On March 14, President Trump issued an executive order (EO) titled “Continuing the Reduction of the Federal Bureaucracy,” which limits the Community Development Financial Institutions (CDFI) Fund to the minimum statutory functions permitted by law. The EO represents a major shift in the Trump administration’s priorities relating to CDFIs, as he signed into law a $12 billion investment into CDFIs during the COVID-19 pandemic. The EO has garnered bipartisan pushback and faces an uncertain future, based on interpretations of what is and what is not permitted under statute.
EO Provisions
President Trump’s EO requires the CDFI Fund to eliminate the “non-statutory components and functions” of the CDFI Fund “to the maximum extent consistent with applicable law.” The EO also requires the CDFI Fund to “reduce the performance of their statutory functions and associated personnel to the minimum presence and function required by law.” Within seven days of the issuance of the order (March 21), the director of the CDFI Fund is required to submit a report to the Office of Management and Budget (OMB) confirming “full compliance” with the order, explaining which functions of the CDFI Fund are required under statute and to what extent.
Subsection (c) of the EO permits the OMB and the Treasury Department to reject funding requests for the CDFI Fund “to the extent they are inconsistent” with the EO. The EO also applies the same requirements to the Department of Commerce’s Minority Business Development Agency (MBDA) and the United States Interagency Council on Homelessness (USICH), among other entities.
The Treasury Department has indicated in response to inquiries from Congress that all current functions of the CDFI Fund are statutory. However, it is unclear whether certain programs will be impacted now or in the future, and if there are any changes to the certification process.
Next Steps
The CDFI Fund was authorized and established under the Riegle Community Development and Regulatory Improvement Act of 1994 (P.L. 103-325) and has been authorized in numerous other laws, including the Housing and Economic Recovery Act (P.L. 110-289) and the Community Renewal Tax Relief Act (P.L. 106-554). OMB or the Treasury Department’s view of the CDFI Fund’s statutory functions will play a major role in the potential impacts to the CDFI Fund. The CDFI Fund administers numerous programs, including the Capital Magnet Fund, the New Markets Tax Credit Program and the CDFI Bond Guarantee Program. It is unclear how many programs may be deemed to be non-statutory. Any action may face a legal challenge from affected parties.
President Trump also signed a continuing resolution (CR) into law the same day the EO was issued, which includes $324 million in funding for the CDFI Fund in fiscal year (FY) 2025—the same level of funding as FY 2024. The CDFI Fund’s FY 2025 program award funding applications are due March 21, placing uncertainty on applicants. Additionally, it is unclear if previously approved grants will be disbursed for financial institutions that are currently deploying CDFI Fund grants.
In addition to bipartisan pushback from Congress, the Defense Credit Union Council (DCUC) urged the Treasury Department to clarify its stance on the EO and the status of CDFI funding. America’s Credit Unions also raised concerns, requesting that the Treasury Department evaluate the benefits of the CDFI Fund and work to protect its essential functions.
Brownstein is working with stakeholders to identify any potential impacts for both financial institutions and housing providers. For additional information on the EO, please contact a member of the Brownstein Financial Services team.
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