“Spreading the Wealth Around”
In his legendary encounter with Joe the Plumber, Candidate Obama expressed a preference to ‘spread the wealth around,’ showing a brief glimpse and clear warning what his administration would be focused upon.
I’ve found a classic example of how the administration is continuing its process of rewarding friends and punishing enemies. It’s called the Community Development Capital Initiative (CDCI), which having been established for over 15 years is now considered a new TARP program that
“makes capital available to certain certified Community Development Financial Institutions (CDFIs) for the purposes of increasing lending to small businesses and other community development projects that will spur new economic growth”
First, I have to give some quick background. At last year’s RedState gathering, one of the speakers suggested that we all ”adopt” a Representative from Congress and follow their actions, highlighting things that should be more well known. I started to do that, but like all other things in life, the discipline to continue on faltered a bit after the Healthcare vote. In particular, I started reading up on the activities of Representative Slaughter from New York, in part because of one of her speeches carried by C-SPAN. It was so over the top bad, from my perspective, that I decided that she should be my focus.
Well, this week, I found this little nugget: “Representative Slaughter announces a $528,770 grant to Genesee Federal Co-Op.” Being a member of a federal co-op myself, this piqued my interest — because credit unions are run for the benefit of members, this seemed an unlikely place for federal largesse. Pretty, naive, eh?
The Genesee Co-Op Federal Credit Union is based in Rochester, New York, the heart of Representative Slaughter’s district. Nothing unusual there. Their website proudly proclaims their neighborhood focus, serving specific areas of the city and their mission statement says
“Genesee Co-op Federal Credit Union provides a broad range of affordable, quality services to increase the financial skills and wealth of our member-owners. We are responsive to the needs of our community. We are committed to social inclusiveness. We are dedicated to responsible community development and education.
OK, nothing unusual so far, but definitely a bit on the social progressive side. But here’s something a bit unusual: membership in the co-op is extended to members of groups such as:
- Community Darkroo
- Gay Alliance of Genesee Valley
- Genesee Co-op Natural Foodstore (dba Abundance Cooperative Market
- 19th Ward Community Association
- Open Sky Yoga
- Rochester Friends Monthly Meeting
- South East Area Coalition
which is a pretty good start on a laundry list of Democrat-base groups. Not that there’s anything wrong with that, but I haven’t seen Rep. Slaughter pursue grants for more typical rust-belt or high tech industry economic development (but I’m still looking). But it is part of something called A Community Development Credit Union (CDCU) – a special designation because it serves a predominantly lower-income community. So, there it is! The community organizer is spreading money to lower income communities in the guise of grants to CDCUs as they qualify to become Community Development Financial Institutions under the CDCI program.
The Credit Union, according to their filing with the NCUA, has about 2,600 members, and assets just under $10Million, so this grant represents about 5% of their total assets. In other words, it represents about the same amount of capital provided by about 150 of the co-op’s members. But the loan also represents about a 30% shot in the arm to their ‘cash on hand’ reported in June 2010. I’m not a financial expert, but paging through the forms on the NCUA Call Report, the co-op reported about $230K in earnings from interest on loans, so again, this grant seems to be a really healthy shot in the arm.
But here’s what puzzles me (again, my expertise is lacking, but this seems a bit odd) — the co-op reports having 71 real estate loans out at 9.3% interest for a total of $2.9M, and 877 unsecured loans out at 12.81% (I’m guessing credit cards here) for a balance of over $616K. Both of these seem a tad high. Our radio ads in Atlanta are screaming real estate loans in the 4s and 5s and most credit union credit cards are in the 7-9% range from a quick scan. So this sorta treads on ‘sub prime’ territory and puts this co-op in the ‘evil bank’ range of interest rates, or so it would seem. On top of that, the NCUA report rates the co-op as ‘well capitalized’, which to the untrained eye would suggest they really don’t need federal help.
So why is the federal government giving the co-op nearly $600K? According to Representative Slaughter:
“It’s hard enough for our small businesses to get back on their feet in this economic climate without also being told they can’t access the credit they need to help get our economy moving again,” said Slaughter. “This award comes at a time when access to credit is still extremely limited. I’m pleased that it will provide a much needed shot in the arm to our local entrepreneurs and the folks who are at the forefront of our economic recovery and job creation.”This particular co-op doesn’t appear to fit the narrative of tight access to credit, having plenty of assets, few defaults and being ‘well capitalized.’But the Treasury is folding them into TARP (clever, eh?) and then allowing these organizations to charge the lower income community higher rates of interest…because the community being served is pretty much the base of the Democrat party. All in the name of social inclusiveness, so it has to be good, right?Look around your own neighborhoods and districts. The Treasury Department is apparently spreading over $30M to co-ops just like this all around the country in the first wave of grants just announced. There are sure to be others in the months ahead.