CUNA President/CEO Bill Cheney said increasing the cap would help create more jobs and that the credit unions' tax-exempt status was to encourage them to serve the underserved. That status doesn't mean credit unions should be at a disadvantage in areas such as business lending, he added.

At issue is legislation proposed by Sen. Mark Udall that would raise the cap on MBLs from 12.25% of assets to as much as 27.5%.

Independent Community Bankers of America Board Member Noah Wilcox told the panel that if credit unions want to make more business loans they should pay taxes and comply with the Community Reinvestment Act, just as banks do.

Wilcox, the president/CEO of Grand Rapids State Bank in Grand Rapids, Minn., said he is at an unfair disadvantage in competing with area credit unions. He said they can offer lower rates on all loans because of their tax-exempt status.

Senate Banking Committee Chairman Tim Johnson (D-S.D.) asked NAFCU Chairman Michael Lussier how credit unions would manage the additional risk that comes from making more business loans.

Lussier, president/CEO of Webster First FCU in Worcester, Mass., said that most business loans are small, between $50,000 and $250,000, and his credit union is careful about the individuals to whom it lends.

In response to a question from the panel's top Republican, Sen. Richard Shelby (R-Ala.), Lussier said he would support including a provision in the bill to only allow CAMEL 1 and 2 credit unions to increase their business lending.