National Credit Union Central Liquidity Facility Lending Before the Year 2000 Date Change

GGD-00-143R: Published: May 23, 2000. Publicly Released: May 23, 2000.

Additional Materials:


Thomas J. McCool
(202) 512-3000


Office of Public Affairs
(202) 512-4800

Pursuant to a congressional request, GAO reviewed the lending activity of the National Credit Union Central Liquidity Facility (CLF), focusing on: (1) CLF's lending during October through December 1999; and (2) credit union borrowing from the discount window and the comparison between credit unions' cost of borrowing from CLF to the cost of alternative sources of liquidity.

GAO noted that: (1) CLF lending increased during the last 3 months of 1999; (2) because of the prospect of problems related to the year 2000 date change, CLF set up expedited procedures for lending in order to meet year 2000-related liquidity demands; (3) as a result, any credit union qualifying for access with a stated liquidity need was eligible to obtain loans from CLF; (4) 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 timeframe; (5) 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; (6) 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; (7) 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; (8) during this same period, 25 credit unions also borrowed from the Federal Reserve's discount window; (9) by law, use of the discount window requires that all borrowers, including credit unions, maintain reservable transaction accounts or nonpersonal time deposits; (10) nearly two-thirds of all credit unions qualify for access to the discount window, including most of the largest; (11) 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; (12) the rate on the other widely used discount window loan--the Special Liquidity Facility, which was a special credit available in advance of year 2000--was considerably higher than the CLF rate; (13) under ordinary circumstances, corporate credit union officials said that most credit unions would look first to their corporate credit union to satisfy liquidity needs; (14) the rates that two corporate credit unions charged their members for non-CLF loans were also higher than CLF charged; and (15) 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.

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    Priority Open Recommendations:

    Department of the Treasury
    GAO-20-549PR: Published: Apr 23, 2020. Publicly Released: Apr 30, 2020.

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