Spending Deal: No Marijuana Banking, No CLF Extension

The Government's FY23 spending bill left out some major issues concerning credit unions, while including others. Learn how the industry could be impacted.

David Baumann


Dec 20



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David Baumann

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David Baumann

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Government agreement includes funding increases for both CDFI Program and NCUA’s Community Development Revolving Loan Fund.

The FY23 government spending deal reached by negotiators Monday does not include marijuana banking or NCUA Central Liquidity Facility provisions that credit union trade groups and the agency wanted.

It also would not give the NCUA oversight powers over credit union third-party vendors—a plan favored by the agency, but opposed by credit union groups.

The bill, however, would increase funding for the CDFI Program by $29 million, to $324 million overall. It also would provide $3.5 million for the NCUA’s Community Development Revolving Loan Fund program, an increase of $2 million.

House and Senate appropriations committee members cut a deal on the 4,155-page, $1.7 trillion bill in an effort to avoid a partial government shutdown. Current funding for many federal programs expires Friday.

The NCUA and the CFPB are not funded through the appropriations process, so they would not have been affected by a shutdown.

Marijuana Banking

The marijuana banking proposal was among the most closely watched issues as the spending bill was negotiated. The plan would have given credit unions and banks a regulatory safe harbor for providing financial services to marijuana-related businesses in states where cannabis is legal.

Rep. Ed Perlmutter, D-Colo., had pledged to add the provision to any available bill. He succeeded in adding it to the House-passed version of the defense authorization bill, but negotiators dropped it. He also pushed for it to be included in the end-of-year spending bill, but that effort apparently has failed. Perlmutter is retiring at the end of the year.

Some Senate Democrats had hoped to attach it to the spending bill, but Minority Leader Sen. Mitch McConnell, R-Ky., has been an outspoken opponent of the provision.

And as the spending agreement was released, Sen. Richard Shelby, R-Ala., the ranking Republican on the Senate Appropriations Committee, pointed out that the bill does not include controversial riders.

“And, once again, we rejected all poison pills while preserving crucial legacy riders,” Shelby said.

NCUA Central Liquidity Facility

The bill does not include an extension of the pandemic-related CLF provisions that both the NCUA and credit union trade groups wanted.

As part of pandemic-related legislation, Congress allowed corporate credit unions to become agent-members for groups of credit unions.

Without that agent membership, credit unions with less than $250 million in assets will be much less likely to have access to a federal liquidity backstop when they need it, according to NCUA board Chairman Todd Harper.

Board members have warned that without legislation to extend the temporary CLF enhancement provisions, there will be a $9.7 billion reduction in reserve liquidity for the credit union system at the end of 2022.

They also have said that the 3,648 credit unions with less than $250 million in assets with current access to the CLF through their corporate credit unions will lose a liquidity lifeline.

The Treasury Department and CDFI Grants

Additionally, the spending bill would require the Treasury Department and other regulators to develop a strategy to improve financial inclusion, with appropriators noting, “The strategy should aim to broaden access to financial services among underserved communities and improve the ability of such communities to use and benefit from financial tools and services.”

They added, “The strategy should establish national objectives for financial inclusion; set benchmarks for measuring progress; and offer recommendations for advancing financial inclusion through public policy, government programs, financial products and services, technology, and other tools and infrastructure.” The bill would require that regulators brief the appropriators on plans to implement the strategy within 90 days of the bill’s passage.

Further, the legislation would compel Treasury Secretary Janet Yellen to report on the impact the most recent CDFI grant recipients have had on their communities, the overall risk the fund’s portfolio is exposed to and a description of awardees that are at risk of non-compliance.

The Treasury Department would also be required to take into account non-metropolitan and rural areas in awarding CDFI grants.

What Else Is Included?

The spending measure would additionally:

–Extend the authorization of the National Flood Insurance Program through the end of FY23. Congress has been unable to reauthorize the program and it regularly has been renewed in incremental steps.

–Not allow for an expansion of the Postal Service’s pilot banking program. The House-passed Financial Services appropriations measure would have allowed such an expansion.

–Require the director of the CFPB to brief appropriators on the CFPB’s finances and expenditures at least once a year. The Fifth Circuit Court of Appeals has found the agency’s budget process unconstitutional since the agency does not go through the appropriations process. The agency has asked the U.S. Supreme Court to consider its appeal of that ruling.

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