Tuesday, December 29, 2009; A14

The Dec. 23 Economy & Business story "Obama takes loan plea to small banks" reported on the Treasury Department's plans to offer community banks $30 billion to make more loans to small businesses to spur economic growth and create jobs. Credit unions could advance these goals at no cost to the U.S. government under legislation that Sen. Mark Udall (D-Colo.) introduced Dec. 21 with bipartisan support.

The bill would raise the cap on credit unions' small-business loans from 12.25 percent of assets to 25 percent and exempt loans under $250,000 (rather than today's $50,000 limit) from counting toward the cap. Reps. Paul E. Kanjorski (D-Pa.) and Ed Royce (R-Calif.) have introduced a similar bill in the House. This would allow credit unions to generate $10 billion in new lending in the first year, which could create about 108,000 jobs. There is no safety-and-soundness rationale for the current caps.

The chairman of the National Credit Union Administration, the federal agency that regulates credit unions, supports legislation to raise the caps. Moreover, the change would come at no cost to U.S. taxpayers.

Community bankers are quoted in story as saying the real problem is lack of demand. That has not been the credit unions' experience. For the 12 months ending June 30, demand for small-business loans from credit unions rose 14 percent, according to the Credit Union National Association, while declining 8 percent for banks, according to the FDIC.

If Congress and the Obama administration backed this legislation, credit unions could do more to help solve the small-business credit crunch without adding to the federal debt.

Daniel A. Mica, Washington

The writer is president and chief executive of the Credit Union National Association.