Gillibrand: Lift cap on credit union loans
New York's junior senator pushed Tuesday for federal legislation to let credit unions lend more money to small businesses.
On Long Island, supporters claim, the change would make almost $320 million more in loans available.
The proposed legislation has bipartisan backing in the House and Senate, although it's not clear if it will draw enough votes to pass. Previous attempts failed because of opposition from banks.
Federal law enacted in the 1990s restricts business lending by credit unions to 12.25 percent of their total assets. The proposed bill would raise that limit to 27.5 percent.
In a telephone news conference Tuesday, Sen. Kirsten Gillibrand (D-N.Y.), a sponsor in the Senate, cited estimates from the Credit Union National Association that the bill would allow New York State's 422 credit unions to lend a combined total of $1 billion more to businesses, which the association said would create more than 11,000 new jobs statewide. "It's something that will create economic growth, and it won't cost the taxpayers anything," she said.
But some bankers, like chairman and chief executive Doug Manditch of Empire National Bank in Islandia, question the need for the measure. He said businesses are drawing an average of only about 40 percent of their available credit now, because of economic concerns -- compared to a historical average of about 55 percent. "Businesses are just not borrowing," he said. Manditch also said bankers consider credit unions unfair competition because of their income-tax-exempt status: "I don't mind if [credit unions] are more competitive if everything is on an even scale," he said.
At Bethpage Federal Credit Union, president and CEO Kirk Kordeleski said demand for business loans is strong, including the refinancing of older, high-interest loans. The financial crisis restricted until recently banks' lending abilities, he said, leaving room for credit unions. But, he said Bethpage is close to its $620-million commercial-lending limit. "We are about a year to a year and a half from hitting this cap," said Kordeleski. The legislation would more than double that limit to $1.3 billion.
As for unfair competition, Kordelski said that credit unions are subject to many other restrictions on their businesses, including how they can invest and where they can operate.