ALEXANDRIA, Va. (8/03/09)--The National Credit Union Administration has announced the transfer of the accounts holding $1.8 billion of the Central Liquidity Facility's (CLF’s) funds, which are currently held by U.S. Central Federal Credit Union, to the U.S. Treasury. The NCUA also announced that it is exploring "alternatives regarding the transfer of primary ownership of CLF stock from [U.S. Central] to other credit unions or groups of credit unions through the anticipated reforms to the corporate network." U.S. Central currently owns approximately 96 % of the CLF's stock and, eventually, natural-person credit unions may need to directly invest in CLF stock in order to have continued CLF access, which would effectively buy out U.S. Central's CLF stake. According to the NCUA, this change, which will invest the CLF funds in U.S. Treasury securities on behalf of the CLF, will not impact the CLF's ability to provide liquidity to credit unions. In a statement, the NCUA said that this move was “not based on a concern of diminished confidence in NCUA’s conservatorship efforts to restore U.S. Central to a financially strong operational status.” NCUA explained that this transfer resulted from the CLF's consultations with its auditor. Sources also indicated that the Treasury was in favor of this change. But for this transfer of the CLF's funds, the CLF and its auditors had determined that "GAAP accounting rules may require the funds invested in U.S. Central to be presented on CLF's financial statement as a contra equity account rather than an asset. This contra equity treatment would effectively result in CLF total member equity of zero….because CLF's borrowing authority is determined based on a multiple of its equity, this treatment would effectively reduce CLF's borrowing amount to zero." In other words, U.S. Central acting as both an investor in the CLF and as the agent holding the CLF's funds (including the cash resulting from its own investments in CLF stock) may have led to double counting assets. The Senate in September is scheduled to vote on allowing the CLF to extend until 2010 its full borrowing authority of around $40 billion. The Credit Union National Association (CUNA) is evaluating NCUA's analysis of the current situation involving the CLF. Senior CUNA staff were briefed by NCUA representatives on Friday morning about this transaction, and CUNA will be pursuing further dialogue on this issue with the agency. CUNA's Government Affairs Committee and its subcommittees are also expected to assess the implications of these changes to the CLF in the very near future. For the full NCUA release, use the link.