Congressman Sherman Issues Statement on the Importance of Credit Union

Washington DC – Congressman Sherman released the following statement on the importance of Credit Unions:

“I strongly believe that the not-for-profit, cooperative nature of credit unions and the services they provide to their members and communities amply justify their continued tax-exempt status,” said Congressman Sherman. “Credit unions have a special mission, and they play a unique role in meeting the credit and savings needs of consumers – especially those persons with low and moderate income. Please be assured that I will continue to work to preserve the credit union charter and will vigorously resist efforts to tax credit unions.”

Read Congressman Sherman’s Full Statement:

Credit Union Member Business Lending

Our economy needs more business loans, particularly to small businesses. Whenever I meet with credit union leaders, they tell me that they are ready to expand their member business lending. For this reason, I have cosponsored H.R. 1418, the Small Business Lending Enhancement Act of 2011, which would allow credit unions to make more loans and larger loans to their small business members.

In particular, the bill would raise the cap on a credit union’s member business lending portfolio to as much as 27.5% of total assets and revise upwards the size of loan excluded from this cap to $250,000. The bill would also ensure a focus on lending to underserved areas and low-income communities by excluding such loans from the cap.

Under current law, credit unions are restricted from holding member business loans exceeding the lesser of 1.75 times the credit union’s net worth or 12.25% of the credit union’s total assets. Furthermore, a loan is counted under this cap so long as it is larger than $50,000 – a level that is prohibitively small to allow credit unions to effectively serve the borrowing needs of their business members in today’s economy.

The Credit Union National Association estimates that H.R. 1418 will allow credit unions to expand their business lending by $13 billion in the first year, helping to create 140,000 jobs across the country – at no cost to the federal government. We know that credit unions are eager to put their capital to work to help sustain the recovery, and I will continue advocating for the government to simply get out of the way.

Sherman Amendment a Major Victory for Credit Unions

I am especially pleased to report that I led the fight to ensure that only the largest financial institutions would be forced to pay the costs of dealing with the next financial crisis. Thanks to an amendment I sponsored during consideration of the Wall Street Reform and Consumer Protection Act of 2010, special assessments to recoup any losses to the Government will be imposed on institutions with greater than $50 billion in assets, rather than a mere $10 billion. In effect, the Sherman Amendment exempts the entire credit union movement from bearing the costs of cleaning up a future mess created by Wall Street. While we hope that taxpayers will never again be called upon to bail out Wall Street, if it happens, credit unions will not be asked to pay a dime.

This victory would not have been possible without the grassroots activism of credit union executives and volunteers. I have no doubt that my amendment was the right thing to do, but it might have never been adopted without the efforts of your colleagues across the country. It was credit union leaders like yourself who reached out to their own representatives – at just the right moment – to convince them of how important it was to support the Sherman Amendment.

Alternative Sources of Capital

In order for credit unions to do their part to help make credit available to America’s consumers and small businesses, they need access to alternative sources of capital beyond their retained earnings. Congress should change the law to allow credit unions to raise additional capital in ways that are consistent with their character as non-profit, member-owned cooperatives.

It was less than three years ago that the largest banks in America came to Washington looking for investments from the taxpayer, and over the objections of the American people, Congress gave them $700 billion of additional capital, despite my efforts in opposition. Credit unions, on the other hand – who are not responsible for the financial mess that led to the bailouts – are not asking for any taxpayer money. They are simply asking to be allowed to raise alternative sources of capital.

To me, it is a paradox that our government would hand over billions of taxpayer dollars to banks while standing in the way of credit unions raising private capital. As we work to develop new capital standards that will strengthen the balance sheets of all financial institutions, credit unions must be part of the discussion. The National Credit Union Administration (NCUA) should submit a proposal to Congress that would allow credit unions to raise capital from alternative sources. The time is now to make this a reality.

Regulatory Relief

In many important respects, credit unions are too heavily regulated and unnecessarily restricted in the services that they may offer. The Federal Credit Union Act has not been amended in a truly meaningful way since 1998, and credit unions remain the most regulated and restricted of all depository institutions. I have been working to ease the regulatory burden and other constraints on credit unions for a number of years, and I will continue my efforts to enhance their ability to serve their members and their communities.

I supported the Financial Services Regulatory Relief Act of 2006, which became law and took some valuable first steps toward regulatory relief for credit unions. The 2006 Act allowed leases of land on federal facilities for credit unions, increased the 12-year limitation of the maturity of credit union loans to 15 years, clarified the definition of credit union “net worth” to conform with the accounting standards of other depository institutions, and permitted credit unions to extend lifeline services and remittances to non-members who otherwise fall within their field of membership.

Last year, I worked to ensure that the Dodd-Frank Wall Street Reform and Consumer Protection Act largely preserves the NCUA’s longstanding consumer protection role, rather than creating a new layer of regulation for credit unions. The Act exempts smaller credit unions (those under $1.5 billion in assets) from examination by the newly-established Consumer Financial Protection Bureau (CFPB). Thus, most credit unions will continue to be examined by the NCUA, but they will also benefit from the harmonization of consumer protection that will result by consolidating the rule-writing responsibilities under the CFPB. For too long, banks and thrifts have had the advantage of shopping around for a charter that offered the regulator with the lightest touch. A uniform approach to enforcing our truth-in-lending laws and other federal consumer protections will benefit consumers, while leveling the playing field for community financial institutions.

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