National Federation of Community Development Credit Unions (U.S.)

Transcription

1 National Federation of Community Development Credit Unions (U.S.)

2 The Federation: A Network of CDCUs CDCUs (Community Development Credit Unions) = credit unions that specialize in serving lowincome people

3 What do CDCUs Do? Savings Loans Cash transactions International money remittances Financial education

4 Who Do CDCUs Serve 2/3: Cities 1/3: Rural areas or Native American Reservations CDCU members People with small savings People who need small loans / no or poor credit history Microenterprises and local small businesses Cooperatives Minorities and immigrants Low-wage workers

5 The Federation s Profile Nonprofit charity (NGO) - Founded: 1974 Membership: 235 CDCUs throughout U.S. Total assets: $11 billion USD Total members: 1.6 million 15-person staff - New York City headquarters

6 Our Mission: Strengthen CDCUs by Providing Capital: equity, deposits, mortgage purchases to help CDCUs expand Consulting Training and professional development Regulatory and legislative advocacy

7 Credit Unions in the U.S. Not for profit... Not for Charity But for Service The largest cooperative movement in the U.S. 7,700 credit unions (CUs) 90 million members $875 billion in assets

8 Credit Unions in the U.S. First CU established: Not-for-profit Tax-exempt. Cooperative ownership. 1 member = 1 vote. Government regulated Government deposit insurance but financed by credit unions cooperatively Consumer finance small business auto finance home ownership

9 CDCUs are the small progressive wing of the U.S.

10 And there s a broader ( systemic ) crisis for CUs Deposit insurance in credit unions is controlled and guaranteed by the government but it is cooperatively funded, by credit unions. Large wholesale credit unions lost $$$billions on investments in mortgage-backed securities. This means all credit unions must make good their losses because deposit insurance fund doesn t have enough money.

11 The Changing CU System Second and third tier wholesale credit unions will disappear or shrink. Most credit unions have strong capital but will be unprofitable in More mergers = fewer but larger credit unions

12 CDCUs and Low-Income Communities Vulnerable!! Most CDCUs are small. Most have less equity capital and reserves to absorb losses. CDCU members are vulnerable Many are low-paid workers in construction, service sector. BIG JOB LOSSES! They have fewer personal reserves. Result: larger CDCU loan losses. Social safety net in our communities is suffering.

13 Community Development Financial Institutions (CDFI) Financial innovation to serve low-income communities

14 CDCUs are part of Both Movements Credit Unions CDCUs CDFIs

15 The CDFI Movement is: Community Development Credit unions Loan funds Venture capital funds Banks Microenterprise funds $30 billion in assets under management U.S. Treasury CDFI Fund (1994 )

16 CDFIs: Varied Institutions with Varied Financial Tools Small loans for households Access to financial system for financially excluded Loans for small businesses Loans for affordable housing development Loans to cooperatives Venture capital

17 A Brief History of CDFIs 1994: President Bill Clinton establishes CDFI Fund under U.S. Treasury Department : big increase in variety and size of CDFIs : Pres. Bush attempts to eliminate CDFI Fund. He fails!

18 The Obama Administration and Community Development Finance The Stimulus and CDFIs The Community Development Capital Initiative (CDCI) New financing proposals: Bank on Healthy food financing

19 Reforming the Banking System: What s on the Table? Limit executive compensation Restrict investment powers of depositories Separate consumer banking from investment banking Monitor and manage systemic risk Expanded consumer protection Maximize transparency

20 Credit Unions are perfectly positioned for the new banking Not-for-profit Strict democratic control and accountability: 1 member, 1 vote. Limited executive compensation Uncompensated board of directors drawn from membership Focus on consumer products Often can provide better rates and access to capital than banks Direct local control over capital Regulated and insured Scalable

21 The Case for a Credit Union Strategy 90 million members Broad recognition (though not enough) Despite the current crisis, credit unions will survive the stress test! Well capitalized (on average) Self-financed Demonstrated increased lending in 2008 when banks were freezing credit

22 Elizabeth Friedrich National Federation of Community Development Credit Unions 39 Broadway, Suite 2140 Floor New York, New York / fax: efriedrich@cdcu.coop