Congress Must Extend CU Lifeline
WASHINGTON – One of the first things the credit union lobby will work for when the new Congress commences in January is an extension of the funding for the credit union emergency loan fund, the Central Liquidity Facility.
Known as the CLF, the fund has provided more than $1.7 billion in short-term liquidity to credit unions since September, made possible only by the increase in its lending capacity by Congress from $1.5 billion to $41 billion. In addition, NCUA plans to use the CLF for a new program that would funnel as much as $4 billion in low-cost funds to credit unions in order to help them refinance at-risk mortgages.
But the increased capacity to $41 billion was only part of a temporary spending bill approved by Congress that will expire on March 29. Unless the emergency limit is extended it could severally hamper what has become a lifeline for credit unions.
NCUA Chairman Michael Fryzel said he plans to ask lawmakers for an extension next year. "We’ll be back to talk with the Hill about expanding it," he told The Credit Union Journal this week.
Because of other liquidity sources, the CLF has gone largely unused for the past 10 years. But difficulty being experienced by regular liquidity sources, particularly the corporate credit unions and the Federal Home Loan Banks, has magnified the importance of the CLF in the growing financial crisis.
Fryzel recognized the importance of the fund as soon as he took office and within weeks asked Congress for the increased borrowing capacity. He sees it as a vehicle for not only helping credit unions, but their members too. A program he proposed this week, called CU Homeowners Affordability Relief Program, would provide $2 billion in low-interest loans to credit unions through the CLF to help them refinance thousands of at-risk mortgages. Fryzel said he wants to see a larger number of homeowners helped under the program. "I’d like to see it go as high $4 billion as quickly as possible," he said. That could be used to refinance as many as 20,000 home loans, considering the size of the typical credit union mortgage.
