(February 3, 2010 – Washington, DC) At a meeting with key leaders of community development credit unions (CDCUs) and community development banks, Treasury Secretary Tim Geithner announced yesterday a major capital investment program for depositories certified as community development financial institutions (CDFIs). The CDCU movement was represented at the private session by Clifford N. Rosenthal, President/CEO of the National Federation of Community Development Credit Unions (Federation), and Luis Pastor, CEO of Latino Community Credit Union (Durham, NC), one of the most prominent CDCUs in the nation.
While final terms and guidelines for the program have not yet been announced, Rosenthal estimated that as much as $200 million could be invested in more than 100 qualifying credit unions serving low-income communities. “This program is a milestone in the history of the CDCU movement,” explained Rosenthal. “The Federation has worked for more than two decades to win support for credit unions that serve low-income communities across the country. The establishment of the CDFI Fund in 1994 was a great victory. This is another.”
Rosenthal worked closely with senior Treasury officials throughout the development of this initiative, along with Federation members Bill Bynum (CEO of Hope Community United Credit Union/Enterprise Corporation of the Delta (Jackson, MS), who chairs the CDFI Fund’s Advisory Committee, and Martin Eakes, CEO of Self-Help Credit Union (Durham, NC). “We commend the Treasury Department’s staff for working diligently and creatively with us to develop this program,” Rosenthal said. “There are no financial institutions closer to ‘Main Street’ than CDCUs. The Federation’s more than 200 member credit unions serve over one-million people in low-income communities across the nation. Small and neighborhood businesses, homeowners, and hard-pressed consumers will all benefit from this program.”
The program will be limited to community development credit unions and community development banks certified as community development financial institutions by the Treasury Department’s CDFI Fund. “There are currently more than 150 credit unions certified as CDFIs,” said Rosenthal. “We know that many more CDCUs qualify for this designation, and we will work intensively with our members and other interested credit unions over the coming months to help them become certified.”
Based on yesterday’s announcement, investments through the program will take the form of secondary capital (equity-like subordinated debt), at a rate of two-percent for at least eight years. Low-income credit unions are the only credit unions with the power to accept secondary capital; however, in order to participate in this initiative, credit unions must have low-income designation as well as CDFI certification. The National Credit Union Administration (NCUA), the federal regulator for the credit union industry, will play a major role in determining eligibility for the funds. “We have been consulting with NCUA about needed regulatory changes, and we will continue discussions about the standards of viability that credit unions must meet in order to receive funds,” Rosenthal added.
Since 1994, the U.S. Treasury Department’s CDFI Fund has invested over $1 billion in community development financial institutions nationwide. The Federation drafted the original concept paper used to advocate for creation of the CDFI Fund, and served as co-founder of the CDFI Coalition, which represents the spectrum of community development financial institutions of various types. Federation President/CEO Cliff Rosenthal was the first elected chairman of the CDFI Coalition, where he continues to serve on their Board of Directors. The Federation is itself a certified CDFI Intermediary with more than $50 million in assets under management through its Community Development Investment Program (CDIP).
© 2010 National Federation of Community Development Credit Unions.
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