Monday, April 27, 2020

Bill Would Exclude Business Loans from MBL Cap for 3 Years

Representative Brad Sherman (D-CA) on April 17 introduced a bill (H.R. 6550) that will provide an exception from the aggregate member business loan (MBL) cap for loans made to aid in the recovery from the COVID-19 emergency.

The bill will exclude any member business loan from the aggregate MBL cap that is originated during a three-year period beginning on March 13, 2020.

The only caveat in the bill is that the extension of credit does not seriously threaten the safety and soundness of an insured credit union.

In aggregate, MBLs are capped at 12.25 percent of assets under current law.

However, roughly half of all credit unions are not subject to the MBL cap; because they have either a low income designation or have a history of making business loans or were chartered for the purpose of making business loans.

If this bill becomes law, I will be interested in seeing whether this program sunsets in three years.

As Milton Friedman said, "Nothing is so permanent as a temporary government program."

Read the bill's text.

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