Federation Issues Major Study of CDCUs and CDFI Industry
(March 14, 2012 – New York, NY) A major new study by National Federation of
Community Development Credit Unions (Federation) President/CEO Cliff
Rosenthal, entitled Credit Unions, Community Development Finance and the
Great Recession, has been released by the Federal Reserve Bank of San
Francisco as part of their Working Papers series.
The paper offers the most detailed history to date of the role of community
development credit unions (CDCUs) within the Community Development Financial
Institutions (CDFI) movement; shows how federal investments helped preserve
and expand CDCU services during the Great Recession; and recommends ways to
strengthen CDFI depository institutions of all types through best-practice
models and innovative collaborations to increase impact.
In the study, Rosenthal introduces the broader credit union movement to the
world of community development finance and identifies factors that have
limited the recognition of credit unions within the CDFI field. One
consequence of this limited recognition, he writes, is disproportionately
low levels of financial and technical support for CDCUs and other
depositories compared to non-regulated loan funds, which regularly claim
75-85% of direct assistance from the CDFI Fund.
By contrast, the Treasury Department’s Community Development Capital
Initiative (CDCI) invested more in CDFI depositories in 2010 – the single
year of its existence – than the CDFI Fund had invested over its entire 15
year history; CDCI placed nearly $570 million in secondary capital loans –
equity-like subordinated debt – in CDFI banks and CDFI credit unions using
funds from the $800 billion Troubled Assets Relief Program (TARP). CDCI was
a vital source of capital at a critical moment; it allowed credit unions to
strengthen their financials in order to grow more rapidly in communities
that were hardest hit by the recession. Unfortunately, the CDCI program was
vastly undersubscribed as many credit unions chose not to accept the
investments due to burden of compliance with requirements designed for the
largest financial institutions.
The paper shows how the damage wrought by the Great Recession on CDCUs was
compounded by the crisis of the wholesale or “corporate” credit union
network, which resulted in system-wide deposit-insurance premiums and other
assessments that eroded credit union capital and profitability.
The paper underscores the unique and powerful resources available only
through the CDFI Fund and makes specific recommendations to strengthen and
expand the field of community development finance, including:
. Increased investment in CDFI depository institutions.
. Improved and expedited certification procedures for all CDFIs.
. Strategic investments to build the CDFI field, through new structures and
platforms, such as hybrid structures that marry the complementary strengths
of CDFI loan funds with CDFI credit unions.
The Federation co-founded the CDFI Coalition in the early 1990s, building on
a concept paper that Rosenthal authored in the late 1980s calling for the
creation of an institution like the CDFI Fund. The Federation is a permanent
board member of the national CDFI Coalition and has long led the New York
State CDFI Coalition, which has successfully advocated for a statewide
program to invest in CDFIs of all types.
Through its CU Breakthrough service, the Federation provides comprehensive
consulting services to credit unions seeking CDFI certification and
The full report is available from the Federal Reserve Bank of San Francisco
at: http://www.frbsf.org/publications/community/wpapers/, and is also
available for download via the Federation’s website at:
The National Federation of Community Development Credit Unions (Federation)
is a certified CDFI Intermediary representing more than 240 community
development credit unions (CDCUs). The Federation’s member CDCUs provide
credit, savings, transaction services and financial education to more than
1.7 million residents of low-income urban, rural and reservation-based
communities across the United States, and hold over $11 billion in
community-controlled assets. Founded in 1974, the Federation is
headquartered in Lower Manhattan with offices in Colorado Springs, CO;
Madison, WI; and San Francisco, CA. The Federation offers a wide range of
advocacy, educational, training, investment, marketing, and outreach
programs to support and assist CDCUs. For more information about the
Federation and its programs, please visit: www.cdcu.coop.
© 2012 National Federation of Community Development Credit Unions.
Rafael O. Morales
Public Affairs Officer &
West Coast Program Officer
Tel 800.437.8711 x206