WASHINGTON — LeeAnn Rasachak grew up in a family of immigrants, originally farmers from Laos. There was always a side hustle in her family, she said, or a small business that someone was passionate about, and it usually involved food.
Rasachak was thrilled, then, when her career brought her from traditional finance to lead WomenVenture, a Minnesota-based Community Development Financial Institution that specializes in promoting women-owned businesses — the only CDFI like it in the state. The businesses that WomenVenture support range from food trucks to child care, bakeries, home care agencies and more, and span across Minnesota’s farms and cities. Rasachak said the CDFI’s work funds the kinds of dreams that her family came to America to pursue.
“This is what it means to literally have a village of people to farm together, to grow products, to have childcare as a community and to make sure that your kids are taken care of while parents are off working and selling their goods,” she said.
Roughly 45% of WomenVenture’s funding sources comes from the government, whether that be state or local programs, Small Business Administration funding or the Treasury Department’s CDFI Fund, Rasachak said. WomenVenture’s ability to continue to offer these kinds of opportunities is suddenly more tenuous, however, now that the Trump administration has targeted the Treasury CDFI fund for significant cuts.
“When you think about taking some of those financial resources away, what it could look like is daycare or childcare centers not being able to stay open, it looks like small businesses shutting their doors,” she said. “If payments are delayed, it can very well close people’s doors, furlough employees and then there’s no support in their communities.”
President Donald Trump on Friday evening issued an
“There’s not a whole lot of fat here to cut,” said Graham Steele, a fellow at the Roosevelt Institution who until recently oversaw the CDFI program under the Biden administration as the Treasury Department’s assistant secretary for financial institutions. “Pretty soon you’re hitting bone.”
The industry also might not be able to depend on the kind of strong bipartisan Congressional support that it’s been used to.
While the Senate Community Development Finance Caucus co-chairs Sens. Mark Crapo, R-Idaho, and Mark Warner, D-Va., rushed over the weekend to assure the industry that they continue to support the CDFI Fund’s mission, key Republican banking lawmakers are stopping short of criticizing the executive order or saying that they will fight for the program.
“Chairman Scott has long supported efforts to increase access to capital in underserved communities and will continue to work with his colleagues and the Trump administration to unleash both private and public investment in areas across the country that need it most, whether that’s through the CDFI Fund or other programs,” the office of Senate Banking Committee Chairman Tim Scott, R-S.C., told American Banker in a statement.
House Financial Services Committee Chairman Rep. French Hill, R-Ark., had a similar statement. “Chairman Hill knows the impact CDFIs can have on communities, particularly in rural areas,” a spokesperson told American Banker. “Our committee looks forward to learning more from the administration.”
The executive order has left many in the industry scrambling to understand its actual impact, since the bulk of the CDFI Fund’s programs have statutory authorization. The executive order directs the head of the government agency in charge of each of the programs it targets to study and report which components are statutorily required.
“It depends on the view that Treasury lawyers take,” Steele said. “In my experience, the CDFI Fund doesn’t do very much that is not explicitly part of one of the grants or other financial support programs that Congress has created them to do. The functions I could think of that might arguably be outside of some of that stuff would be like industry outreach, which would be very politically unpopular to eliminate.”
Still, even making those cuts could hit the community development financing industry hard, he said.
“What does service to the industry from Treasury look like if you cut it way back and underresource it?” Steele said. “Can a CDFI even get recertified if they want to, and could some of them get kicked out of the program? So there’s a whole lot of chaos that can be created just if Treasury doesn’t have sufficient resources to actually administer the program itself.”
Groups representing CDFIs said that because the bulk of the CDFI programs are authorized through Congress and backed up by continual funding in appropriations bills, the funding should continue — at least from a legal standpoint.
“If they look at what’s actually in the statute and what the CDFI Fund is actually doing, the CDFI Fund is fine,” said Jeannine Jacokes, chief executive officer of the Community Development Bankers Association.
Harold Pettigrew, president and chief executive officer of the Opportunity Finance Network, said the order sparked a lot of “concern and fears” among the network’s members, and that “anything is possible” when it comes to how Trump’s Treasury Department will interpret what is and isn’t statutorily required.
“From our lens, we don’t believe that the order itself or that the CDFI Fund should really be subject to the executive order,” Pettigrew said. “The CDFI Fund from the very beginning was authorized in statute, and subsequent acts by Congress created different programs and different functions of the fund, so we feel pretty strongly in the interpretation in the direction of the order that the CDFI Fund should not be subject to any reduction of functionality.”
Regardless of how this executive order gets implemented or interpreted, the Trump administration at the very least has signaled that it doesn’t view the CDFI Fund as a priority. Even if the Treasury Department finds that the bulk of the fund’s programs are spelled out sufficiently in statute, there are a number of avenues through which Washington could curb the fund’s activities.
The CDFI Fund was uncontroversial — a rarity — in the most recent Congressional Resolution, which was passed just hours before Trump signed his executive order. It received full funding at $324 million.
That said, with the White House taking this strong of a position on the fund, it’s not guaranteed that it’ll be included in the long-term funding bill that lawmakers now have to pass. Republicans can pass this bill on their own via a process called reconciliation, which requires just a simple majority in the Senate rather than a filibuster-proof 60 votes.
It’ll be up to those Republican lawmakers — likely Crapo, Scott and Hill — to decide how much of a conflict they might have to provoke with the White House on the issue.
“It’s a little bit perplexing, just as a political matter, why the Trump administration is deciding they want to pick this fight,” Steele said.
To be sure, this isn’t the first time that CDFI funding has been on the chopping block. During Trump’s first term and his
“Over the years, there’s been different funding levels for the CDFI Fund that our organization — as with many others — have certainly advocated for impact to the industry,” Pettigrew said. “I think we’ve seen from that when you talk in very plain ways the CDFI Fund is a direct line of support for the issues that everyone cares about, once you begin to draw straight lines of the fund and its impact, that’s where I think we’ve seen bipartisan support.”
Part of the effort in winning Republican support, Jacokes said, is pointing out that most CDFI offices — about 60% — are located in politically red districts, and highlighting the work they do in rural areas.
“CDFIs have earned bipartisan support because they are nonpartisan,” she said. “They work in all types of low-income and distressed communities, including rural and urban ones.”
In the meantime, CDFIs are left with a potentially unstable major funding source in the federal government as Washington figures out to what extent it will keep up the programs that many in the industry have relied upon for years.
Some are more dependent on the CDFI Fund and public sources of funding than others, said Randell Leach, CEO of Beneficial State Bank, a $1.7 billion California bank that’s also a CDFI.
“I think that nonbank CDFIs tend to be more reliant on the CDFI Fund, as well as more reliant on foundations and other grants and they just don’t have access to the capital markets,” Leach said. “They can’t go public, they have a harder time doing private placements. This is just not a segment of the financial services industry that attracts capital because it’s not trying to maximize return back to shareholders.”
Leach added that the smaller, more rural CDFIs are the ones that will struggle if the fund is, in fact, gutted.
“The large, sophisticated ones will probably survive, because private investors know them and understand them and they’re happy to support them,” he said. “It’s going to be the smaller ones in the lowest income communities that I think are going to have the hardest time here. They’re going to have the hardest time getting the attention of the department itself to help with things like certification, and they’re gonna have the hardest time going out there and raising capital from other places.”
As for Rasachak, she said WomenVenture is planning for all kinds of contingencies in Washington, looking at alternative funding sources and partnering with other financial institutions to fill in the gaps.
“I firmly believe that small-business owners and entrepreneurs are the ones that are helping to keep our economies going, and at the same time they’re stitching together and preserving our social fabric,” she said. And they’re doing that through child care, through home health care, through nail salons and making sure that people are being taken care of.
“Because right now we need to be taking care of ourselves as well,” Rasachak said.