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American Bankers Association Senior Economist Keith Leggett sent a letter dated Aug. 13 to the NCUA opposing easing restrictions on member business loans, contending that it could threatening the financial health of credit unions and the NCUSIF. The full text of the letter can be found at: www.ncua.gov/Regulations OpinionsLaws/Comments/723/

In fact, the recent failures of two mid-sized credit unions–Huron River Area Credit Union (Ann Arbor, Mich.) and Norlarco Credit Union (Fort Collins, Colo.)–demonstrate the reason for congressional concern about the risk posed by business lending to the safety and soundness of credit unions. The failure of these two credit unions can be directly attributed to losses arising from their business loan programs.

According to the news reports, both credit unions were actively involved in making construction and land development loans, the riskiest form of commercial real estate lending, in southwest Florida–well outside each of their local market areas.