A Capital (Decision) Delay

WASHINGTON-A number of people remain hopeful that early next year community development financial institutions will learn they have access to more secondary capital.

That is the hope of Cliff Rosenthal, executive director of the National Federation of Community Development CUs. Rosenthal told Credit Union Journal that his organization has yet to hear back from the Treasury Department on the matter of allowing CDFIs to securitize secondary capital and a variety of loans, especially mortgages, under the government's plan to issue as much as $3 billion in Community Development Financial Institution bonds.

"We are still waiting impatiently for the regulations to be released" said Rosenthal. "They were supposed to come out by the end of September, but the fund was not able to meet that deadline."

In a comment letter on the Treasury proposal (Credit Union Journal, Oct. 10), Rosenthal stated that investments of secondary capital "enable credit unions not merely to fund loans, but to leverage their net worth-to expand their deposit base and generate loans for the full range of credit needs in underserved communities, including but not limited to housing, microenterprise, working capital for small businesses, education, and other essential needs of their members."

The bonds, authorized by last year's Small Business Jobs Act, would carry the wrap of the U.S. guarantee and the Treasury would issue $1 billion of bonds a year-a total of $3 billion-to be backed by assets of CDFIs still to be determined.

Mainstream credit unions are barred from accepting and counting secondary capital as net worth under NCUA's prompt corrective action rules, but 1,100 credit unions NCUA has qualified as low income may count secondary capital as net worth.