Credit Union Times - October 08, 2008
WASHINGTON - Credit unions will have more funds available to shore up any liquidity shortfall as a result of Congress' decision to increase the cap on the on the central liquidity facility.
The continuing resolution to fund the government contains a provision that eliminated the artificial cap on the facility's borrowing authority. Currently, it is capped at $1.5 billion (as it has been since 2001), and the change would allow the facility to lend money to credit unions based on the formula established in the Federal Credit Union Act, which is estimated to be $41.5 billion.
The NCUA and the credit union trade groups pushed hard for including the provision.
"I am extremely pleased that Congress has responded favorably to our request that NCUA be given authority to lend to its statutorily set central liquidity facility loan level, which is now $41 billion," NCUA Chairman Michael E. Fryzel said. "The careful case that we built in asking for the authority was based on the concept that I wanted to be proactive and preventative, rather than reactive during a crisis, and I commend Congress for providing NCUA an additional tool with which to address liquidity needs that may develop."
CUNA and NAFCU both praised the congressional action and said it will help the government and credit unions during difficult times, such as the current economic slowdown.
Congress created the central liquidity facility in 1998 and the Treasury Department is authorized to lend it up to $500 million if it is determined that the facility doesn't have enough money to meet the liquidity needs of credit unions. Membership is voluntary and credit unions that join purchase stock in the facility.