ALEXANDRIA, Va. (2/11/10)—Closely following the U.S. Treasury Department’s announcement of an initiative intended to enable low low-income credit unions (LICUs), banks and thrifts to increase lending in low-income areas, the National Credit Union Administration (NCUA) Tuesday approved by notational vote an interim final rule regarding use of secondary capital by LICUs. Last week Treasury announced the Community Development Capital (CDC) Program under which it plans to set aside up to $1 billion in Troubled Asset Relief Program (TARP) funds for use by Community Development Financial Institutions (CDFIs). Under the Treasury plan, CDFI-designated credit unions would be able to borrow as much as 3.5% of their total assets over an eight-year period. The interim rule changes NCUA rules concerning redemption of secondary capital by LICUs to facilitate the credit unions’ participation in the administration’s initiative. The new regulation permits, with approval of an NCUA Regional Director, redemption of all or part of government-funded secondary capital along with its matching secondary capital at any time after it has been on deposit for two years. Prior to the NCUA’s action, LICUs were limited with respect to the percentage of secondary capital they could redeem prior to maturation. The NCUA announcement noted that the amended rule also allows LICUs to redeem secondary capital accepted under the CDC Program before interest rates on program secondary capital escalate to 9% over the last five years to maturity. And the amended rule changes the loss distribution procedures applicable to secondary capital by making CDC Program secondary capital senior to any required matching secondary capital. NCUA Chairman Debbie Matz urged, “The time is now for eligible credit unions to utilize this additional capital tool and give consumers greater access to mainstream financial services." The interim final rule will have a 30-day comment period. When the Treasury program was unveiled, Credit Union National Association (CUNA) President/CEO Dan Mica said that while CUNA appreciates the Treasury's announcement, CUNA "continues to contend that the most effective way to help many more credit unions help the economy is by giving credit unions greater capacity to make business loans." "Doing so – through legislation raising the amount of loans credit unions can make in business loans to 25% of total assets--would inject more than $10 billion into the economy and create 108,000 new jobs in the first year. There is no public policy reason to deny credit unions this, while at the same time giving banks--who are not lending -- $30 billion as an enticement to do what credit unions are already doing, and are willing to do more of," he added.