Trump scales back Treasury’s CDFI Fund

President Donald Trump issued an executive order Friday night scaling back the Community Development Financial Institutions Fund, a key Treasury Department program that supports underserved areas and that has enjoyed bipartisan support in Congress. 

Trump directed various federal agencies to eliminate a number of economic development, cultural, and social service programs — including the CDFI Fund — to the extent allowed by law, deeming them “unnecessary.”

“The non-statutory components and functions of the following governmental entities shall be eliminated to the maximum extent consistent with applicable law,” the order states. “Such entities shall reduce the performance of their statutory functions and associated personnel to the minimum presence and function required by law.”

In addition to the CDFI Fund, the order applies to the Federal Mediation and Conciliation Service, the U.S. Agency for Global Media, the Woodrow Wilson International Center for Scholars, the Institute of Museum and Library Services, the U.S. Interagency Council on Homelessness and the Minority Business Development Agency. The order also directs agency heads to report their compliance with the mandate to the Office of Management and Budget within seven days.

The CDFI fund — established by the Riegle Community Development Regulatory Improvement Act of 1994 — supports financial institutions that serve economically distressed communities. The fund certifies financial institutions that focus on financial inclusion as CDFIs, among them banks, credit unions, nonprofit loan funds, microloan funds, and venture capital funds. 

CDFIs rely on a mix of public and private funding to provide capital to underserved areas, offering financial services to individuals and businesses that traditional banks often overlook due to higher risk. By using targeted lending and financial counseling, CDFIs help bridge gaps in access to capital, though their performance is difficult to measure due to the complexities of serving high-risk borrowers.

The Trump administration proposed eliminating or significantly reducing the CDFI Fund’s budget in the past in its annual budget proposals, citing concerns about the federal government’s role in subsidizing financial activities that could be handled by the private sector. Trump issued a directive to executive agencies last month instructing them to identify positions not mandated by law as an initial step toward future job cuts, and the administration has more aggressively worked to shutter the Consumer Financial Protection Bureau. 

The CDFI program enjoys bipartisan support in Congress, particularly among lawmakers representing rural and economically struggling districts, who have repeatedly called for preserving federal support for the program.

At his January 2025 confirmation hearing, Treasury Secretary Scott Bessent expressed strong support for CDFIs. In response to a question from Senator Mark R. Warner, D-Va., Bessent reaffirmed his commitment to collaborating with lawmakers to expand the role of CDFIs. He highlighted his background as a financial services analyst and stressed that the inclusion of CDFIs in underserved areas is vital to the U.S. financial system’s strength and global distinction.

“The early part of my career was as a financial services analyst, I believe that the breadth of the U.S. financial services industry is what differentiates the U.S. economy from the rest of the world,” Bessent said at the hearing. “The addition of these CDFIs into these underserved communities is very important.”

Over the weekend, Senators Warner and Mike Crapo, R-Idaho, — co-chairs of the Senate Community Development Finance and influential members of the Senate Banking committee — reaffirmed the strong bipartisan support for the fund and its mission. 

“Since 1994, the CDFI sector has grown to over 1400 institutions, located in every state and territory in the nation — and leveraging at least $8 in private sector investment for every $1 in public funding received,” the Senators wrote in a statement. “As co-chairs of the Community Development Finance Caucus, a group which has grown to 28 members, 14 Democrats and 14 Republicans, we are proud to reaffirm our bipartisan commitment to support the CDFI Fund’s mission.”

Harold Pettigrew, President and CEO of the Opportunity Finance Fund — a group that works with and advocates for CDFIs — said CDFIs play a vital role in directing capital to underserved areas and that the group would fight the order.  

“We can’t have America First without putting our communities first,” Pettigrew said. “For decades, CDFIs have been a driving force in bringing capital to communities that traditional financial institutions have left behind. We are fighting to ensure that federal support continues for the vital work that community development financial institutions deliver to Main Street.”