Banks urge Trump admin to restore CDFI Fund staff, funding

Key insight: The trade association letter urges the White House to reverse cuts to the congressionally mandated program.

Supporting data: The Office of Management and Budget has let go CDFI Fund staff as part of a reduction in force across the government, and the administration has singled out the program for cuts to the extent possible under the law.

Forward look: The letter raises bipartisan pressure on the administration as the ongoing government shutdown enters its fourth week.

A coalition of banking industry groups Monday is urging top Trump administration officials to restore staff and funding for a Treasury lending program for underserved communities. 

In a letter to Treasury Secretary Scott Bessent and Office of Management and Budget Director Russell Vought, six trade groups — including the American Bankers Association, Independent Community Bankers of America and the Mortgage Bankers Association — applauded efforts to streamline the program under Trump's second term, but expressed concern after the administration announced it would gut agency staff as part of an overall shrinking of the federal workforce.

"Ensuring the Fund has the necessary resources in place will allow it to sustain momentum and fully deliver on the Administration's priorities of revitalizing communities, supporting small businesses and homeownership, and promoting economic growth nationwide," the groups wrote in a letter. "The Administration's actions to make the Fund more effective should not be undercut by the loss of the experienced professionals who are key to implementing them."

Established by the Riegle Community Development Regulatory Improvement Act of 1994, the CDFI Fund is a Treasury Department program that has enjoyed bipartisan support in Congress, who has repeatedly called for preserving federal support for the program. At his January confirmation hearing, Treasury Secretary Scott Bessent expressed strong support for CDFIs. 

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. 

The CDFI Fund was already under scrutiny by President Trump's camp in his first term, when the administration proposed cuts, citing concerns about the federal government's role in subsidizing financial activities that could be handled by the private sector. Trump issued an executive order in March scaling back the program to its minimum under federal law. In August, internal documents obtained by American Banker showed OMB had frozen nearly all discretionary CDFI funds. Military credit unions have since urged Congress to restore funding, warning that cuts would hurt veterans and undo decades of financial inclusion progress.

CDFIs

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The administration also moved to abolish the fund, including laying off its staff as part of its accelerating reductions in force during the ongoing government shutdown over extending health care subsidies backed by Democrats. While the Treasury has argued the fund's programs are legally mandated, OMB has blocked disbursement of appropriated funds and OMB Director Russell Vought has floated the idea of a "pocket rescission" to cancel them. CDFI Fund champion Senator Mark Warner, D-Va., has said he believes OMB, not Treasury, ordered the layoffs at the CDFI Fund, calling it an illegal move. 

In Monday's letter, the banking groups argued that the FY 2025 funds remain available and that keeping the fund running could be a boon to the administration's stated goals of promoting economic growth.

"Its programs are invaluable in helping banks and other lenders meet community credit needs, create jobs, and build local wealth," the groups argued. "Banks, credit unions, and nonbank CDFIs alike rely on Treasury-issued CDFI certification as the recognized standard for determining whether an entity effectively serves low-income communities … [and] sustaining the Fund's full operational capability will also protect the stability of key segments of the federally insured financial system."