Federation Exploring Possible $100 Million in Capital for CDCUs
The National Federation of Community Development Credit Unions is investigating whether and how it could use a federal bond program to help CDCUs boost their secondary capital by possibly millions of dollars.
The Small Business Jobs Act of 2010 included a provision which allows the Department of the Treasury to guarantee bonds issued for economic or community development. The law allows Treasury to issue up to $1 billion per yer in bond authority through Sept. 14, 2014. The minimum bond increments for the taxable instruments would $100 million, but the guarantees may be structured to last as long as 30 years.
Credit unions that might eventually take part in the program would have to be recognized as Community Development Financial Institutions by the Treasury Department's CDFI Fund.
National Federation CEO Cliff Rosenthal stressed the Federation was only in the exploratory or preliminary part of a process to determine the rules that would be necessary to determine which credit unions, if any, might be able to participate in the proceeds of such a bond.
Currently, 200 credit unions have been recognized as CDFIs, according to the National Federation, and there is evidence of interest in such a program were it available.
Rosenthal pointed out that the Treasury Department made almost $70 million in secondary capital loans to CDCUs under its Community Development Capital Initiative and that many credit unions that wanted to participate in the program had been discouraged by the program's source of funds and extra requirements.