On March 14, President Trump issued an executive order titled “Continuing the Reduction of the Federal Bureaucracy,” which aims to eliminate non-statutory components of a handful of governmental entities. Beyond that, the order states those entities reduce their statutory functions and personnel to “the minimum presence and function required by law.” Among the entities targeted is the Community Development Financial Institutions (CDFI) Fund.
The CDFI Fund explained
As we have previously shared here on CUSO Magazine, the CDFI Fund was established in 1994 as part of a bipartisan effort to support low- and moderate-income communities through investment and assistance. As part of the Riegle Community Development and Regulatory Improvement Act of 1994, the Fund would be formed with the mission of expanding “economic opportunity for underserved people and communities by supporting the growth and capacity of a national network of community development lenders, investors, and financial service providers.”
To accomplish this, the CDFI Fund supports its certified institutions through the provision of grants, tax credits, awards, technical assistance, and other direct contributions. Per the CDFI Fund’s website, it has awarded more than $5.2 billion to CDFIs since its inception through its various award programs (as well as an additional $66 billion in tax credit allocations).
To become certified as a CDFI, credit unions need to go through an application process run by the CDFI Fund. Credit unions need to prove they meet a variety of criteria and be able to show that 60% of their service is given to “low- to moderate-income” individuals, which the CDFI Fund defines as 80% or less of median family income.
Order is unpopular on both sides of the aisle
The response to the order has been one of consternation from lawmakers, both Democrats and Republicans. As pointed out by the CEO of the Community Development Bankers Association Jeannine Jacokes, 92 percent of the 435 voting congressional districts have at least one CDFI physically located within, split half and half between Republicans and Democrats. Broken down yet further to the number of physical offices, 60 percent are Republican-held districts, said Jacokes.
Representatives from both side have come out in support of the CDFI Fund and the important role it has served in providing for unbanked and underbanked communities. “The CDFI Fund is a lifeline for underserved populations to access capital & directly supports multiple Orange County credit unions that serve our community,” wrote Rep. Young Kim (R-Calif.), who also serves as a member of the House Financial Services. “This partnership represents the best of public-private sector collaboration & deserves our continued bipartisan support.”
More Senators and Representatives have issued bipartisan statements supporting the CDFI Fund’s mission as well as associated financial institution groups, such as the Defense Credit Union Council, arguing the Fund’s impact on military communities.
After calling CDFIs “very important” during his confirmation hearing in January, Treasury Secretary Scott Bessent renewed his support of the Fund this week in a statement: “CDFIs are a key component of President Trump’s commitment to supporting Main Street America in the pursuit of job growth, wealth creation, and prosperity,” though the Treasury Department will still comply with the order and provide a response to the Director of the Office of Management and Budget (OMB).
In a response to Bessent’s remarks, America’s Credit Unions President/CEO Jim Nussle wrote, “We thank Secretary Bessent for emphasizing that CDFI Fund programs are statutory programs and stressing the importance of the CDFI Fund to the success of Main Street America. Nearly 500 credit unions are designated as a CDFIs and are critical institutions in boosting local economies and securing the American Dream for their members. America’s Credit Unions has remained committed to educating and providing support to ensure the credit union difference is shared with the Trump Administration, Treasury Department, and other key stakeholders so the millions of Americans served by CDFI credit unions can reach their goals and live their best lives.”
Though details on the Treasury Department’s response to the OMB are still unknown, America’s Credit Unions has reported that “some within the CDFI space received a message from Treasury indicating that the fund’s programs “are statutorily authorized.””
With so many pouring out support for the CDFI Fund and it still unclear the degree to which the President can actually cut the fund, the future of the CDFI is unclear, but hopeful.
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As a supervising editor of CUSO Magazine, Esteban reviews and edits submissions, assists in the development of the publishing calendar, and performs his own research and writing. His experience provides CUSO Mag with a seasoned writer and content curator, able to provide valuable input to contributors, correspondents, and freelance journalists.
Esteban has worked at CU*Answers since 2008 and currently serves as the CUSO's content marketing manager.
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