NEW YORK — Some community development credit unions came away very disappointed by the latest round of key government grants, according to the National Federation of Community Development Credit Unions.
Federation CEO Clifford Rosenthal explained that the organization is hearing an unprecedented level of complaint and concern from its members about the most recent round of grants from the U.S. Treasury Department's Community Development Financial Institutions Fund.
These grants have played a strong role in the development of many CDCUs since they include both financial grants that CDCUs can use to strengthen their equity positions and technical assistance grants that they can use to both start new programs and develop expertise.
According to Rosenthal, a number of qualified CDCUs made what they believed to be strongly competitive applications for this year's grants, only to have them fail to win any awards. Credit unions and credit union organizations, including the federation, shared roughly $4.7 million of the CDFI fund's roughly $54 million from this round of grants. According to the federation's figures, credit unions saw 15% of their applications succeed in winning 9.6% of the total CDFI grant pie this year, which Rosenthal said is down from last year.
"We are planning to meet with the CDFI fund and see what's going on," Rosenthal stressed, adding that while the federation had been among three credit unions or CU organizations to have won grants of $1 million, other qualified and well-deserving credit unions had been passed up.
"We have long been perplexed and concerned that regulated institutions whose deposits are insured like credit unions only get a small portion of the CDFI distributions each year," Rosenthal said. "That doesn't make sense to us."
Other than the federation, the $280 million ASI Federal Credit Union in Harahan, La., and the $66 million Latino Community Credit Union based in Durham, N.C., also received $1 million grants.
Rosenthal stressed that the federation was not objecting to these big grants but rather to what they saw as significantly smaller part of the overall CDFI grant allocation that was going to CDCUs. The federation has long pointed out that, despite their smaller size, community development credit unions have an large impact on their communities.
The CDFI grants only gained in importance in the light of the recent market upheavals currently shaking the financial system, even though Rosenthal estimated that the current bankruptcies and sales would not have as much of a direct impact.
Rosenthal reported that CDCUs have not had much contact with Lehman Brothers, the giant investment bank that filed for bankruptcy last week, but that community development credit unions might face more impact from Bank of America's purchase of the distressed Merrill Lynch.
Bank of America and Merrill Lynch announced the sale last week.
"There may be some impact from the Merrill purchase," Rosenthal said. "Merrill has a community development company which has made investments in some community development financial institutions and even though its likely a separate company, it's unclear what will happen with that."
Merrill's Web site identified the Merrill Lynch Community Development Co. as a wholly owned, for-profit subsidiary of Merrill Lynch Bank USA that was formed to help the bank meet its obligations under the Community Reinvestment Act.
–dmorrison@cutimes.com
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