Interchange is Red Hot, But MBLs are Heating Up Too

This entry was posted by Tuesday, 15 June, 2010
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June has been consumed by the fight over debit interchange, but another key credit union priority: raising the statutory cap on member business loans, may soon be elevated as well.  They are two different issues, but do have something in common.  The credit union grassroots outpouring that has accompanied the interchange battle is also expected to have residual benefit in convincing Congress to enact an MBL bill.

The key developments that occurred when Credit Union National Association CEO Dan Mica testified on that issue in May before the House Financial Services Committee have added to the MBL issue’s momentum.  Chairman Barney Frank (D-Mass.) said then that he would hold a committee vote on MBLs relatively soon.  And another witness, Treasury counselor Gene Sperling, stated publicly the parameters (stemming from discussions with CUNA) under which the Administration would support raising the cap

Rep. Frank’s desire to move quickly to MBLs after dealing with financial reform is welcome and makes sense from a policy and economic standpoint.  The May U.S. employment figures were disappointing, generating talk of a jobless recovery.  Meanwhile the Senate is contemplating a jobs bill that could become a vehicle for MBLs in that body.  Why?  As CUNA, the leagues and CUs have emphasized repeatedly, raising the cap is a job-creating measure, generating loans that would lead to an estimated 108,000 jobs in just the first year.

Nor would the MBL plan come with any government cost. That sets it apart from the Administration’s plan to channel $30 billion leftover from the Troubled Asset Relief Program (TARP) to community banks as incentive to lend.  And, of course, beyond the job-creation and no-government-cost elements is another major policy imperative: small businesses are still in need of capital, and they’ve not been able to get it from the banks.  Federal Reserve Board Chairman Ben Bernanke flagged the problem in a speech this month, noting banks’ outstanding loans to small businesses fell in the first quarter of 2010 to $600 billion from $700 billion two years prior. He added that only 40 percent of small business that tried to borrow last year had all of their borrowing needs met.

Many credit unions can provide specific examples of small business borrowers turned away by banks, and the media has been paying attention.  A May 27 Wall Street Journal story (“Credit Unions Fight Cap Law”) spotlighted two such borrowers—a bagel shop owner in San Antonio, Texas and the owner of an inn and cultural center in Albuquerque, New Mexico.  Thanks to her loan from Randolph Brooks Federal Credit Union, the bagel shop owner just hired her 13th employee, the Journal noted, adding that the credit union helped after the owner had been rejected by several banks.

Too often, the banks aren’t lending. Yet they are the ones seeking to block the MBL legislation.  If the issue heats up again soon as expected, CUNA, leagues and credit unions will need to block the banks.  That  is where the grassroots efforts that were ramped up on the interchange fight will have residual benefit, both going forward as grassroots are again called upon—and by calling back to mind what legislators saw in recent weeks.

“Members of Congress have good memories; so do their staffs,” says John Magill, CUNA senior vice president of legislative affairs.  “They’ll remember vividly the massive response on interchange, which will definitely have a spillover effect on MBLs.  There will be instant recall of something that happened so recently, and it will have a positive effect on our lobbying efforts.”


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