An Analysis of the Impact of Expanding the Ability of Credit Unions to Increase Commercial Loans

This article was published by Capital Policy Analytics Group. Click here to read the full article.

By Ike Brannon

Credit union advocates are supporting controversial legislation that would increase the ability of credit unions to make business loans, which the law currently caps (in most instances) at 12.25 percent of the credit union’s total assets. The legislation increases this to 27.5 percent.

They assert that increasing the cap would not only be good for credit unions but also a positive development for the economy as a whole, contending that it would provide a spark in the credit market, with more companies being able to obtain loans. As a result, they aver, an expansion of the cap would lead to greater economic growth and more tax revenue for the government.

However, upon closer scrutiny, the claims made by credit union advocates regarding job creation and economic growth as a result of an increase in the business loan cap are highly questionable.