Subcommittee OKs CLF at $1.5 billion

WASHINGTON-The Senate Appropriations Subcommittee on VA, HUD, and Independent Agencies, chaired by Senator Barbara Mikulski (D-Md.) approved legislation last week on the Central Liquidity Facility (CLF). The CLF provision is included in the Veterans Affairs, Housing and Urban Development, and Independent Agencies Appropriations bill. According to numerous knowledgeable sources, the bill continues the current $1.5 billion borrowing authority for the NCUA's CLF through fiscal year 2003. The CLF serves as a back-up source of liquidity for credit unions and has been historically set at $600 million, though in the original statute no cap existed. The CLF was initially raised to $1.5 billion in deference to concerns regarding the millennium date change. Full committee mark-up was expected just after deadline. Just prior to the issue coming before the subcommittee, NAFCU wrote the lawmakers urging them to maintain the $1.5 billion ceiling. "In keeping with its congressional mandate, during the intervening years 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," NAFCU wrote. The trade association made note of its uses during the failure of Penn Square National Bank, which failed in 1984 with $275 million in loans; when the Rhode Island Share Deposit Insurance Corporation (RISDIC) failed in 1991 with $114.5 million; and in 1995 when NCUA seized CapCorp, the CLF extended $390 million. "With the uncertainty of world events since last fall, we believe that it would not be prudent to set the cap at a level below this amount for FY '03," NAFCU's letter read. The trade association also requested that in the future the CLF would be returned to its originally intended borrowing authority of twelve times the subscribed capital stock and surplus, which in 2001 was approximately $23.1 billion. CUNA had written earlier this congressional session in support of the $1.5 billion cap. -scooke@cutimes.com