WASHINGTON — NCUA spokesman John McKechnie confirmed that the agency's new Credit Union System Investment Program, announced Dec. 9, will increase liquidity in the credit union system, not recover corporate investment losses.Corporates will issue CU SIP notes to natural person credit unions and use the funds to pay off liquidity lines from sources like Federal Reserve Banks and Federal Home Loan Banks, which will free up collateralized assets and, in theory, allow corporates to borrow more."This money from SIP will not be collateralized," said Dave Dickens, executive vice president of asset-liability management for the $38 billion U.S. Central Federal Credit Union. "What that will do is allow us to pay down borrowings we have that are collateralized, freeing us up for future liquidity needs on behalf of the credit union system."Here's how the cash flow works: natural person credit unions will apply for a CU SIP advance to the NCUA's Central Liquidity Facility. The CLF will review the application and determine eligibility, including a minimum 6% net worth ratio that has been recalculated to include the requested advance amount.The advance carries a one-year term, maturing no later than Dec. 31, 2010, and has a rate equal to the greater of the primary credit rate at a Federal Reserve Bank discount window or the rate on a comparable maturity Treasury security plus 12.5 basis points.Natural person credit unions are then required to invest the funds in CU SIP notes, which will be issued by corporates and will carry an NCUSIF guarantee, Notes will have maximum one-year terms, and the return will equal the advance rate plus 25 basis points."The SIP note issued by the corporate will match the term of the CLF advance, provide a positive spread against the CLF advance and be structured as a senior debt obligation; thus guaranteed under the NCUSIF guarantee program announced back in October," said Western Corporate Federal Credit Union President/CEO Bob Siravo in a statement. "Consequently, this will provide a risk-free opportunity, as well as a way to support the corporate credit union network."NAFCU President/CEO Fred Becker agreed, saying that the program was a good way for his members to support the corporate network and operate as a cooperative system. Becker said his staff is also sorting through all the details but said he's certain about one thing: he's glad the program utilizes the CLF, not the NCUSIF, which NAFCU opposed.While the devil is in the details, corporates say they aren't seeing red over any provisions yet. Dickens said U.S. Central plans to apply to function as the agency group representative, interfacing with the CLF on behalf of other corporates and will also apply to issue SIP notes.Members United Corporate Federal Credit Union Senior Vice President Victor Vrigian said his $6 billion institution was still sorting through the mechanics of the program, but he said, "it feels like a good thing for credit unions and the network, and I don't know why we wouldn't want to participate."Bruce Fox, Southwest Corporate Federal Credit Union executive vice president and chief investment officer, said his team is also reviewing the details. "Any initiatives by the NCUA to provide additional liquidity to the credit union system is positive in the view of Southwest Corporate," he added.Siravo didn't state that WesCorp will apply to issue SIP notes. He did say that his corporate is working with the NCUA and U.S. Central to finalize the application process, indicating that the $25 billion corporate may participate. –[email protected]