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Bank Abuse of Small Business Fund All the More Reason for MBL Reform

By:  Bill Cheney, President/CEO of the Credit Union National Association

Last week the American Bankers Association (ABA) had its member banks in Washington. This week it was the Independent Community Bankers of America (ICBA). The ICBA ran more ads critical of too-big-to-fail-banks. But we know their agenda also included credit unions’ tax exemption and MBLs.

The community banks’ credibility on credit union issues was heavily damaged, though, by a controversy they brought on themselves. This same week, the House Oversight Committee examined community banks’ abuse of the $30 billion government fund set up to spur lending to small businesses. Turns out 132 of the 137 TARP-recipient banks that also grabbed billions in taxpayer dollars from this Small Business Lending Fund (SBLF) used most of it to repay their TARP obligations, not lend to small businesses. Lawmakers on the committee weren’t pleased.

Both ABA and ICBA had promoted the SBLF as a way for banks to help small businesses. Meanwhile bank profits have rebounded, up 37%. So the banks have no excuse for their misbehavior. We underscored these points in a letter to the committee’s leadership: “Banks are clearly in excellent financial condition,” we said, “but have ignored small business lending and chosen instead to use Bank Bailout 2.0 to cheaply pay off their obligations from Bank Bailout 1.0.” All the more reason the House should pass Rep. Ed Royce’s bill to raise the MBL cap. Our MBL bill still faces a hard road due to small-bank opposition, but their misappropriation of SBLF’s billions will weaken their position.

 

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