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NAFCU letter ahead of tomorrow’s HFSC SC on capital markets and GSEs hearing “Legislative Proposals to Enhance Capital Formation and Reduce Regulatory Burdens, Part II”

(May 12, 2015) — 

The Honorable Scott Garrett
Chairman
Subcommittee on Capital Markets & GSEs
House Financial Services Committee
United States House of Representatives
Washington, D.C. 20515

The Honorable Carolyn Maloney
Ranking Member
Subcommittee on Capital Markets & GSEs
House Financial Services Committee
United States House of Representatives
Washington, D.C. 20515

Re: Enhancing Capital Formation and Reducing Regulatory Burdens

Dear Chairman Garrett and Ranking Member Maloney:

On behalf of the National Association of Federal Credit Unions (NAFCU), the only national trade association that exclusively represents the interests of our nation’s federal credit unions, I write in conjunction with the subcommittee hearing being held tomorrow entitled “Legislative Proposals to Enhance Capital Formation and Reduce Regulatory Burdens, Part II.” While not the subject of tomorrow’s hearing, credit unions and their 100 million members urge the committee’s additional consideration of legislation that would reduce impediments to capital for our nation’s small businesses by allowing credit unions to better assist in lending efforts.

As you know, there was a severe reduction in the availability of capital during the financial crisis. This credit crunch is still being felt by many small business owners today. As the economy recovers, credit unions continue to serve as an important resource for small businesses to obtain capital oftentimes in the event that they have been turned away from other financial service providers. While credit unions are equipped to help small businesses, their efforts, unfortunately, are severely hindered by the arbitrary credit union member business lending cap. This cap is denying our nation’s small businesses all the tools they need to grow and spur economic activity, such as job creation. With this in mind, Representatives Ed Royce and Greg Meeks have introduced bipartisan legislation, the Credit Union Small Business Jobs Creation Act (H.R. 1188), to raise the arbitrary credit union member business lending cap. Both the Treasury Department and the National Credit Union Administration (NCUA) have signed-off on this proposal that would create jobs without spending a single dime of taxpayer funds.

Another impediment to credit unions providing much needed capital is their inability to access supplemental forms of capital. Under current law, a credit union’s net worth ratio is determined solely on the basis of retained earnings as a percentage of total assets. Because retained earnings often cannot keep pace with asset growth, healthy growth can dilute a credit union’s regulatory capital ratio. Representatives Peter King and Brad Sherman have introduced bipartisan legislation, the Capital Access for Small Businesses and Jobs Act (H.R. 989), that would address this problem by authorizing NCUA to allow credit unions to access supplemental forms of capital that do not alter their cooperative nature. With NCUA’s recent burdensome risk-based capital proposal, this legislation is needed now more than ever to ensure credit unions are able to maximize lending to small businesses and meet the needs of their members.

We urge you and your colleagues to consider and support these two bipartisan commonsense legislative proposals. Enacting these bills would help reduce impediments to capital formation at our nation’s small businesses. If you have any questions or require additional information, please contact me or Jillian Pevo, NAFCU’s Director of Legislative Affairs, at 703-842-2836 or jpevo@nafcu.org.

Sincerely,

Brad Thaler
Vice President of Legislative Affairs

cc: Members of the House Financial Services Subcommittee on Capital Markets and GSEs


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