Small-business proposal gets cold shoulder from GOP, credit unions

Republicans and credit unions gave a stiff reception to the administration’s proposal for a $30 billion fund to boost bank lending to small businesses.

The administration is urging Congress to pass legislation that would shift $30 billion from the $700 billion financial bailout program to a new small-bank-lending fund.

The new fund would then invest capital in banks with $10 billion or less in assets and encourage them to make loans to small businesses.

House and Senate Republicans lashed out at the proposal as a measure to recycle money from the Troubled Asset Relief Program (TARP), as the bailout is known officially.

“It’s not for a piggy bank,” Sen. Judd Gregg (R-N.H.) told Peter Orszag, head of the Office of Management and Budget, at a hearing on Tuesday.

Meanwhile, the two main credit union lobbying associations launched a broadside against the new proposal. Credit unions have lobbied for years for an increase in the member business lending cap that they argue would bolster small businesses.

That provision has met firm resistance from the banking lobby. The administration said it consulted several times on the new fund with the Independent Community Bankers of America (ICBA).

“Credit unions are outraged and baffled that the administration, by not endorsing greater business lending capacity for credit unions in its small-business lending plan, would blatantly ignore the potential contribution credit unions could make toward national economic recovery,” said Dan Mica, head of the Credit Union National Association.

Dan Berger, executive vice president at the National Association of Federal Credit Unions, said credit unions are disappointed in the new proposal.

“Unfortunately, people continue to forget that many regional and community banks took massive amounts of taxpayer-funded TARP bailout funds,” Berger said. “On the other hand, credit unions are willing and able to assist with small-business lending needs by just raising or eliminating their arbitrary member business lending cap, and unlike any program to date, this would not cost the taxpayer a single penny.”

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