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B-285159
with a stated liquidity need was eligible to obtain loans from CLF. However, of the
approximately 10,000 credit unions in the United States, less than 1 percent (38 in total) of all
credit unions obtained loans from CLF during the October through December, 1999, time
frame. Although the total amount that CLF loaned was about $666 million, the largest value of
loans outstanding on any given day was about $159 million. In most cases, the determination
regarding whether a credit union would obtain a loan from CLF was made by the credit
union's corporate credit union.' When a credit union notified its corporate credit union of a
need to borrow liquidity, the corporate credit union decided whether to make a loan to the
credit union itself or to go to CLF on behalf of the credit union.
During this same period, 25 credit unions also borrowed from the Federal Reserve's discount
window. By law, use of the discount window requires that all borrowers, including credit
unions, maintain reservable transaction accounts or nonpersonal time deposits. Nearly two-
thirds of all credit unions qualify for access to the discount window, including most of the
largest. Of the two types of discount window credit most used by credit unions during this
period, one-adjustment credit-had an interest rate somewhat lower than the rate charged
by CLF. The rate on the other widely used discount window loan-the Special Liquidity
Facility (SLF), which was a special credit available in advance of the Year 2000-was
considerably higher than the CLF rate.2 Under ordinary circumstances, corporate credit union
officials said that most credit unions would look first to their corporate credit union to satisfy
liquidity needs. The rates that two corporate credit unions charged their members for non-
CLF loans were also higher than the rate CLF charged. However, because the corporate
credit unions increased the rate they charged on CLF loans to cover expenses before passing
CLF credit on to their member credit unions, the actual rate paid by members of the two
corporate credit unions for CLF loans was closer to the rates charged for non-CLF liquidity
loans.
Background
The CLF operates out of the offices of NCUA. The staff consists of four people, two of whom
devote part of their time to their CLF activities. The two senior CLF staff, the President and
Vice President, also serve NCUA as the Deputy Director, Office of Examination and
Insurance, and the Director of Risk Management, Office of Examination and Insurance,
respectively. According to CLF officials, CLF has successfully functioned with this level of
resources for at least two reasons. First, since it was established in 1979, CLF has
experienced long dormant periods, in some cases lasting years, when it made no loans.
1 Corporate credit unions are cooperatively owned by their member credit unions and serve their members by either lending to
them or investing their excess funds.
2 During this period, the Federal Reserve lent $462.3 million to credit unions as adjustment credit and $309.3 million as SLF
credit. Two credit unions borrowed $42 million in seasonal credit during this same period. These seasonal loans were not
included in the analysis. Moreover, in the data provided to us, the Federal Reserve did not include information on loans that it
identified as "test loans," which are defined as very short-term loans in amounts between approximately $1,000 and $10,000.
GAO/GGD-00-143R CLF Lending to Credit Unions Before Year 2000 Date Change
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