CDCUs Seek Federal Funds To Boost Capital

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NEW YORK — The National Federation of Community Development CUs hopes to tap the Treasury Department's Community Development Financial Institutions fund this year for as much as $2 million to help recapitalize its members who are being badly hit by growing NCUA assessments for the corporate credit union bailout.

Federation Director Cliff Rosenthal said his organization has committed to pumping $1 million into undercapitalized CDCUs but much more will be needed, with as many as 110 CDCUs having applied to NCUA for CDFI capital grants to be provided by the Treasury. That program will provide credit unions up to 3.5% of their assets as long-term capital, defined as up to eight years, which will defined as secondary capital, according to Rosenthal.

The CDCU figure said low-income credit unions, many of which operate on thin capital margins, will be particularly hard hit by the corporate bailout charge, a $1.1 billion assessment set last week by NCUA, as well as a subsequent charge expected this fall to replenish the National CU Share Insurance Fund. "CDCUs tend to be lower-capitalized than all credit unions," he told the Credit Union Journal. "Therefore, any corporate or Share Insurance Fund assessment is going to come down on them particularly hard."

The NCUA assessment comes as private-sector foundations which the Federation typically counts on for assistance, are also hard-hit by declines in their endowments, drying up a potential source of funding, said Rosenthal.

The CDFI program has been a reliable source of funding for CDCUs, with more than 50 credit unions and affiliated entities, including the Federation, having tapped into the Treasury program for more than $50 million since its inception. Nine credit union and related organizations received $17 million in CDFI funding during last year's round.

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