WASHINGTON–What had been expected to be a low-key five days in Washington with Congress out of session this week has instead turned into a frenzy of activity after President Trump’s March 14 executive order that seeks to significantly downsize the Community Development Financial Institutions Fund (the CU Daily has coverage here, here, and here.

America’s Credit Unions, the Defense Credit Union Council, Inclusiv and individual state CU associations have been attempting to sort out what the elimination of the fund means for both the 495 CUs that are CDFIs and the communities that have counted on programs underwritten by the CDFI Fund.

“We’ve been very active in reaching out and informing members of Congress with our concerns about the executive order, the ambiguity and the lack of transparency that is out there,” said DCUC Chief Advocacy Officer Jason Stverak. 

Who’s Been Contacted

According to Stverak, DCUC has reached out to the House Financial Services Committee, Senate Banking, Housing & Urban Affairs committees, and committees that are related to defense issues, as well as members of the Congressional Black Caucus, the Congressional Hispanic Caucus, and the Congressional Asian Pacific Islanders Caucus and the Native American Caucus to alert them to the executive order that seeks to terminate the CDFI Fund. 

A specific focus is the Senate Community Development Finance Caucus, which is led by Sens. Mike Crapo (R-ID) and Elizabeth Warner (D-MA). 

While the executive order cannot remove CDFIs as part of its statute, the EO directs the Fund to be eliminated to the maximum extent consistent with applicable law and reduced the performance of their statutory functions and associated personnel. That’s a very direct threat to the future of the CDFIs, according to the associations.

“We have had many of our credit unions that may not be CDFIs at this time, but they’re low-income designated and they’re asking the question, ‘Are we next?’ We believe we need to step in and try to provide some clarity and additional information for credit unions across the spectrum,” said Stverak. 

Why Worry?

Asked by the CU Daily why low-income-designated CUs are expressing worries, Stverak assured he has not heard anything on Capitol Hill that is a concern related to LICUs, but “we understand how they might have some concern as the days go on and more programs are targeted or considered for potential executive orders.”

He said DCUC has also had member CUs ask what they can do from a grassroots perspective and it has provided guidance on how to get involved. 

Overall, Stverak said he believes there is a very strong case to be made for the efficacy of funds deployed by CDFI grants and through CDFI credit unions with benefits to be seen in both Democratic and Republican districts. 

And You Will Pay For That How?

Stverak made clear DCUC remains concerned with another issue that was percolating prior to Congress going into recess: the CU tax exemption.

“We have been told that next week the Ways and Means Committee is going to start looking at the ‘pay-fors’; how they are going to pay for making the tax cuts permanent,” he said. “Obviously, that’s where the discussion in relation to keeping the credit union tax status comes into play. We will continually reach out to leadership on both sides of the aisle and also the membership of Ways and Means and Senate Finance committees to ensure that they know the benefit of the credit union tax exemption and the incredible harm that will be done in their communities if it goes away.”

The CU Daily has been told that a point increasingly being made on the Hill by the banking industry is that the bank acquisitions by credit unions demonstrate the tax exemption is no longer necessary.  In response, Stverak said the number of CUs buying banks is “miniscule” and that such purchases are a “win-win” for the community. A bigger issue, he said, are those banks being “gobbled up by big banks whose emphasis is on the upper east side of Manhattan rather than Main Street America.”

‘Strong Bipartisan Initiative’

Similarly, as America’s Credit Unions said in a statement over the weekend, the trade group’s chief advocacy officer, Carrie Hunt, expressed support for full funding for the CDFI Fund, saying the group believes the funding awards made by Treasury are in keeping with the statutory authority that was created by the Riegle Community Development and Regulatory Improvement Act of 1994 (see related reporting). 

“We do think that the CDFI program overall is a strong bipartisan initiative that has been in place for quite some time and has clearly demonstrable impacts,” said Hunt, acknowledging there are numerous technical questions surrounding the order that have yet to be answered. 

‘Certainly, a Possibility’

One question: even if the Fund is maintained in some form—its proponents have argued there is a “clear statutory basis” for the CDFI Fund–the executive order could eliminate the personnel needed to administer it. 

The order directs the heads of the CDFI Fund and six other government programs and entities to submit reports to the Office of Management and Budget “explaining which components or functions of the governmental entity, if any, are statutorily required and to what extent” within seven days. It also gives the OMB Director Russ Vought and other administration officials the ability to reject funding requests for the entities “to the extent they are inconsistent with this order.” 

So, is a scenario possible in which no one is available to review the award applications or award funds, even though funds may be available?

It’s “certainly a possibility,” said Hunt. “I will note, though, that the executive order very specifically did reference how grants would be administered and they did say it would be you subject to appropriations…So, certainly, it was not a full-on stop. We are certainly hopeful that we will get to a place where these grants can be administered like many other areas. Treasury has seven days to look at the CDFI programs and determine whether or not this program are really limited to those outlined in the statute.”

Survivors, But…

Following other executive orders, Hunt noted other government entities have survived but in much smaller form and have been able to do at least some of the work done previously.

Hunt said America’s Credit Unions is encouraging its member CUs to contact their representatives in their home districts/states regarding the CDFI Fund and has made a FAQ resource available.