Academic journal article ABA Banking Journal

Q Can Large CUs Be KO'd? an Interview with Keith Leggett, ABA Vice-President and Senior Economist

Academic journal article ABA Banking Journal

Q Can Large CUs Be KO'd? an Interview with Keith Leggett, ABA Vice-President and Senior Economist

Article excerpt

ABABJ: What's the latest on the credit union front?

Reith Leggett: The Udall bill (S. 509) is an emerging concern. It would allow qualified credit unions to increase their business lending from 12.25% of assets to 27.5% of assets. That would be a real concern for community banks.

ABABJ: Is there a chance that the legislation could move?

KL: The credit unions are saying that, if they're given greater business lending authority, they would make $10 billion in additional small business loans and create 100,000 new jobs. Anything that looks like it would help create jobs becomes attractive to Congress. I do think the credit unions run a risk. The expansion of business lending authority at the same time that Congress is looking for new sources of revenue could bring their tax exemption into play.

ABABJ: Where are credit unions vulnerable?

KL: There's a widening gap between the large and small credit unions. The small CUs think the large ones are going to upset the apple cart. The industry is also still wrestling with how to deal with the clean-up of the corporate credit unions that failed. Credit unions will have to pay $8-$10 billion over the next decade. They're going to have to borrow from Treasury, which is going to have some political liability for a tax-exempt entity.

ABABJ: Are credit unions still making loans that are outside the bounds of their mandate to serve people of small means?

KL: There are still credit unions making very large commercial real estate loans. There's one in conservatorship in Texas that funded a shopping mall in Illinois. How a credit union does that is beyond me. …

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