(February 8, 2011 - New York, NY) The National Federation of Community Development Credit Unions (Federation) has joined a group working to design and advocate for a new program that could mean billions of dollars in government-guaranteed bonds issued by Community Development Financial Institutions (CDFIs).
The product of legislation developed by the Opportunity Finance Network (OFN) and championed by Senator Robert Menendez (D-NJ), the CDFI bond program was established under the Small Business Jobs Act of 2010 (PL 111-240), and authorizes federal guarantees for bonds and notes for community and economic development purposes. Under the new legislation, the U.S. Treasury Department may issue up to $1 billion a year in bond authority through September 30, 2014. Minimum increments of bonds are $100 million. The bonds are taxable, and guarantees may be as long as 30 years. The program will be restricted to certified CDFIs.
The Federation represents credit unions in a group of prominent CDFIs organized by OFN, which has been formulating guiding principles for the new bond program.
There are presently approximately 200 CDFI credit unions, an all-time high. Dozens of credit unions received their certification in 2010 with assistance from the Federation, which continues to offer extensive consulting services and training to credit unions seeking the designation, and to those already certified.
"We are excited by the potential to raise large amounts of long-term capital with government guarantees," said Cliff Rosenthal, President/CEO of the Federation. "Because the minimum bond size is $100 million, we foresee a major role for the Federation in aggregating capital demand among our member credit unions," he added.
Among potential uses of the funds, the Federation is exploring a bond to provide equity-like secondary capital for credit unions for terms longer than ever previously available. In 2010, the Federation helped 48 credit unions obtain $69.9 million in secondary capital under the Treasury Department's Community Development Capital Initiative (CDCI). Rosenthal believes that one potential appeal of the bond program is that "it would not carry the onerous restrictions that discouraged many credit unions from participating in that program."
OFN President and CEO Mark Pinsky emphasized "how important it is that CDCUs have access to the bond program, because they serve a market that is critically important and sorely underserved." A long-time colleague and ally of the Federation, Pinsky will be a featured speaker at the Federation's 37th national Conference on Serving the Underserved, being held in Hollywood, CA, June 15-18, 2011.
For further information about this program, please contact Federation President/CEO Cliff Rosenthal at: email@example.com, or (800) 437-8711 x216.
© 2011 National Federation of Community Development Credit Unions.