Executive Order Affects CDFI Fund
On Friday March 14th, President Donald Trump signed an Executive Order (EO) that places limits on the Community Development Financial Institutions (CDFI) Fund. The EO limits the function and personnel of the CDFI Fund to the minimum statutory functions required by law. On March 17th, Treasury Secretary Scott Bessent released a statement to America's Credit Unions noting that the Trump Administration recognizes the importance of the CDFI Fund and that 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." The statement also noted that the Treasury Department "looks forward to future engagement with CDFIs and other stakeholders to strengthen the impact of these statutory programs and incentivize economic opportunities for all Americans."
Based on Secretary Bessent's statement, it appears that the CDFI Fund will continue. So, what happens now and what does this all mean? Under the EO, the Treasury Department is required to review all CDFI Fund programs and determine which do and do not have statutory authorization by March 21st. Programs that have clear statutory authorization are more likely to be left in place. For example, the Small Dollar Loan Program (SDLP). The SDLP provides grants to CDFIs to help them establish and maintain small dollar loan programs. The SDLP was directly authorized by the Dodd-Frank Wall Street Reform and Protection Act of 2010 (Dodd-Frank). Other examples include the New Markets Tax Credit and the CDFI Bond Guarantee Program.
Some programs are outlined in statute but may be discretionary. For example, the Base-Financial Assistance and Technical Assistance programs are both authorized by statute. However, the statute, when authorizing the programs, specifically states that "[t]he Fund may provide." (Emphasis added). What is important to note is that the EO directs the CDFI Fund to "reduce the performance of their statutory functions and associated personnel to the minimum presence and function required by law." (Emphasis added). This, "required by law," is key to understanding what may happen to the CDFI Fund and understanding that just because a program is in a statute, does not necessarily mean the CDFI Fund will continue it.
Some CDFI Fund programs are not directly tied to a statute. These programs include, the Native American CDFI Assistance Program, the Healthy Foods Financing Initiative, the Disabilities Fund, the Persistent Poverty Counties- Financial Assistance program, and the Economic Mobility Corps. These programs and others that are not directly tied to a statute are likely at greater risk of being cut.
For the nearly 500 CDFI credit unions, you may want to start reviewing your CDFI programs and how, if a program is eliminated, it will affect the credit union. For credit unions in the middle of applying to the CDFI program, the application window is still open and we are unaware of any move to close the window early.
Credit unions should also note that moving forward, staffing allocated to the CDFI Fund may be reduced. This could mean that the application or grant making process may be slowed and CDFI credit unions may want to be prepared for that.
Unfortunately, not much is known about how the EO will affect the CDFI Fund. However, rest assured that America's Credit Unions is focused on preserving the CDFI Fund and advocating for its continuance. On Sunday, America's Credit Unions sent a letter to the Treasury Department seeking clarifications and sharing our perspective and the historic bipartisan support of the CDFI Fund. For more information, America's Credit Unions has prepared this FAQ on the Executive Order and CDFI Fund that may be helpful.
