Sens. Alex Padilla (D-CA) and Kevin Cramer (R-ND) introduced legislation in the U.S. Senate this week that would allow certain credit unions to purchase Central Liquidity Facility (CLF) capital stock for the next three years, with the California and Nevada Credit Union Leagues, Credit Union National Association (CUNA), and Dakota Credit Union Association all coordinating with policymakers on the bill.
CLF flexibility — enacted via the CARES Act in 2020 (Coronavirus Aid, Relief and Economic Security Act) — expired at the end of 2022.
“Senator Padilla and other members of Congress who support this crucial legislation realize that extending agent membership in the Central Liquidity Facility is a liquidity lifeline for thousands of credit unions across our nation — especially smaller cooperatives that have a harder time navigating cost-effective funds,” said Diana Dykstra, president and CEO of the Leagues.
She noted how the benefits of this type of extension are significant and relevant to credit unions and their member-owners, especially in a time of economic uncertainty, rising interest rates, and inflation. While Padilla’s introduction of this bill shows he “understands what our industry needs,” it also demonstrates his ongoing strong support for credit unions and their members as they strive to deliver affordable financial services, Dykstra said.
“Instead of delaying, we can work to shield credit unions from unforeseen liquidity problems today,” she said.
A mixed-ownership government corporation, the CLF was created several years ago to improve the general financial stability of credit unions by serving as a liquidity lender to credit unions experiencing unusual or unexpected liquidity shortfalls. Member credit unions own the CLF, which is guided by the National Credit Union Administration (NCUA). The CLF’s president manages the facility under oversight by the NCUA board of directors.
Thousands of credit unions lost an emergency liquidity backstop when the CLF flexibility expired at the end of 2022. Credit unions and their members need access to capital more than ever, with Padilla’s bill introduction serving as a positive step forward.
“We thank Sens. Padilla and Cramer for taking action to ensure credit unions are able to deal with unexpected liquidity shortfalls,” said CUNA president and CEO Jim Nussle. “Extension of these enhancements will better protect credit unions from liquidity issues now and in the future as our economy faces recession and record inflation.”