
August 31
WASHINGTON — The simmering battle between banks and credit unions is heating up again, as credit unions revive their push in Congress to allow their industry to make more small business loans.
A group of around 75 small businesspeople converged Wednesday on Capitol Hill to lobby members of Congress on a bill that would raise the credit union lending cap to 27.5% from 12.25%.
Before they walked the halls of Congress, the business owners got a pep talk from Republican Rep. Ed Royce and Democratic Rep. Carolyn McCarthy, co-sponsors of the House version of the bill.
"We can fight for it. We can push to have a committee hearing on it, so people can hear our voices," McCarthy told the group. "But it's the people back home — it's all of you — that have to do the heavy lifting also."
The day's events were organized by the Credit Union National Association, which generally tried to keep its message positive, arguing that the bill is a way to create jobs without adding to the nation's budget deficit.
But if the bill has any chance of passage, it will have to do so over the vociferous opposition of the banking industry, which argues that the measure would benefit only a small number of large credit unions.
"Only one percent of the credit unions — about two dozen of them — are restricted by this 12.5% cap," said Paul Merski, chief economist at the Independent Community Bankers of America. "It's not getting any traction on the Hill because it's a faux issue."
Bill Cheney, the president and chief executive of CUNA, said bankers are missing the point.
"The bankers have this wrong," he said. "This isn't about credit union growth. This is about access for small businesses to capital. And they have it even more wrong in this environment. They say there's no demand. There's no demand?"
The renewed lobbying push sparked threats of reprisals by the banking industry, which led in turn to threats of counter-reprisals by the credit unions.
Merski said that if votes are held on the credit union legislation, several members of Congress are prepared to introduce an amendment that would tax credit unions, and another that would require them to comply with the Community Reinvestment Act.
"I'm not sure the 7,000 credit unions out there would want that trade-off," Merski said.
But John Magill, executive vice president of government affairs at CUNA, suggested that the credit unions will not back down from a fight.
Magill said that the only realistic possibility for passing the credit union bill is to attach it to another bill, supported by the ICBA, that would ease regulations on community banks.
"Having said that, if they do block us from achieving something, we'll take note of that, and we'll react accordingly," Magill said.
For their own part, the banking trade groups have no interest in a package deal in which both industries' priorities would be addressed.
"That's a non-starter for the community banking sector," Merski said. "It's mixing apples and oranges. One is regulatory relief. And the other bill, the credit union bill, is an expansion into prohibited activities."
James Ballantine, chief lobbyist for the American Bankers Association, agreed.
"I just think each bill should be based on its merits, and we believe the credit union bill has less merit to it," he said.
The tough talk by both sides underscored the divisive nature of the debate. Both community banks and credit unions hold a good deal of sway on Capitol Hill, and most members of Congress would prefer not to antagonize either side.
That was obvious at Wednesday's press conference, where co-sponsors of the credit union bill avoided any discussion of banks, and instead focused on job creation.
"I think we've got to be responsible, and we've got to be responsive to our job creators out there," Royce said.
Support in Congress for the credit union legislation does not split along partisan lines. The bill has more than 120 co-sponsors, drawn heavily from both parties.
But the legislation has also failed to be enacted several times in the past. Its supporters argue that this year may be different because of the need to create jobs, the diminished clout of the banking sector, and the desire by both parties to rack up a few achievements in an election year.
But opponents of the legislation argue that members of Congress will want to avoid weighing in on legislation that so sharply divides community banks and credit unions.
"It's a policy that members don't want to vote on in an election year," Merski said.
The political calculus could change somewhat in 2013 if Royce becomes chairman of the House Financial Services Committee.
Royce has expressed interest in the job, which is opening up, and he could use that perch to build support for the credit union bill.
