By Jason Stverak
When a crisis hits – be it a natural disaster, a global pandemic, or a federal government shutdown – credit unions become the financial first responders for their communities. We saw it during the COVID-19 pandemic, and again this fall when a government shutdown threatened military paychecks: while some banks stayed silent, credit unions on base offered no-interest emergency loans and early access to savings, exemplifying the people helping people ethos. But even first responders need a safety net. For America’s credit unions, that emergency safety net is the National Credit Union Administration’s Central Liquidity Facility (CLF) – a vital federal backstop that ensures we can meet our members’ needs during times of extreme financial stress. Today, that lifeline is badly frayed. Fortunately, Congress has a bipartisan solution in hand: updated legislation introduced last week by Senators Alex Padilla (D-CA) and Kevin Cramer (R-ND) to restore and strengthen the CLF. Lawmakers should seize this moment to pass the bill without delay – because our financial stability, and the readiness of our military communities, depend on it.
The CLF: A Vital Emergency Backstop
The NCUA’s Central Liquidity Facility is essentially an “emergency fund” for credit unions of all sizes. It provides secure loans to help credit unions weather unexpected liquidity crunches, so that even in a sudden economic downturn or crisis, institutions can continue to honor withdrawals and fund loans for their members. During the COVID-19 crisis, Congress temporarily expanded the CLF’s reach under the CARES Act – allowing corporate credit unions to act as “agent members” on behalf of smaller credit unions – and the results were astounding. CLF membership surged from just 283 credit unions to over 4,100, including many serving on-base military communities.
This dramatic expansion proved the CLF’s worth: it provided hundreds of small and mid-sized credit unions with a lifeline to stay resilient and continue lending in their communities (including on military bases) when members needed them most. In short, the CLF enhancements during the pandemic worked exactly as intended, exemplifying the cooperative strength of the credit union system.
Sadly, Short Lived
Sadly, those successful enhancements were only temporary. When they expired at the end of 2022, the CLF’s reach contracted sharply. Over 3,300 credit unions – roughly three out of every four nationwide, mostly smaller institutions under $250 million in assets – lost access to this crucial liquidity safety net, causing the facility’s available emergency funding capacity to shrink by nearly $10 billion. That means thousands of community-based credit unions are once again unable to tap the federal liquidity backstop when crisis strikes.
This is a dangerous gap in our financial system’s defenses, one that leaves credit unions (and the 144 million Americans who entrust their savings to them) more vulnerable in the next crisis. For military-focused credit unions – many of which do not have direct access to the Federal Reserve’s discount window or other emergency funding sources – the CLF truly is the lifeline. Losing that lifeline weakens credit unions’ ability to respond to crises and to best serve the communities, bases, and servicemembers who rely on them.
Bipartisan Legislation Restores Strength
The good news is that Congress has recognized the problem and is moving to fix it. Senators Padilla and Cramer have shown outstanding bipartisan leadership on this issue, and last week they reintroduced a bill (S.3575) with updated language to permanently restore the CLF enhancements that worked so well during the pandemic.
This isn’t a partisan or controversial proposal – in fact, the Senate overwhelmingly approved these same CLF provisions earlier this year as an amendment to its version of the National Defense Authorization Act. (That amendment had broad support but, disappointingly, was left out of the final NDAA deal.) By reintroducing the CLF reforms as a standalone bill, Senators Padilla and Cramer are continuing their persistence and dedication to advancing this important policy.
“Senators Padilla and Cramer continue to demonstrate outstanding bipartisan leadership by reintroducing the CLF bill with language that has already earned Senate approval,” noted DCUC in a recent statement, emphasizing that “this legislation is necessary, timely, and has already demonstrated broad support.”
What Bill Would Do
What exactly would this updated CLF bill do? In simple terms, it would permanently reinstate the successful emergency authorities that lapsed in 2022. By allowing broader participation in the CLF – such as permitting corporate credit unions to once again purchase CLF capital stock on behalf of smaller institutions – the bill ensures credit unions of all sizes can readily draw on emergency liquidity in times of economic uncertainty or market stress.
Put plainly, when members face increased financial pressures – for example, during a recession or natural disaster – their credit unions would have somewhere to turn for cash, enabling them to continue meeting withdrawal demands and making loans without disruption. This safety valve is especially valuable for small, community-based, and defense credit unions that lack other options. As the DCUC has explained, many military-serving credit unions do not have direct access to the Federal Reserve’s facilities; for them, the CLF is the only game in town for emergency liquidity.
By restoring the CLF’s enhanced authorities and membership flexibility, the Padilla-Cramer bill would ensure credit unions serving our troops, military families, and veterans can obtain liquidity when needed – a “common-sense safeguard” that empowers us to continue our “people helping people” mission even under economic duress.
No Cost to Taxpayers
Equally important, strengthening the CLF in this way comes at no cost to taxpayers. The facility is funded by credit unions themselves, not by public funds, and the Congressional Budget Office has confirmed that these reforms carry “no scoreable cost.” In other words, this is a rare policy win-win: we can fortify the credit union system’s defenses and protect consumers, all without spending a dime of taxpayer money. Broader CLF participation also reduces systemic risk and ultimately protects the National Credit Union Share Insurance Fund by containing problems before they spread.
It’s hard to think of a more prudent, fiscally responsible step Congress could take to shore up financial stability. As DCUC President Anthony Hernandez put it, making these CLF enhancements permanent is a “zero-cost, common sense step that strengthens credit unions’ resilience, safeguards financial stability, and ensures military families and underserved communities have continued access to reliable financial support – especially in times of crisis.”
Financial Readiness for Our Military
Why does this matter so much to the defense community? Because, as we often say at DCUC: financial readiness is mission readiness. The men and women of our armed forces perform better in their duties when they aren’t worried about their family’s finances back home. Military-focused credit unions play an indispensable role in that equation, providing trusted, affordable financial services to servicemembers, veterans, and their families.
Strengthening the CLF directly benefits these mission-driven institutions and, by extension, the military communities they serve. The Senate’s NDAA amendment (championed by Padilla and Cramer) was explicitly designed to expand emergency liquidity for smaller credit unions, including those serving military bases, because Congress understood that keeping these institutions strong is part of keeping our defense community strong.
“By leaving out the CLF provisions, Congress missed an opportunity to strengthen both our nation’s financial system and the defense community,” Hernandez noted after the NDAA omission, underscoring that our servicemembers and veterans “deserve the strongest financial support network we can provide.” Put simply, this issue isn’t just about credit unions – it’s about the financial security of our troops and their families. A robust CLF means the credit unions on base will be there to support military households through the next crisis, just as they have in the past. And every American community, military or not, is better off knowing their local not-for-profit credit union has a reliable liquidity backstop in an emergency.
DCUC: Leading the Charge
The Defense Credit Union Council has been beating the drum on CLF reform for years, and we’re not about to let up now. DCUC represents over 200 credit unions serving 40+ million members from the U.S. military and defense community, and from our front-row perspective we recognized early in the pandemic how critical the CLF enhancements were.
In fact, DCUC has championed this initiative as one of our top advocacy priorities since day one, precisely because these reforms are essential for the stability of credit unions and the financial readiness of military families. We encouraged all our member credit unions to join the CLF during the pandemic, and many did. Since 2020, we have consistently communicated the urgent need to make the CLF improvements permanent. We’ve submitted letters and testimony to Congress, and engaged lawmakers on both sides of the aisle – all to drive home the point that failing to restore this liquidity lifeline puts small and defense credit unions, and the communities who count on them, at unnecessary risk.
We are proud that this advocacy helped win broad bipartisan support; indeed, the U.S. House even passed similar measures in 2022, and the Senate’s strong vote this year further validates our position. But advocacy doesn’t stop until the job is done. DCUC has been leading the charge to get these CLF provisions enacted, and we won’t let up until they are law.
We deeply appreciate champions like Senator Padilla and Senator Cramer for their persistence, and we remain at the table, working with Congress and regulators to finally get this across the finish line.
A Call to Action: Pass the CLF Bill Now
In an era of sharp divisions, the effort to strengthen the Central Liquidity Facility stands out as a beacon of smart, bipartisan policymaking. It’s not often you find legislation that is both impactful and cost-free, already tested and proven effective, and enjoys broad support from Republicans and Democrats alike. The CLF Enhancement bill is exactly that.
Congress should pass this common-sense reform without hesitation.
This is a must-pass fix, as I have said before, because we’ve seen the CLF work exactly as intended during a crisis, and we’ve also seen the risks of inaction. There is no excuse for leaving thousands of credit unions – and millions of their members – exposed when a ready solution is at hand.
Need to Act Swiftly
I urge lawmakers to act swiftly to enact the updated CLF legislation and restore this emergency liquidity lifeline permanently. Whether it advances as a standalone bill or gets folded into a larger package, what matters is that it gets done. The stakes are simply too high for delay. As the DCUC wrote to Congress, “we firmly believe this action will safeguard the financial well-being of millions of Americans, bolster the credit union system’s safety and soundness, and ensure that our nation’s servicemembers and their families have continued access to reliable, mission-ready financial institutions in good times and in bad.”
By fortifying the CLF, Congress will strengthen our nation’s financial system and the defense community at the same time. It will equip our financial first responders – the credit unions – with the tools they need to keep serving communities through whatever storm comes next.
Mission Readiness
Financial readiness is mission readiness. That mantra rings true far beyond the halls of the Pentagon; it resonates in every community where a military family lives and works. Passing the CLF Enhancement Act is an investment in financial readiness for all – and it’s an opportunity our leaders must not miss.
On behalf of credit unions serving those who serve our country, I call on Congress to move this bill forward now. Let’s reinforce this vital lifeline and ensure that “people helping people” remains more than a motto, but a promise kept, no matter what challenges tomorrow brings.
Call to Action: Congress, do right by our 134 million credit union members and our men and women in uniform. Enact the Central Liquidity Facility enhancements into law without further delay. Our cooperative financial system and our military families are counting on it.
Jason Stverak is chief advocacy officer with the Defense Credit Union Council (DCUC).
