(September 2, 2011 – Newark, NJ) Despite continuing flood damage in New Jersey and an imminent visit by President Obama, Senator Robert Menendez (D-NJ) spent much of the afternoon of September 2 in downtown Newark with the CDFI community to discuss the multi-billion-dollar Community Development Financial Institutions (CDFI) Bond program that will soon be launched.
Senator Menendez introduced legislation creating the bond program in December 2007, which provides government guarantees for the issuance of $1 billion a year in CDFI loans for each of the next three years. “CDFIs are incredibly important” in providing capital access for small businesses and combating practices like payday lending,” Senator Menendez commented. After putting the “full faith and credit” of the U.S. government behind Wall Street, he noted, the same should be done for CDFIs.
Donna Gambrell, Director of the CDFI Fund, presided over the “listening session,” as it was billed. Key CDFI Fund staff including Lisa Jones and Jodie Harris posed questions about the program’s design, eliciting comments from the dozens of CDFI representatives from as far away as North Carolina who came to the session on the eve of the Labor Day weekend. Federation Board Member Shirley Spruill, CEO of the Renaissance Community Development Credit Union (Somerset, NJ); National Federation of Community Development Credit Unions (Federation) President/CEO Cliff Rosenthal; and Vicky Parker of the North Carolina Minority Support Center were among the community development credit union (CDCU) representatives.
“Senator Menendez’s remarks clearly show that he was aware of key concerns of the CDFI field,” said Rosenthal. “He commented on the need to guarantee bonds based on the creditworthiness of issuing CDFIs, not simply individual projects. He also spoke of the need for flexibility to enable CDFIs to acquire the risk-share and loan loss reserves they needed to participate – ‘skin in the game’,” as he put it. “I have skin in the game, too,” Senator Menendez said.
Rosenthal stressed that it was essential that the CDFI Bond program allow the financing of secondary capital, which helps credit unions build their net worth. Vicky Parker of the North Carolina Minority Support Center urged that the program be structured in a way that it would “trickle down to smaller institutions.” There was broad agreement among the audience that the program should take full account of the variety of CDFIs and the range of asset classes they finance.
The participants and CDFI Fund leadership repeatedly echoed Senator Menendez’s contention that the CDFI Fund could be a “game-changer” for community economic development. Kimberlee R. Cornett, Director of Social Investment Practice at the Kresge Foundation, which works extensively in Detroit, Michigan, described the potential impact on that highly distressed city as “catalytic.”
The CDFI Fund is required to issue regulations for the CDFI Bond program by September 27. The Fund is still developing its positions on a number of complex issues, hence the need for the “listening session.”
While Fund officials gave no definite information about key parameters of the program, CDFI Fund Director Donna Gambrell summarized the themes she had heard from the participants: the need for balancing flexibility, diversity, cost-consciousness, and impact in program design. Implementation “is like walking a tightrope,” she commented in closing the session.
The Federation is a member of the CDFI Bond Policy Group, convened by OFN. In addition, the Federation has convened a task force of member credit unions to identify key issues of concern to CDCUs.
A copy of the Federation's comment letter to the CDFI Fund on the bond program can be found at: http://www.cdcu.coop/i4a/pages/index.cfm?pageid=424. That letter provides recommendations from the Federation and its members, to help make the program work for the more than 200 CDFI certified CDCUs serving low-income consumers and underserved communities across America.
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. The Federation also represents 50 Community Development Partners, some of the nation's largest credit unions with a special commitment to serving low-income communities. 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.