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Checking and saving accounts, mortgages, and the like are the stuff of household finances, and as such are the underlying base of the larger global economy. Credit unions provide such services and facilitate consumer spending for 90 million Americans, in addition to making critical, smaller-dollar loans to businesses. Now, like every other regulatory agency at this particular economic moment, the National Credit Union Administration is eying measures that it believes would stimulate job growth in the overall economy and hedge risks in the credit union sector. Earlier this month, at the 2011 Congressional Caucus of the National Association of Federal Credit Unions, NCUA chairman Debbie Matz outlined steps the agency is pursuing to reach those goals. The NCUA supports legislation that would raise the cap on loans that credit unions are allowed to dispense to member businesses—lending that often finances payrolls and helps keep employers and their employees going. “Obviously, employment is one of the best indicators of the health of the economy,” says NCUA chief economist John Worth. “The key concern is really that we need positive job creation to bring down the unemployment rate.” As Matz testified [PDF] to the Senate Committee on Banking, Housing, and Urban Affairs in June, firms that employ fewer than 50 employees comprise about 40 percent of private-sector employment. More so than larger firms, small businesses often depend on access to credit for their livelihood. Credit unions have been meeting those needs at an escalating rate, says Worth. In 2007, credit unions had approximately $20 billion in outstanding business loans on their books; by the second quarter of 2011 (the most recent data available), credit unions were holding about $37 billion in outstanding business loans. However, federal credit unions—which are owned and operated by their members—are currently only allowed by law to lend up to 12.25 percent of their assets to their member businesses. While some credit unions have lent up to, or near, that cap, others have told the NCUA that the cap is too low to make it worth their while to make these loans, given the costs of setting up the necessary infrastructure. Matz supports legislation, currently making its way through Congressional channels, that would bump the cap, in stages, up to 27.5 percent. “We think that lending would obviously be good for economic growth, good for the economy,” says Worth. “And for credit unions it provides a valuable area for potential growth, as well as a valuable area of diversification of their portfolios.” Another major issue for the NCUA is ensuring that credit unions are accounting for the interest-rate risks in their portfolios. While neither NCUA nor the Federal Reserve foresees a strong likelihood of inflation at the moment, Worth notes that “the risk of inflation, or inflation expectations jumping, or long-term interest rates jumping for another reason, is always out there.” As such, the agency introduced an interest rate risk rule that would require credit unions to maintain an interest rate risk-management policy in writing. The proposed rule is now under review by the agency, and could be finalized by the end of the year, or in early 2012. Beyond the scope of its own corner of the fiscal world, the NCUA is also a voice on the Financial Stability Oversight Council, which was created by the Dodd-Frank Wall Street Reform and Consumer Protection Act in the wake of the economic downturn. NCUA joins with the heads of the traditionally larger-sector banking regulators, as well as Federal Reserve and U.S. Treasury officials, to monitor the nation’s financial system and identify institutions that may merit more oversight. The council works to improve the lines of communication amongst its members, and in so doing, says Worth, “creates a vehicle that can improve our ability to understand and deal with risks as they’re evolving.”

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