NEW YORK (11/3/10)--The National Federation of Community Development Credit Unions (NFCDCU) is rejecting a new paper's hypothesis that political influence determined the U.S. Treasury's Community Development Capital Initiative (CDCI) investments in credit unions. The federation represented most of the 111 credit unions that applied for secondary capital loans through the CDCI program and developed "critical information that was omitted from [Assistant Professor Linus] Wilson's analysis" and that "does not support his conclusions." Wilson's analysis asserted that 48 out of 189 eligible credit unions were selected to receive Troubled Asset Relief Program (TARP) CDCI funds. The federation maintains the numbers are incorrect. At least 72 credit unions received final approval for CDCI secondary capital loans and at least 24 of these declined to accept the investment, said the federation. Wilson said there were 189 eligible credit unions at the start of September and that only CDFI certified credit unions were eligible for the TARP's CDCI. This is incorrect on two fronts, said the federation:
* Credit unions were eligible only if they were both CDFI certified and had an official low income credit union (LICU) designation from the National Credit Union Administration (NCUA). Wilson's count included credit unions that are not LICUs and therefore aren't eligible for CDCI. * Wilson's analysis considered as "eligible" a number of credit unions that no longer exist and that have not been purged from the CDFI Fund certification list. The federation maintains that 135 credit unions eligible when the program began grew to 153 by the end of September. While this is short of the 189 considered eligible in Wilson's analysis, only 111 of the fully eligible credit unions actually applied for the CDCI loans, the federation said, citing NCUA figures.
"These two points alone destroy the foundation of Wilson's argument," said the federation in a news release. "Instead of political influence having driven the selection of 48 credit unions out of 189 eligible institutions, we see that at least 72 credit unions qualified and were approved for loans out of 111 eligible applicants." The federation also noted that Wilson said he does not know the identity of the credit unions that applied for TARP funds. That means he lacked a "control group that could be used to test his hypothesis, "particularly by the location of a credit union in a district represented by a member of the House Financial Services Committee (HFSC), the federation said. It tested the hypothesis against a control group and rejected Wilson's hypothesis. Having provided technical support to more than 100 credit unions during the process, including more than a dozen that did not receive funds, the federation looked at the percentages of credit unions located in districts represented by HFSC members and found:
* 7.1% of credit unions applying for CDCI investments were located in HFSC districts; * 6.9% of credit unions approved for the funds were located in these districts; and * 7.7% of credit unions rejected for CDCI investments were located in the districts.
"The location of a credit union in an HFSC member's district had absolutely no influence on the probability of being approved or rejected for a CDCI investment," said the federation. The federation said it isn't that the CDCI program invested too much in LICUs or in the wrong ones, but that the onerous application process, regulatory burden, fear of political attacks and other factors resulted in "relatively little being invested in the only group of financial institutions that are specifically committed to serving low-income individuals and communities." More than 100 credit unions were qualified to receive funding and an additional $100 million in capital could readily have been put to good use by LICUs, the federation said, adding that the CDCI program was a one-time event and the opportunity won't soon come again.