Let Credit Unions Lend More

Let Credit Unions Lend More

A Modest Proposal to Increase the Availability of Capital to Small Business
February 11, 2009

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All economic choices involve the weighing of costs and benefits. And when it comes to economic stimulus spending, the costs can often prove particularly high. Spending tax money on government programs involves redistributing wealth from those who create it to government planners who believe that they can make a better use of it than can private citizens. Unless the planners make consistently better choices than those arrived at through the accumulated wisdom of the free market, such spending will undermine the economy’s overall performance and efficiency. Thus, politicians who peddle economic stimulus packages claiming that they bear little or no cost should be met with skepticism.

Yet there is one stimulus measure that can yield tangible benefits at practically no cost: deregulation of credit unions to make it easier for them to lend to businesses. The current shortage of business capital is the single most pressing factor facing the nation as it attempts to recover from a recession, so any measure that increases lending to any extent deserves consideration. This paper explains the structure and functions of credit unions and makes the case for expanding credit union business lending, which would unlock otherwise idle capital and thereby help create jobs, especially in areas that have difficulty receiving bank credit.