A CAMEL rating 3 does not mean an institution is failing and is not safe and sound.
It does not mean it is failing, but it is an indica- tion it might not be strong. But a CAMEL rating 1 and 2 institution moving ahead to have the possibility of increasing ac- cording to these limitations, I would support 100 percent.
Cheney, you argue, as I understand it, that the cap on business lending disproportionately hurts small credit unions.
You have also indicated that raising the cap to 27. What is the basis for determining that increasing the cap to 27. The basis for it is that it allows more credit unions to be able to justify the investment necessary to set up a business lending operation. You have to hire people that have experience in the field. You have to set up proce- dures and systems and safeguards and internal controls, so that is really the basis for that statement.
Cheney, point out that nearly 70 percent of credit unions do not engage in any business lending currently.
Why do so few credit unions currently make business loans? And for those credit unions that do business lending, what are the most common types of loans that they make?
We think that the cap is a reason that so few credit unions do business lending because the restriction is cash advance loans Virginia so low. And, by the way, before 1998, there was no restriction on credit union business lending.
So we think raising the cap, as Chairman Matz said, will 21 encourage more credit unions to get involved.
Most are small business loans — not all, but most credit unions make loans to small businesses, as Mr. Wilson, you probably were here earlier when Chairman Matz testified. She noted that one way to deal with the credit crunch would be to increase the business lending cap. She noted also that access to credit remains difficult for many small businesses and entrepreneurs that depend on financial insti- tutions for funding. Why do you think that many small businesses are facing a credit crunch?
There cash advance loans Virginia are people that we would have lent to in the past that we cannot lend to today, and hopefully we will be able to lend to tomorrow. And I think it wise that we do not cash advance loans Virginia from a safety and soundness standpoint.
You know, one of the statements that was made that kind of mystified me was that credit unions are more tightly regulated than banks, and particularly in the commercial lending Senator Shelby.
You know, they made the statement in testimony that, boy, they do a better job be- cause they have had less charge-offs than we have had as banks. And so I was curious about that, and I went to the CUNA site and gathered some statistics, and it seems like we are not comparing apples to apples here, because I would say that my regulator, the Office of the Comptroller of the Currency, is much stricter.
I was amazed at the reason that they avoid charge-offs, and that is be- cause they allow delinquencies 12 months and beyond.
They have a great bucket of loans that are delinquent more than 12 months.
Banking regulators would have had us write those off well before they get to 12 months, so that is not really a fair comparison. The other thing that is such a misnomer, that even though tax exempt and having the requirement to serve people of modest means, you Wyoming instant loans probably are aware that GAO did a study on that and, in fact, banks service more low- to moderate-income individuals, households, cash advance loans Virginia than credit unions do. The GAO found that a low- to moderate-income service in banks was 41 percent of the house- holds. In credit unions it was 31 percent of the households. Let us compete head on and Louisiana same day loans let us take care of small businesses and let us create jobs.
Wilson, has the Dodd-Frank legislation and other regulatory burdens had an impact on the ability of banks to make loans to small businesses? The time we spend on regulatory burden, the uncertainty that all of this regulatory envi- ronment and the tax environment has created has caused many of our good business customers, those that would normally be expand- ing, buying plant and equipment, creating jobs, not to pull the trig- 22 ger on projects. I do not think I have ever had a larger pipeline of loans where the individual businesses are not willing to pull the trigger because of the uncertainty of taxes and regulation, et cetera.
Wilson, I think you went into this a little bit earlier, but I want to, for the record, go back into it.
Lussier note in their testimony that about one- third of all banks or Subchapter S corporations are exempt from Federal income tax.
They argue that puts many banks on a more equal playing field with credit unions. Just again for the record, how does the tax treatment of Sub- chapter S corporations compare to the taxation of credit unions? Whereas, if you are a Subchapter S corporation, it passes to the owners and they pay the tax. It is paid — if you are a C corpora- tion, you pay it twice. You pay it when you make it, and your own- ers pay it when they receive it in the form of dividends. In the case of Subchapter S, they only pay it once, but they pay it. They are taxpaying entities, and I do not have a problem whatsoever as a C corporation competing against a Subchapter S. Wilcox, in your testimony you also noted that your bank has lost business lending opportunities with estab- lished customers to credit unions.
You argue that the credit union tax exemption creates an unfair advantage and distorts the mar- ket. Just again for the record here, how does the credit union tax exemption undermine your ability to offer competitive rates? Cheney states in his testimony that business loan net charge-off rates for credit unions have been roughly one-fourth of the average for banks since 1998. Accordingly, he argues that credit unions can provide business lending in a more safe and sound manner than banks. Why do credit unions appear to have lower net charge-off rates for business lending than banks? Well, it could have to do with some of that, and I think Mr. Banks are under very strict regulatory requirements, especially as it pertains to charge-offs. We have hard caps on days delinquent, and then de- pending on the type of credit that it is, it is demanded to be charged off. If not, you do face some pretty severe regulatory scru- tiny. All of the Federal regulators as well as the State regulators — in my case I see both as a State chartered bank — do look at that on a very regular basis, each examination.
They are looking from a safety and soundness perspective to be certain that the banks are not only managing their delinquency but not hiding it. It would be inconceivable for me to have a loan that is severely delinquent and be able to carry it continuously on my books for 12 months and not 23 charged off.