Easing the restrictions on member business lending that werepart of the 1998 Credit Union Membership Access Act has been one ofthe dozen or so federal charter enhancements NAFCU has sought inrecent years. That's why we are pleased to see that the NCUA Boardplans to take up-and hopefully adopt-its proposed MBL revisions atthis week's open meeting. NCUA's reexamination of its rule, coupledwith the Small Business Administration's decision earlier this yearto open up the 7(a) loan program (which was as strongly advocatedby NAFCU), will go a long way toward meeting our goal of givingcredit unions the tools they need to provide needed business loansto their members. Much of the credit for revamping NCUA's MBL rulemust go to the NCUA Board itself, which has made promulgatingregulations that are both flexible and market-oriented a hallmarkof its regulatory philosophy. The soon-to-be-finalized update ofthe MBL rule is a good example. In short, we fully agree with theNCUA Board's assessment that its proposed rule will provide greateropportunities for credit unions to respond to their members'aspirations of starting or improving a small business. We alsoagree with the NCUA Board that the proposed changes will not placeundue risk on the National Credit Union Share Insurance Fund. It isnot surprising that the bankers have criticized NCUA's proposed MBLrule, and I have absolutely no doubt we will hear a good deal morefrom them on this subject. The Treasury Department also submitted acomment letter to NCUA raising strong concerns with parts of theproposed rule. However, the original sponsors of CUMAA, Rep. SteveLaTourette, R-Ohio, and Paul Kanjorski, D-Pa., also submitted acomment letter to NCUA with a strong and unambiguous endorsementfor the proposed revisions to the rule. It is important to onceagain look at the numbers for credit union business lending; whenyou do, it is difficult to understand the bankers' concerns inlight of the realities of the consolidated credit union balancesheet. At year-end 2002, banks had $953.6 billion in commercialloans, while federally insured credit unions (FICUs) provided $6.7billion in loans to members for business purposes, or justseven-tenths of 1% of the bank total! Some 1,500 FICUs, or about16% of the nation's 9,500 FICUs, are doing some form of businesslending, and when added all together, federally insured creditunion business lending remains less than 2% percent of total loans.When the similar numbers lead the Treasury Department to analyzeMBLs in its 2001 study, it concluded in its study that credit unionmember business lending is “not a threat to the viability andprofitability of other insured depository institutions.” In short,this final rule will not dramatically transform the credit unionbalance sheet or result in any significant business lendingcompetition with banks. The fact that the NCUA Board has approvedseven state MBL rules that are exempted in some significant waysfrom the current rule begs the question that Board Member DeborahMatz first asked: why not look at those state rules as potentialmodels for making constructive changes to NCUA's MBL rule? Thismakes the rule an important dual chartering issue, and NCUA is in aposition to level the field for the benefit of all credit unions –most -especially with the elimination of the requirement for thepersonal guarantee-while at the same time allowing states tocontinue applying for separate exemptions. It is obviouslyimportant to acknowledge the thoughtful concerns raised by TreasuryAssistant Secretary Wayne Abernathy to the proposed NCUA MBL rule,yet when NCUA was approving the various state MBL rules, there wereno objections from Treasury. All three NCUA Board members haveclearly articulated support for changing the MBL rule within theconstraints of CUMAA. Each board member approaches the proposedrule and its likely final version from his or her own experiences,and together their ideas make for a most persuasive case in favorof the suggested changes that have been put on the table. Inparticular, Vice Chair JoAnn Johnson and Board Member Matz havetaken leadership positions and devoted significant energy inbringing the NCUA Board to this point. In conjunction with theimportant success of the Access Across America initiative, ChairmanDennis Dollar has noted that access to start-up capital for smallbusinesses in underserved areas is a missing component of all thegovernment programs he has observed. The chairman has encouragedcredit unions that adopt underserved areas to explore filling thisstart-up capital void that undeniably exists in far too manycommunities across our country. Vice Chair Johnson chaired an NCUAinternal working group that has made a comprehensive review of theMBL rule. Mrs. Johnson has dovetailed her efforts with the BushAdministration's economic initiatives to strengthen smallbusinesses. As she has reminded us, 99% of all employers fall underthe rubric of “small” and these businesses: 1) employ half theprivate workforce, 2) generate half of our GNP and 3) create twoout of three jobs in our economy. In addition, 40% of thesebusinesses are owned by women and 15% by minorities. Board MemberMatz first discussed the issue of member business lending with manyin the credit union community and came to the conclusion thatchanges needed to be made, especially in the context of the NCUABoard approving a variety of state MBL rules. In February of thisyear, Mrs. Matz announced the Partnering and Leadership Successes(PALS) initiative to promote and facilitate the sharing of bestpractices among credit unions. PALS complements Access AcrossAmerica and provides a forum for highlighting innovative solutionsto problems credit unions face on a daily basis. Member businesslending fits well into the PALS framework and reinforces the factthat MBLs can be a tool for credit unions to offer affordablefinancial services to meet members' needs now or in the future.Regarding the specifics of the rule, we support the proposal toexclude loan participations from the calculation of the aggregateMBL limit. Notwithstanding Treasury's comments, we believe thefinal rule will create more diversity within and among creditunions in this type of lending, thereby enhancing overall safetyand soundness. Both sides of a transaction benefit regardingparticipation loans, with the credit union that selling MBLparticipations generating liquidity, and while the purchasingcredit union is augmenting its investment portfolio. The final rulewill change requirements, make clarifications and simplify orremove unnecessary provisions now in the MBL rule. We believe thatthis rulemaking is what regulatory agencies need to be doing moreof to remove burdens and create more opportunities to contribute toour economy. Member business lending is, and will likely remain, a“niche” market for the credit union community. But even if thisrule leads to just a few more credit unions providing the start-upcapital to businesses in areas that need financial services themost, it is worth it. It also would convincingly refute thebankers' arguments that they adequately satisfy the borrowing needsof America's business owners and that credit unions should remainon the sidelines, despite their members' legitimate needs forcapital to start or expand a business.