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Credit unions push for bigger loans to small biz

Credit unions have increased small business loans in recent years. Now they want Congress to raise the cap on these loans.

David Brancaccio: During the economic crisis, while banks were making it tougher for small businesses to get loans, many credit unions went the other way -- they increased lending. And now some credit unions are pushing Congress to let them do more commercial lending, but regular banks think this is a terrible idea.

Elizabeth Wynne Johnson reports.


Elizabeth Wynne Johnson: The Senate is getting ready to vote on a bill that would more than double the amount that credit unions can devote to small business loans.

According to credit union lobbyist John Magill:

John Magill: It would put $13 billion into the coffers of small businesses that aren't otherwise getting loans -- and at no cost to taxpayers.

Can't argue with that, right? Paul Merski of the Independent Community Bankers of America can. He says credit unions are trying to exploit their tax-exempt status to compete unfairly with local lenders.

Paul Merski: All you're doing is cutting into federal revenues, state and local revenues, by displacing tax-paying community bank service with the tax-exempt credit union service.

In addition, he says, credit unions have fewer regulatory requirements, which could mean greater risk.

The Senate could vote on the credit union lending bill any time in the next few weeks. Until then, it's an all-out David versus Goliath battle -- with both sides claiming to be 'David.'

In Washington, I'm Elizabeth Wynne Johnson for Marketplace.

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Mr. Merski states (and Ms. Johnson reports) that credit unions "have fewer regulatory requirements". This is incorrect. Credit unions are actually more highly regulated than banks, with tighter capital limits and no access to alternative capital. This is why credit unions didn't take a penny of TARP or any other government funds when the banks were being bailed out left and right. Credit unions have always been responsible lenders and will continue to operate responsibly when their business lending caps are extended. As a responsible journalist, Ms. Johnson should do a little more research before she reports.

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