For once, credit unions and banks agree on something.
Both major national credit union trade associations and the four biggest bank trade associations are in rare agreement in their opposition to a proposed $15.4 billion rescission package that would claw back $23 million in fiscal year 2017 funding.
The Trump administration has proposed a rescission of funds previously appropriated for the U.S. Department of the Treasury’s Bank Enterprise Award Program and $151 million in 2018 funding for Capital Magnet Fund. The U.S. Treasury Department’s Community Development Financial Institutions Fund administers the CMF, and the CMF provides grants to CDFI credit unions to finance affordable housing.
Just two months ago, Congress passed the fiscal year 2018 omnibus bill. After an early version of the budget proposed eliminated funding of the Community Development Financial Institutions Fund, the budget deal included $258 million in funding for the CDFI fund.
On Wednesday, Jim Nussle, president and CEO of the Credit Union National Association, sent a letter to House and Senate appropriations leaders opposing any rescissions from the fund. The letter said in part:
“CUNA opposes this rescission from funds that have already been authorized, particularly funds that credit unions are able to leverage for much-needed affordable housing solutions in the communities they serve. Congress has repeatedly protected the CDFI Fund from proposed cuts and elimination. As you know, the fiscal year 2018 omnibus appropriations legislation passed by Congress in March funded the CDFI program at $250 million, a $2 million increase from the previous fiscal year. Fully funding the CMF and the CDFI Fund is an important investment by the federal government.”
Brad Thaler, vice president of legislative affairs for the National Association of Federally-Insured Credit Unions, on Thursday told Credit Union Journal: “The Capital Magnet Fund in the CDFI program is an important resource for a number of credit unions to provide affordable housing solutions. These funds have already been collected from the GSEs and are authorized. NAFCU supports CDFI programs and we urge Congress to keep these funds available and not sweep them into a rescission.”
In their letter sent Thursday to House and Senate leadership, the American Bankers Association, the Independent Community Bankers of America, the Community Development Bankers Association and the National Bankers Association pointed out the CDFI Fund programs have earned widespread bipartisan support over many years “as they have been successful in spurring economic activity in disinvested inner cities and distressed remote rural communities.”
“The administration has characterized the items in the rescission package as unspent money that was unused and not needed; and thus no harm would be done by clawing back the money. This is not accurate,” the bank trades wrote.
The rescission package has “halted the current BEA Program funding round that was imminently expected to announce $23 million in awards,” the bank trades wrote, adding: “The banks fulfilled all the BEA Program requirements, prepared and submitted applications, the CDFI Fund competitively evaluated the applications, and was ready to make awards. The BEA Program enables small banks in distressed communities to finance small business, affordable housing, neighborhood revitalization, and responsible consumer financial services. Without these resources, banks will not be able to reach as deep to serve high poverty communities.”
The National Federation of Community Development Credit Unions also criticized the plan, saying in an email to Credit Union Journal that "The rescission of funding for BEA and Capital Magnets will directly impact consumers in low-income communities served by CDFI certified credit unions."
"Over the years, the BEA has helped to stimulate millions of dollars in deposits for low-income credit unions enabling them to increase their lending for consumers," added Federation CEO Cathie Mahon. "These partnerships between banks and community development credit unions provide a rare and important example of how collaboration between our industries results in increased responsible lending for low-income consumers. The reduction of support for any of these CDFI Fund programs results in reductions in the access to credit, financial services, affordable housing and services and asset building strategies and supports in communities that need it most."
This story was updated at 3:07 P.M. on Friday, May 11, 2018.