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Washington
Federation working on 1B CDFI bond program
NEW YORK (2/9/11)--The National Federation of Community Development Credit Unions has joined efforts to develop a new program that could mean billions of dollars in government-guaranteed bonds issued by Community Development Financial Institutions (CDFIs). The product of legislation developed by the Opportunity Finance Network (OFN) and championed by U.S. Sen. Robert Menendez (D-N.J.), the CDFI bond program was established under the Small Business Jobs Act of 2010. It authorizes federal guarantees for bonds and notes for community and economic development purposes. Under the new legislation, the U.S. Treasury Department may issue up to $1 billion a year in bond authority through Sept. 30, 2014. Minimum increments of bonds are $100 million. The bonds are taxable, and guarantees may be as long as 30 years. The program will be restricted to certified CDFIs. The federation represents credit unions in a group of CDFIs organized by OFN, which is formulating guiding principles for the new bond program. There are about 200 CDFI credit unions, an all-time high, said the federation. Dozens of credit unions received their certification in 2010 with assistance from the Federation, which continues to offer consulting services and training to credit unions seeking the designation, and to those previously certified. In looking at potential uses of the funds, the federation is exploring a bond to provide equity-like secondary capital to credit unions for terms longer than ever previously available. In 2010, the Federation helped 48 credit unions obtain $69.9 million in secondary capital under the Treasury Department’s Community Development Capital Initiative (CDCI). Cliff Rosenthal, federation president/CEO, said a potential appeal of the bond program is that “it would not carry the onerous restrictions that discouraged many credit unions from participating in that program.” OFN President/CEO Mark Pinsky emphasized it is important “that CDCUs have access to the bond program, because they serve a market that is critically important and sorely underserved.”
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