Letter to Reps Cochran, Bond and Murray Regarding CDRLF & CLF
July 18, 2006
The Honorable Thad Cochran
Senate Committee on Appropriations
113 Dirkson Senate Office Building
Washington, DC 20510
Dear Chairman Cochran:
On behalf of the Credit Union National Association (CUNA) and America's 88 million credit union members, I am asking for your support of two programs administered by the National Credit Union Administration: the Community Development Revolving Loan Fund (CDRLF) and the Central Liquidity Facility (CLF).
First, CUNA and its member credit unions strongly support an increase in the CDRLF fund to a minimum of $2 million. The CDRLF plays a vital role in underserved communities by providing loans and technical assistance grants to credit unions, enabling credit unions to enhance their technologies in order to provide increased products and services. Additionally, the NCUA covers all administrative expenses for the program, ensuring the appropriated funds are maximized to the fullest extent.
The CDRLF also plays an essential role in the success of NCUA's Access Across America program, which aids underserved communities and creates economic empowerment for lower-income individuals. By offering affordable financial services in distressed communities, credit unions provide a safe and reliable alternative to predatory check cashers, pawnshops and title loan companies.
Second, CUNA supports the $1.5 billion limit on the CLF borrowing authority. The CLF continues to be an efficient, highly effective system that is uniquely adapted to credit union needs, and 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.
Credit unions maintain very strong liquidity rates. In 2005, not a single request for a loan was placed to the CLF. However, it is essential the CLF borrowing authority be upheld at the $1.5 billion cap to ensure back-up liquidity is available during unexpected events or crises.
In closing, I am asking for your leadership in securing a funding level of $2 million to enable the CDRLF program to provide continued growth and sustainability for credit unions in underserved communities, and the $1.5 billion cap on borrowing authority for the CLF.
Thank you for your consideration.
Daniel A. Mica
President & CEO