Snow Showers Praise on Credit Unions' Tax Exemption, Business Lending
Treasury Secretary John Snow addressed a credit union rally in Washington this week and reinforced what we already know, that the administration opposes raising taxes on credit unions. Snow, as other administration officials have done before him, played to his audience when he said, "Let me say to you: I understand you are for service and not for profit. Which is the fundamental reason why this talk of taxation of your industry, and what you do, is something we oppose." While the credit unions are portraying this as a major policy statement, it is simply a reiteration of long-standing policy that transcends party or administration.
The credit unions were in Washington to rally support for H.R. 3579, the Credit Union Regulatory Improvement Act of 2003, which would expand commercial lending opportunities for credit unions, facilitate conversions to community charters, and allow credit unions to cash checks or wire funds for anyone, including non-members.
While Snow praised credit unions for their "dedication to small business lending," applauded their role in encouraging small business entrepreneurship, and endorsed their eligibility for SBA's 7(a) small business loan program, he stopped short of sanctioning the credit unions' flagship legislative proposal.
Still, this bill could be put on a fast track, at least in the House. House Financial Institutions Subcommittee Chairman Spencer Bachus (R-AL) told the credit unions that hearings on H.R. 3579 could begin within a month (remember, Bachus was one of only eight House members who voted against H.R. 1151, which imposed the 12.25% asset cap on credit union business loans back in 1998). Full Financial Services Committee Chairman Mike Oxley (R-OH) said he wants to move H.R. 1375, the regulatory relief bill (that also contains provisions favorable to credit unions) first, possible by mid-March.
Please keep up your lobbying efforts against the credit union bill. While the shortened congressional schedule may not favor passage this year, we should not underestimate the power of the credit union lobby. And this is a dangerous bill. It will raise the cap on "member business loans" to 20% of assets, it will exempt from this cap loans under $100,000 and certain loans to non-profit religious organizations, and it will lift the prohibition against under-capitalized credit unions making commercial loans.
Please urge Congress not to expand the credit unions' commercial lending powers. Despite the praises heaped on credit unions by Secretary Snow, they should be reducing their risk portfolio, not increasing it.