NEW YORK The National Federation of Community Development CUs called on NCUA to convert its $18 million community development loan fund which has suffered from almost no demand the past five years to secondary capital for endangered CDCUs and especially minority credit unions.
The Federation applauded NCUA’s outreach to minority credit unions, as required under the Dodd-Frank Act, but said its current proposals would do little to help staunch the disappearance of African-American, Native American and other minority-based credit unions, which are being merged out at an accelerating pace.
But, the Federation said, NCUA could tap its revolving loan fund, which has had as much as $14 million of unobligated assets, as well as the National CU Share Insurance Fund’s emergency section 208 assistance, for secondary capital assistance for the threatened minority credit unions.
“NCUA should expand financial support specifically designated to minority credit unions,” wrote Cathy Mahon, president of the Federation in a comment letter on the agency’s proposed program to help minority credit unions. “We urge NCUA to provide direct financial assistance to minority credit unions, in cases where such assistance could stabilize a struggling institution. This would be especially appropriate in cases where a long-standing and historically stable credit union suffered a loss of capital resulting from NCUA assessments, for example, or an unusual loss related to economic conditions outside the credit union’s control,” Mahon wrote.
“We recognize that the agency has been reluctant to provide such assistance to date, and would argue that the urgency of the Congressional mandate to preserve minority credit unions requires new thinking and the expanded use of such powers,” she added.
She also urged NCUA to ease expectations of minority credit unions, especially during financial work-outs. “We do not propose that every struggling credit union be saved and maintained as it operates today, nor do we suggest the Agency neglect its responsibilities to maintain the safety and soundness of the credit union system,” wrote Mahon. “But that does not change the fact the Agency’s stated goal and obligation to preserve these institutions presents opportunities to develop new approaches.”
