By definition, if a bill is sponsored by Sens. Mark Udall, D-Colo., and Rand Paul, R-Ky., or any similarly odd ideological couples in the House, it more than meets the definition of bipartisan. For that, it should get a big kumbaya from the Beltway cognoscenti.
Yet the Udall-Paul bill, S. 968, should be cheered not just because of its bipartisanship, but because it actually spreads freedom. Those concerned with government eroding options for entrepreneurs should cheer this legislation, which lifts regulatory barriers to an untapped source of capital for startups: America’s credit unions.
Small business and startups pursue many diverse sources of funding. As traditional sources have dried up, many credit unions have stepped up to fill the void. As Rohit Arora, CEO of the Biz2Credit small business loan arranging service, recently explained at FoxBusiness.com, “Following the mortgage bust, many big banks essentially turned off the spigot to small business lending. Credit unions decided to take advantage of this hole in the marketplace by increasing their small business loan-making.”
But because of government barriers to credit union business lending, thousands of entrepreneurial ventures may be unnecessarily deprived of the seed capital credit unions could provide to them. As Arora says, “Credit unions are handcuffed by a lending cap of 12.25 percent of their assets imposed by the Credit Union Membership Access Act of 1998. Thus, many of those who became active in small business lending quickly hit their limit.”
And this regulatory barrier is exactly what Udall-Paul, and its House companion H.R. 688, sponsored by Rep. Ed Royce, R-Calif., would fix. The legislation would raise the cap for business lending to 27.5 percent of a credit union’s assets. The modest hike in the lending cap would pay big dividends for entrepreneurs and the economy. The Credit Union National Association estimates this increase in the cap would create 138,000 jobs in the first year, a figure Pepperdine University economist David M. Smith calls “conservative and well within the bounds of a reasonable projection.”