A Friday night executive order from the White House set off a bomb in community development finance. Lawmakers and advocates are racing behind the scenes to contain the damage.
Over the weekend, the Treasury Department’s Community Development Financial Institution Fund was included on a list of government agencies to be “eliminated to the maximum extent consistent with applicable law.” That inclusion came as a shock to financiers, advocates and lawmakers of both parties.
Until this week, the industry financed in part by the CDFI Fund had been a bipartisan darling of public-private partnership. CDFIs are a type of financial institution certified by Treasury to specialize in community lending and affordable housing finance. CDFIs play a particularly crucial role in rural and tribal communities.
The tiny CDFI industry took on a larger role amid the Covid-19 pandemic after policymakers realized that many business owners of color were not receiving emergency funding. “They can’t do work like this without the CDFI Fund,” said Jeannine Jacokes, CEO of the Community Development Bankers Association.
CDFIs have never faced a threat this serious. But advocates have receipts, and they’re ready to mount a counter-offensive.
“Of the 435 voting congressional districts, 92% have at least one CDFI physically located within and serving their community,” Jacokes said. “If you count the number of physical offices, 60% are in Republican-held districts,” she added.
Friends in high places: The industry has built up considerable support in Congress over the last decade, culminating in the launch of a congressional CDFI caucus chaired by Sens. Mark Warner (D-Va.) and Mike Crapo (R-Idaho) two years ago. The two senators issued a joint statement on Saturday saying they were “proud to reaffirm our bipartisan commitment to support the CDFI Fund’s mission.”
The CDFI approach is a “capitalist-driven approach” to reach underserved and rural communities, Warner said in a Monday interview.
“The idea that they’re somehow going beyond their statutory authority – I have no idea what they’re talking about,” Warner added.
News nugget here: Warner told us he spoke to Treasury Secretary Scott Bessent and received some assurances about the CDFI Fund.
“I talked with him briefly this weekend,” Warner said of Bessent. “I think – he said they would try to correct this. But the proof will be in the pudding.”
A Treasury spokesperson didn’t respond to a request for comment.
Republicans have been quiet so far. A Crapo spokesperson declined to comment beyond the joint statement issued over the weekend. But without a clarification or reprieve from the White House, Warner doesn’t think Republicans will stay quiet for long.
“Many times since the Trump administration, on whatever is the issue of the day, I’ve had to go out and try to reach out to my Republicans and try to get them on,” Warner said. “This is one where our phones are ringing off the hook from Republican members saying, ‘Hey, we wanna help.’”
In the meantime, the U.S. economy’s not looking so hot. CDFI advocates say they’re prepared to help here – if the administration lets them. A White House spokesperson didn’t respond to a request for comment.
“In the event of the economic downturn, policymakers are going to need CDFIs,” Jacokes said, “because they have the unique ability to go deep into local markets to promote recovery.”
