Christine Henzig, CUDE
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www.theleague.coop
The real facts support federal small business job creation legislation
Pewaukee, Wis. – Passage of the Credit Union Small Business Jobs Bill (S. 2231)—now pending in Congress—would inject $13 billion in new credit to the economy and put 140,000 Americans back to work. In Wisconsin alone, the bill would make $405 million in new credit available to small businesses and create as many as 4,400 new jobs in just the first year—all at no cost to taxpayers. The legislation has the support of federal regulators, more than 30 progressive and conservative business groups and organizations, and 84% of Wisconsin voters in a recent poll. Forbes even called it a “no brainer.”
The facts undeniably support the need for this legislation, despite the recent misstatements by WBA President Rose Oswald-Poels claiming that there is no “credit gap” for small businesses and that an increase in credit unions’ member business lending would benefit only a few credit unions. The need for the legislation, which would raise the arbitrary cap that federal law now imposes on credit unions’ business lending and permit them to lend more to Main Street small businesses, is clearly demonstrated in the facts:
· Small businesses themselves say there’s a credit gap. A survey by the Small Business Majority, Main Street Alliance and the American Sustainable Business Council found that 90% of small businesses have credit access problems.
· Recent research has revealed there’s a credit gap. The NFIB Research Foundation found that while 57% of small employers sought credit from a financial institution in 2011—an increase of nine percentage points over 2010—“more attempts resulted in more rejections rather than more small-business owners obtaining credit.” A white paper by the Progressive Policy Institute noted that small businesses ignored by banks face a “serious impediment.”
· Wisconsin statistics illustrate the credit gap. Since the start of the recession in December 2007, Wisconsin banks grew their business lending a mere 5% while Wisconsin credit unions grew theirs by 52.3% to compensate, and the requests for loans keep coming. There is no shortage of demand.
· The need to fill the credit gap is greater in Wisconsin than in other states. Wisconsin is among the top three states nationally where demand for business loans has come closest to credit unions’ legal authority to fulfill the requests. Credit unions here that make business loans – in aggregate – already are just shy of the cap. Wisconsin also has among the largest expected increase in jobs created (4,437) if the proposed legislation is passed.
· Waivers don’t provide a solution. Waivers merely offer credit unions flexibility on certain limitations related to business loans – like the maximum loan amount to individuals or appraisal requirements. They don’t allow credit unions to exceed the cap.
· The cap constrains almost all of Wisconsin credit unions from meeting loan demand. A very few credit unions are exempted from the cap—either because they were grandfathered when the cap was arbitrarily imposed in 1998 (no credit unions were subject to a cap before that) or because they exist in low income census tracts where borrowers’ small credit needs are of no interest to banks and where banks have no branches. But every other Wisconsin credit union—close to 190 of them—is hindered by the cap. Those approaching the cap must deny otherwise sound requests for loans. The rest can’t even get into offering business loans because the cap prevents them from recovering the costs of doing so.
· There is no cost to taxpayers to raise the cap. The increased loan capacity would come from credit union member deposits loaned to credit union member businesses. A blog post by the American Consumer Institute for The Hill newspaper applauded the tax-free economic stimulus that could be achieved.
· There is no safety and soundness concern. Federal regulators support increased credit union business lending. In fact, Wisconsin credit unions have had a lower rate of delinquency and losses on business loans than banks for more than a decade.
“This bill provides a huge opportunity for small businesses across our state and new opportunities for Wisconsin workers,” said Brett Thompson, President & CEO of the Wisconsin Credit Union League. “This bill is for them.”
Credit unions are cooperative financial institutions that are owned by their members and do not have stockholders. Because they are not-for-profit, they return earnings to members via more competitive rates of return on accounts, lower interest on loans, lower fees and improved services. Around 2.2 million Wisconsin residents belong to credit unions, of which nearly half are open to the local community. Find a credit union to join by visiting www.asmarterchoice.org. The League’s REAL Solutions Scorecard explains how credit unions returned more than $201 million to their members in 2011 and served their communities regardless of profit. It is available at www.theleague.coop/scorecard.
