WASHINGTON–When it comes to the fate of community development financial institutions (CDFIs) and the CDFI Fund, everyone is looking to Friday.

March 21 is the deadline for the Department of Treasury to provide the White House with its proposal for considerably shrinking the CDFI Fund. It is also, coincidentally, the deadline for applications from credit unions to file for grants from the CDFI Fund for fiscal year 2025—for which funding has already been allocated.

Looking beyond Friday, in the longer term the focus will be on parsing the language of a bill passed in 1994.

According to the White House, the executive order, Continuing the Reduction of the Federal Bureaucracy, reflects the commitment to “further decreasing the size of the federal government to enhance accountability, reduce waste, and promote innovation.”

Approximately 495 credit unions are CDFIs. In 2024, the CDFI Fund  awarded 357 Community Development Financial Institutions (CDFIs) with $408.2 million in Financial Assistance (FA) awards and through the Native American CDFI Assistance Program (NACA Program).

The Key Language

The key language that is getting the attention in the order is this: “The non statutory components and functions of the following governmental entities shall be eliminated to the maximum extent consistent with applicable law, and such entities shall reduce the performance of their statutory functions and associated personnel to the minimum presence and function required by law.”

The big question that raises has to do with funds already allocated. At the same time the president signed an executive order he also signed a continuing resolution (CR) to keep the federal government running that includes $324 million in appropriations for the CDFI Fund and $500 million in CDFI Bond Guaranty Authority. 

Treasury was given a short window—seven days—to respond to how it plans to define what is the “minimum presence and function required by law.”

Once it does so, as the CU Daily reports separately, some people expect litigation will be filed seeking to turn back the order.

The Question

The CDFI Fund and numerous related appropriations and funds were created by the Riegle Community Development and Regulatory Improvement Act of 1994.

“The question…becomes, what is the statutory function for the CDFI Fund,” observed Stacy Augustine, president of CU Strategic Planning, which has been involved in more than $1 billion in CDFI Fund grants to credit unions. 

Augustine’s comments came during a Monday webinar the company hurried to put together in response to the executive order.

The Unknown

Where Congress will stand on the CDFI Fund and the way the executive order has been worded is, of course, an unknown. One state league reported a senator from its state said he was informed by Treasury that the CDFI Fund will continue to operate by statute as required. Another person said he had been informed by someone at the White House that the statutory portions of the CDFI Fund’s functions would not be “interfered with,” especially other related funds that are appropriated by Congress. However, the Financial Assistance programs that are often tapped by credit unions in the form of grants are appropriated by Congress. 

“The point is there is going to be some impact,” said Mike Beall, chief experience officer with CU Strategic Planning. 

Focus on Treasury Secretary

Some in credit unions have been expressing their hope that new Treasury Secretary Scott Bessent will be true to a statement he made during his confirmation hearing in the Senate.

“During his hearing he actually said, and I quote, ‘The CDFI fund is a vital partner in this endeavor and we must protect it at all costs,’ which is pretty strong support for this program,” said Augustine. “At the same time, he has been put in his position by the administration and is an animal of this administration, so I think he’s very respectful of the president’s desire to have a slimmed-down government, so I think it will be a very considered response. Any contacts that we have with him will be to help bolster the importance of this program and his predisposition to support it.”

Also to be a focus of credit union outreach is Sen. Tim Scott (R-SC), who is chair of the Senate Banking Committee and who has in the past made public statements about the need to support disadvantaged communities. 

‘No Better Delivery Point’

John McKechnie, who advocates on the Hill for the Defense Credit Union Council and other credit union organizations, said he is hopeful the Trump administration, as it changes how aid is delivered to underserved communities, will recognize that credit unions are one of the most effective ways to deliver such assistance.

“You can’t find a better delivery point on community development than credit unions,” McKechnie said during the CU Strategic Planning webinar. “Whatever this administration wants to do in community development, they need to put credit unions in front.”

During the webinar, several examples of how credit unions make a difference in credit unions were shared, including by Southwest Louisiana CU, which added a branch in community health enter to address financial health and accessibility issues.

Southwest Louisiana CU also happens to be located in House Speaker Mike Johnson’s district. 

Augustine said research shows that for every $1 in CDFI Funds granted to a credit union, $10 is returned to the community.

Be Prepared

“We need to be prepared to say, ‘OK if you’re not going to do it the way you’ve been doing it, what’s next?’,” McKechnie added.  “Credit unions need to be an integral part in the next act in this play. We need to make sure we toot our own horn. There is an average of 220,000 credit union members in every congressional district in the country. That’s a big number. Let’s make our voices heard.”

Other Questions Raised

Several questions were raised in the chat during the webinar, including:

• In response to a question raised during the webinar, Beall said he has not heard any discussion of “clawing back” prior CDFI Fund grants. 
• In response to a question over whether credit unions should apply for grants with the deadline on Friday, Augustine said it’s “business as usual.”