WASHINGTON - House Financial Services Committee Chairman Barney Frank is asking Federal Reserve Chairman Ben S. Bernanke to support permanently lifting the cap on the Central Liquidity Facility.
Frank said doing so would help the CLF fund programs that will "keep the credit union system strong."
He wrote the letter on December 23 but it was released today.
He thanked Bernanke for supporting NCUA's request to use the CLF for the Credit Union Homeowners Affordability Relief Program (CU HARP), which will assist homeowners struggling to make mortgage payments and the Credit Union System Investment Program (CU SIP), which is designed to help provide liquidity to corporate credit unions.
According to the NCUA, the CLF is funding $164 million in advances under the CU HARP and approximately $4.9 billion in advances under the CU SIP.
Last fall, Congress passed a measure raising the CLF's cap from the $1.5 billion it had been at since 2001. The change allows the facility to lend money to credit unions based on the formula established in the Federal Credit Union Act, which is estimated to be $41.5 billion.
Frank also said he feared that credit unions would be hurt by Treasury Secretary Henry Paulson's "misguided" decision not to use Troubled Asset Recovery Program (TARP) to buy illiquid assets."
NCUA Chairman Michael E. Fryzel said in a statement that he is "pleased Chairman Frank has recognized NCUA's efforts to equip credit unions with any and all appropriate tools for use in dealing with the broader market dislocations."