BALTIMORE The Treasury Department is expected to issue as much as $500 million in a pilot CDFI Bond Guarantee program, providing a vast new source of funding for community development credit unions and other CDFIs, according to the head of the Community Development Financial Institutions Program.
“We believe the program can benefit credit unions,” Donna Gambrell, director of the CDFI Program, told attendees of the National Federation of CDCUs’ annual conference yesterday.
The CDFI Director noted the Federal Reserve last week approved an interim rule for issuance of the bonds, which are aimed at providing an additional source of long-term funding for CDFIs.
The program will issue bonds with maturities as long as 30 years in lots of $10 million. That means credit unions will have to team with each other or a larger entity such as the Federation to participate. The bonds will be collateralized either by the assets of the CDFIs, or letters of credit or a pledge from a sponsoring foundation. “It’s a very complex, complicated program,” said Gambrell, whose agency has provided more than $135 million in grants to CDCUs over the past decade.
The creation of the CDFI bonds, which will be purchased by the Treasury’s Federal Financing Bank, was authorized in the Small Business Jobs Act of 2010 and authorizes the Treasury to guarantee up to 10 bonds per year, each at a minimum of $100 million. The total of all bonds cannot exceed $1 billion per year.
The Treasury will be holding training programs on the new bonds later this year, Gambrell said.
She added the Treasury plans to issue as much as $500 million of the CDFI bonds by year-end.
