WASHINGTON-Faced with declining numbers, the National Federation of Community Development CUs is asking NCUA to act to convert some $16 million in low-interest loans through NCUA's Community Development Revolving Loan Fund into permanent capital.
"We lost about 20 credit unions last year, one of our worst years ever," said Clifford Rosenthal, director of the Federation, of the merged and failed CDCUs in 2008.
Rosenthal said he has asked NCUA to move to boost the waning capital in some CDCUs by converting existing loans to capital, either as long-term loans or grants, similar to what the Treasury's Community Development Financial Institutions Program does.
The Federation believes NCUA can alter the revolving loans to make it capital on its own. If not, said Rosenthal, they are willing to ask Congress to for enabling legislation. The Federation has about 200 CDCU members.
During its meeting at CUNA's GAC last week the Federation's board also endorsed several options being pursued to alleviate the cost of the $5-billion corporate credit union bailout on credit unions, including allowing the Central Liquidity Facility to lend directly to corporates; seeking financing from the Treasury's Troubled Asset Relief Program; and legislation to allow NCUA to stretch out the cost of the bailout to as long as eight years.
"These actions will help all credit unions," said Rosenthal. "However, it is important to recognize that small and low-income credit unions are especially vulnerable during this crisis. In 2008, the pace of liquidations and mergers of low-income credit unions doubled, and far exceeded that of the rest of the credit union industry. If this trend continues, the capacity our credit unions have painstakingly built up over the last thirty years will be dismantled, leaving many low-income communities with little or no access to affordable financial services."
