Robin Pharo runs a green building consulting firm near Madison, Wis. She approached two banks and a credit union about getting an automatic rate cut (ARC) loan—a five-year, 0% loan available under the federal stimulus program. But ARC loans aren’t big moneymakers for financial institutions. You can guess what happened.
“The banks said, ‘No, we’re not going to make any money on this loan,’?” Pharo says. “We understood that, but we were going to bring our whole book of business over: a line of credit, business credit cards, business checking. But they just weren’t interested.”
She had a far different experience at Summit Credit Union in Madison. “I said, ‘I know ARC loans aren’t going to make a lot of money for you. But we’re willing to bring all our business over,” Pharo recalls. “And [the lending officer] said, ‘We’d be happy to do an ARC loan for you. We don’t care if you bring your book of business over. We’d love it if you do, but ARC loans are going to make so much sense for you, and that’s who we’re in this business to serve.’?”
That’s why Congress ought to pass S. 509, introduced by Sen. Mark Udall, D-Colo. It would raise the statutory cap on credit union member business lending (MBL) from 12.25% of total assets to 27.5%. As Udall notes, these changes “would not cost taxpayers a cent, but they would dramatically increase the amount of private capital to small businesses to help make payroll, buy inventory, and expand and innovate.”
The arguments that prompted Sen. Udall to call passage “a no-brainer” last year still hold true. Vociferous banker opposition blocked that bill, and we expect it will be no less vociferous again.
But significant political differences increase the likelihood the bill will win passage. Consider:
Meantime, the weak economic conditions that augured so strongly for passage last year haven’t improved much. And too many small-business owners like Robin Pharo continue to receive a cold shoulder from banks.
An MBL bill, now predicted to generate $13 billion in new loans the first year and create 140,000 new jobs (up from $10 billion and 100,000, respectively), deserves passage.
Credit unions will still have to work intently to build congressional support in the face of stiff banker opposition, but conditions have moved more in our favor. As Cheney told the 4,000-strong GAC crowd: “We can get this done.”