Treasury to review CDFIs for ‘violations’

• Key insight: The Community Development Financial Institutions Fund has come under persistent attack from the Trump administration despite wide bipartisan support in Congress. 
• What’s at stake: The White House insists that the CDFI Fund favors urban and minority groups, while the program’s data shows the program benefits a wide array of communities, with the greatest share of awards going to states that Trump carried in 2024. 
• Forward look: The Treasury Department will also issue other rules related to CDFIs, and minority-focused or women-focused CDFIs are expected to face increasing pressure from the administration in the future. 

WASHINGTON — The Treasury Department said that it has “initiated a review” of community development finance institutions. 

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Trump administration officials have insisted that CDFIs — which serve both rural and urban communities but that include some institutions that focus on minority-owned businesses or communities — unfairly use taxpayer funds for “woke” causes. The program has been the target of a White House executive order and cuts have appeared in both this and last year’s budget proposals, although Congress has continued to fund the program. 

It’s been a notable change from Trump’s first term, where the CDFI program grew and politicians across the aisle praised the private-public partnership. 

The Treasury Department said on Monday that it would examine CDFIs for “potential violations of applicable law or CDFI requirements and to help ensure that CDFIs that receive federal assistance act as proper stewards of taxpayer funds.” 

“CDFIs that engage in predatory practices and take advantage of the very communities they are intended to serve will be reviewed and, where appropriate, held accountable,” Treasury Secretary Scott Bessent said in a statement. “We remain committed to enforcing the law and protecting taxpayer resources while supporting the mission of responsible CDFIs.”

Throughout this Trump administration, CDFIs have struggled to get access to congressionally mandated funding, as the Office of Management and Budget has delayed taking procedural steps that would allow the Treasury Department to disburse the funds. 

While OMB has now released those funds, doing so came alongside another Treasury Department memo that said that CDFI funds are intended only for U.S. citizens — a stipulation that was already in place, but was included amid the administration’s crackdown on immigration. The Treasury Department also said that they would create a provision “to ensure certified CDFIs do not engage in practices that violate federal antidiscrimination laws, including providing employment or financial preferences or set-asides based on race, ethnicity, or sex in a manner inconsistent with federal laws.”

OMB Director Russell Vought has also publicly criticized the program, echoing the White House’s rhetoric. 

“If you look at what these CDFIs were funding, many of them continue to be woke,” Vought said in a House Budget hearing earlier this month. “They continue to be pushing an ideology that is very harmful.”

Vought also referenced the safety and soundness of the program’s loans, an argument that the White House had not levied against the program up to that time. 

“When a CDFI does a loan, it is exempt from ability-to-pay requirements, so you’re getting a loan on the books that is not necessarily as sound and secure as one that would come from a typical bank,” Vought said. “So we have issues with this program.”

Treasury Secretary Scott Bessent last week echoed those sentiments, telling the Senate Appropriations Committee that “part of the CDFI program had lost its way in terms of a partisan agenda.”