Letter to Representatives James Walsh and Alan Mollohan regarding the Central Liquidity Facility
March 7, 2002
On behalf of the Credit Union National Association (CUNA) and 82 million credit union members nationwide, I am writing to express my support for the $1.5 billion limit on the Central Liquidity Facility (CLF) borrowing authority sought by National Credit Union Administration Chairman, Dennis Dollar.
The CLF plays an important role by serving as a backup liquidity source for credit unions. Natural-person credit unions depend on a three-tiered approach to fulfill their liquidity needs. Credit unions turn first to their correspondent financial institutions, principally corporate credit unions, to withdraw deposits and to borrow additional amounts as needed. Next, if corporate credit union and other correspondent funding is unavailable, credit unions can access the CLF as a back-up liquidity provider to meet their liquidity needs. Finally, to the extent both corporate credit union and CLF funding are unavailable, credit unions may seek liquidity from the Federal Reserve System's discount window, the financial system's lender of last resort. The CLF continues to be an efficient, highly effective system that is uniquely adapted to credit union needs.
The Credit Union National Association (CUNA) has a long-standing policy of supporting removal of the cap on the CLF's borrowing authority. Until fiscal year 2000, the appropriations limit for the CLF had not been adjusted since Congress first imposed the $600 million limit in 1980. Although CUNA believes the cap is unnecessary and should be omitted from the appropriations bill, especially since it has no budgetary or scoring impact, we agree with Chairman Dollar that $1.5 billion should be adequate coverage for Fiscal Year 2003.
Thank you for your strong support of the CLF, especially your willingness to advocate for a higher borrowing ceiling. We look forward to continuing to work with you on this important issue.
Daniel A. Mica
President & CEO