July 29, 2013

Appropriations bills differ on CDFIs, CDRLF

July 30, 2013 – The Senate Appropriations Committee last week allocated funds for community development funding and set no limit on the Central Liquidity Facility's access to credit, but there are differences from a House committee-approved package that may have to be ironed out in conference.

Last week, the Senate committee reported out a package that would provide $230 million for fiscal 2014 operations of the Treasury Community Development Financial Institutions Fund and $1.128 million for the NCUA Community Development Revolving Loan Fund for credit unions. The House Appropriations Committee approved $221 million for the CDFI Fund the week before and $1.2 million for the CDRLF. Those are differences that lawmakers will need to resolve before a final package is approved in both the House and Senate.

NAFCU supports maximum funding for the CDFI Fund and CDRLF to support credit union operations in low-income and economically distressed areas. All insured credit unions with NCUA's low-income designation are eligible for CDFI certification and for assistance from the revolving loan fund.

Limits on CLF since U.S. Central wind-down

Congressional appropriators have proposed no limits in the CLF's access to its statutory line of credit with the Federal Financing Bank, but the facility faces other limits due to last year's wind-down of U.S. Central Bridge Corporate FCU.

Under the Federal Credit Union Act, the CLF can borrow up to 12 times its total subscribed capital stock and surplus. And while Congress isn't proposing to limit the CLF's access to credit, the fund's capital and surplus totaled just $124.2 million on June 30, a small fraction of the more than $1.9 billion it had in June 2012.

Until late last October, U.S. Central held stock in the CLF on behalf of all natural person credit unions that are members of a corporate but not direct members of the CLF. The bridge corporate closed last year, and its redemption of CLF stock was part of the wind-down. That immediately reduced the capital stock at the CLF while also cutting off most insured credit unions' access to the facility.

Credit unions are eligible to become direct members of the CLF, or they may obtain access it they belong to a corporate credit union that has opted to serve as an agent member of the CLF.

NAFCU has urged NCUA to make it easier for credit unions to obtain direct membership in the CLF and to permit credit unions more flexibility in addressing emergency liquidity needs than the agency would do in a current proposed rule.

Other federal liquidity sources available to credit unions include the Federal Reserve discount window, the Federal Home Loan Banks and Treasury securities.