More than 100 executives from credit unions, CUSOs, regulatorsand advisory firms dialed into a March 4 conference call to findout what credit unions will have to do to obtain money under theU.S. Treasury's Community Development Capital Initiative.

The Treasury and White House first announced the program inFebruary. It makes funds from the Troubled Asset Relief Programavailable to development banks and credit unions in the form oflong-term, low-interest loans that will be used to strengthencapital positions. The conference was one of the opportunities CUshad to find out what they would have to do to obtain a loan, whichcan be for up to 3.5% of a credit union's assets. The loans willcarry an interest rate of 2% for eight years and then a rate of 9%for credit unions that want to hold on to them for five moreyears.

The good news from the call came early. The initial applicationfor the money will be two pages long. But the details about whatcredit unions would have to do to support the application were abit more daunting.

Since the program is targeted at community development financialinstitutions, credit unions that wish to participate have to berecognized as a low-income credit union by the NCUA and as acommunity development financial institution by the Treasury'sCommunity Development Financial Institutions Fund.

This dual hurdle challenges a number of credit unions that mighthave one designation but not both. It also throws the question ofsupplementary capital and its role in a credit union into sharprelief, according to Cliff Rosenthal, CEO of the NationalFederation of Community Development Credit Unions who participatedon the call.

“It's not clear to me that sufficient numbers of credit unionsreally understand what subordinated capital is, how it works andwhat it can mean for a credit union,” Rosenthal said on the call,adding that the federation was extending a helping hand to creditunions wanting to apply.

Secondary capital plans from those CUs that have applied forCDCI money are due before May 3, but the NCUA recommendedinterested credit unions submit them as soon as possible. Creditunions seeking to apply for the CDCI loans have to have theirapplications in by April 2. Those credit unions that are notalready certified as CDFIs have until April 16 to submit anapplication for that designation to the CDFI Fund.

Rosenthal challenged the notion that the money provided tocredit unions should be seen as a negative for credit unions justbecause the money comes from the TARP program.

“In contrast to the banks, the TARP money being provided shouldbe seen as vote of confidence for credit unions,” Rosenthal toldthe call participants. He said a credit union using the funds mustreceive an NCUA blessing that the credit union is “viable.”

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