National Credit Union Central Liquidity Facility Lending Before the Year 2000 Date Change Page: 3 of 28
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Second, when CLF does become active, employees of the corporate credit unions and U.S.
Central Credit Union do much of the staff work.3
During the months leading up to the Year 2000 date change, there was a great deal of
uncertainty regarding the amount of liquidity that might be needed as a result of both
expected and unforeseen problems that could arise. Most financial institutions were
preparing for an unprecedented, yet unknown, Year 2000 event. Federal agencies responsible
for financial institutions were asked to develop contingency plans to meet possible Year 2000
problems because of the concern that Year 2000 problems might adversely affect financial
institutions' ability to use their computer systems. Even if real systems problems did not
arise, there was concern that depositors would withdraw substantial amounts of money for
safekeeping. To instill confidence in the credit union system, CLF undertook several
initiatives to calm the fears of both credit unions and their members that adequate liquidity
might not be available when needed. In part, this was accomplished by CLF having a
substantial amount of cash on hand and mechanisms in place to expedite the delivery of
funds to credit unions with liquidity needs.
In anticipation of potential demand for liquidity due to the Year 2000 date change, Congress
removed the appropriations cap on CLF borrowings.4 Before that removal, the limit on CLF
borrowing for the purposes of making new loans to credit unions had been $600 million. The
borrowing cap was removed so that CLF could provide more backup liquidity to credit
unions, if such a need arose. In preparation for the Year 2000, CLF borrowed $1 billion from
the Federal Financing Bank (FFB).5 FFB is an entity within the U.S. Department of the
Treasury that is charged with lending Treasury funds to certain agencies of the federal
government. Although CLF funded the majority of its loans with its own cash on hand,
between December 27 and 29, 1999, it used $49.1 million of the funds borrowed from FFB.
After borrowing $1 billion from FFB, CLF had the authority to borrow an additional $20
billion (approximately) to fund loans to credit unions, if it had become necessary.6
CLF and NCUA implemented expedited Year 2000 lending procedures in order to respond to
any potential Year 2000 liquidity demand. The procedural changes included (1) delegating
lending authority to the CLF President without previous approval from the NCUA Board; (2)
3 U.S. Central is a corporate credit union that is owned jointly by all of the other corporate credit unions. Along with other
services that it provides its owners, U.S. Central is the CLF agent group representative for most corporate credit unions and
obtains loans from CLF on their behalf.
4 When a CLF member has a liquidity need due to unanticipated cash flows, it may seek a loan from CLF. Under the National
Credit Union Central Liquidity Facility Act, CLF is authorized to borrow from any source 12 times its subscribed capital stock
and surplus, which according to NCUA is currently $21 billion.
5 On November 12, 1999, CLF borrowed $200 million from FFB. Between November 12 and December 1, 1999, CLF borrowed an
additional $200 million four times, thereby reaching a total of $1 billion in borrowed funds. These loans were rolled over weekly
until paid off in early January 2000. CLF officials stated that FFB was not set up to easily provide significant amounts of funding
on a short-term basis, which would have prevented CLF from obtaining overnight loans to meet potential liquidity demands. As a
result, CLF decided to borrow $1 billion from FFB and roll the amount over until after the Year 2000 date change to maintain a
store of cash on hand.
6 At year-end 1999, CLF had paid-in capital stock of $881 million. This constituted one-half of the subscribed capital stock of CLF.
The remainder of the capital stock was held in callable accounts at the member credit unions or their agents (the corporates).
With total capital stock of approximately $1.76 billion, the CLF's statutory limit on total borrowing would be about $21 billion.
GAO/GGD-00-143R CLF Lending to Credit Unions Before Year 2000 Date Change
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United States. General Accounting Office. National Credit Union Central Liquidity Facility Lending Before the Year 2000 Date Change, text, May 23, 2000; Washington D.C.. (https://digital.library.unt.edu/ark:/67531/metadc296283/m1/3/?rotate=90: accessed May 22, 2019), University of North Texas Libraries, Digital Library, https://digital.library.unt.edu; crediting UNT Libraries Government Documents Department.