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Updated July, 2010
Congress established the Central Liquidity Facility (CLF) in 1978 as a backup liquidity lender for credit unions. Title III of the Federal Credit Union Act authorizes the CLF to borrow from any source, up to twelve times the subscribed capital stock and surplus of the facility. A Congressional appropriations limitation of $600 million was established in 1981 as the amount the CLF can borrow for the purpose of making direct loans to credit unions. That cap was removed for FY 2000 due to Y2K concerns, but was re-established in FY 2001. In recent years, an appropriations limitation approved by Congress raised the cap to $1.5 billion. In light of the uncertain economic times we face today, NAFCU lobbyists, in conjunction with the NCUA, led a successful effort to allow the CLF to lend out up to it statutorily authorized amount of approximately $42 billion for FY 2009.
At the request of the president and through the work of the House Appropriations Financial Services Subcommittee, the arbitrary cap on the Central Liquidity Facility’s borrowing authority remained off for FY 2010.
In February 2010 President Obama submitted his FY 2011 budget request to Congress, and again has asked that this arbitrary cap remain off. Allowing this cap to remain off will better equip credit unions with the liquidity they need for planning and contingency purposes, and NAFCU will work with Congress to ensure the president’s vision is realized for FY 2011.
The CLF has been crucial to making credit available in unusual and/or emergency circumstances of a longer term nature resulting from regional or local difficulties. As such, NAFCU has historically recommended that no cap be set through the appropriations process, so that the CLF would be allowed to exercise its full authority under the Federal Credit Union Act. NAFCU strongly opposes the re-imposition of any arbitrary appropriations cap.
Community Development Financial Institutions Fund (CDFI)
The Community Development Financial Institutions fund (CDFI) was created by an act of Congress in 1993 to provide financial support to credit unions and other financial intermediaries chartered to assist in developing and rehabilitating economically distressed areas. The program is housed within the Treasury Department and enjoys broad participation from many different types of financial institutions, with credit unions seeking to participate in growing numbers each year.
The President's FY 2011 budget request includes $250 million for the CDFI fund, an increase of about $3 million over the amount Congress appropriated last year, and more than double the amount allocated in FY 2009 by the previous Congress.
NAFCU is pleased to see this increase included in the President's budget, and will work hard to ensure the respective House and Senate Appropriations Committees approve full authority of the President's request. The Obama Administration values the CDFI as a conduit to help credit unions make financial services and affordable credit available in distressed communities, and NAFCU salutes this commitment.
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