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Credit unions need ability to help economy

Two pressing economic concerns are the need to create jobs and the lack of credit available to our nation’s small businesses.

Congress holds in its hand the ability to inject as much as $10 billion in loan capital to small businesses, which in turn can create more than 100,000 new jobs nationally and it won’t cost taxpayers a cent.

H.R. 3380 and S. 2919, companion legislation on Capitol Hill that would increase the lending authority of credit unions, sits idle while small businesses, desperate for available capital, are forced to deal with the sharpest decline in lending since 1942 (Wall Street Journal, Feb. 24).

As a matter of urgency, and as a matter of good public policy, Congress should move swiftly to pass this legislation.

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

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

But credit unions can do more if Congress acts. Current law restricts credit union small business lending to 12.25 percent of assets — an arbitrary level imposed in 1998 — meaning the amount of funds available to help community businesses is capped.

However, enacting legislation that increases the cap to 25 percent will give credit unions the authority to invest more into small business across the country, including right here in Ohio.

Most importantly, the ability of credit unions to “stimulate” the economy costs taxpayers nothing.

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

Credit unions have shown the ability to manage loans of all types for more than 100 years, and were largely utilized during the Great Depression, giving struggling Americans access to needed credit.

In fact, credit unions routinely have lower charge off and delinquency rates than banks.

Others argue that giving credit unions more capacity to make business loans will hurt banks.

The fact is as of December 2009, credit unions held a total of $36 billion nationally in loans to small businesses.

This represents 4.5 percent of all small business loans at depository institutions. It took credit unions 100 years to reach this share of market.

Even if credit unions were to double their market share in the future, banks would still hold an overwhelming 91 percent share.

Those who are really hurting are our nation’s small businesses, which have seen access to credit dry up.

Credit unions stand ready to assist those who are looking for credit; however, thanks to an arbitrary law, their ability is limited.

It is time Congress acts and allows credit unions to step up to the plate and further fulfill their “People Helping People” mantra.

This will cost taxpayers nothing and help put our country on the path to economic recovery.

R. Lee Powell is the CEO of Desco Federal Credit Union.