NAFCU urges Senate to place CLF as high as possible

WASHINGTON-In a recent letter to Senate Appropriations Subcommittee on VA, HUD, and Independent Agencies Chairwoman Barbara Mikulski, NAFCU urged the subcommittee to remove the $600 million borrowing cap on the Central Liquidity Facility (CLF), or if not possible, at least set it at last congressional session’s $1.5 billion. The letter falls just prior to the subcommittee’s hearing, while the House subcommittee has already held a hearing on the legislation. NAFCU’s letter read, “.the CLF has served credit unions very well by providing an appropriate source of liquidity to meet short-term and seasonal liquidity needs, and by making credit available in unusual and/or emergency circumstances of a longer term resulting from regional or local difficulties.” In 1984, when Penn Square National Bank failed, NAFCU wrote, credit unions borrowed $275 million from the CLF to help stabilize the situation. A similar problem occurred with the failure of the Rhode Island Share Deposit Insurance Corporation in 1991, and credit unions were able to get $144.5 million in loans from the CLF. Also, when NCUA decided to liquidate Capital Corporate Federal Credit Union in 1995, the CLF loaned out $390 million to assist credit unions, according to NAFCU. Additionally, NAFCU wrote that during the Y2K date change period, the CLF borrowing authority was increased to its full statutory level of 12 times capital and surplus. “Thanks to the responsible action of Congress in removing that cap, credit unions were recognized by their members and others in the financial services marketplace as being well-prepared to respond to any needs associated with the millennium date change,” NAFCU wrote. NAFCU noted that a study performed last year by the Government Accounting Office found that credit unions were using the fund to appropriately meet liquidity needs and not as an avenue to expand their portfolios. However, NAFCU expressed its acceptance of a level equal to last year’s $1.5 billion of the statutory level, approximately $21.5 billion, would not be possible after the recent tax cuts. NAFCU also expressed its support for the $1 million proposed to go towards the Community Development Revolving Loan Fund Program (CDRLF). “We believe that the CDRLF provides a valuable tool for credit unions to provide financial services to low-income communities, by providing loans and deposits to low-income-designated credit unions,” NAFCU’s letter read. They noted that $350,000 of the CDRLF was earmarked for technical assistance. [email protected]