Lawmakers question Bessent about trimming resources for Community Development Financial Institutions
Headline: CDFI Fund Faces Moderate Cuts in Proposed 2026 Budget, Sparking Concern Among Lawmakers and Banking Groups
The proposed budget for the next fiscal year (FY 2026) has allocated $276.6 million to the Community Development Financial Institutions (CDFI) Fund, marking a 7.9% cut compared to the FY 2025 enacted level. This reduction, while significant, is a rejection of the extreme Administration cuts that had proposed a 90% reduction and the elimination of core programs [1][3].
Despite the allocation, concerns and delays persist within the federal banking community programs. The Treasury Department has yet to release a notice of funding availability for the Bank Enterprise Award (BEA) program, delaying its distribution—a key initiative helping banks with community development lending [2]. Lawmakers, including Senators Warner and Crapo, have pressed the Office of Management and Budget (OMB) to act on unobligated CDFI money, criticizing the delay in disbursing awards for multiple CDFI Fund programs despite application periods closing months ago [4].
The CDFI Fund, which aims to increase access to capital, infrastructure financing, and main street business development, has been the subject of political discourse. During a House Financial Services Committee hearing, Treasury Secretary Scott Bessent was questioned about the future of funding for community development financial institutions (CDFIs) [5]. Rep. Al Green, D-TX, raised concerns about potential cuts to the funding intended for CDFIs and Minority Depository Institutions (MDIs), questioning the "woke" label in Trump's budget and asking if it's the CDFI fund's statutory function to be "woke" [6].
The proposed budget includes a new $100 million award program for affordable financing, primarily in rural America [7]. However, Green expressed concern about this allocation, noting that $100 million is quite a distance from the $12 billion intended for CDFIs and MDIs by a bipartisan group [6]. The new program requires 60% of CDFI loans and investments to go to rural areas [8].
The House appropriations subcommittee's proposal to maintain most core CDFI programs is viewed as continuing "business as usual" but still insufficient compared to advocates’ goals for maintaining or increasing funding levels [3]. Banking groups have also voiced their concerns, noting that some programs, like the BEA, remain unfunded or delayed, impacting banks in rural and Republican-leaning areas that regularly benefit from the program to support community lending [2].
Lawmakers have highlighted funding delays and pressed for faster allocation, warning that the uncertainty jeopardizes CDFIs’ ability to leverage federal subsidies with private funding and grow their lending capacity [4]. As of this year, there are approximately 1,432 certified CDFIs, including 359 banks [9]. Rep. Maxine Waters, D-CA, has been instrumental in securing capital investments and grants for CDFIs and MDIs, working with Steve Mnuchin, Treasury secretary during Trump’s first term [10].
Bank trade groups have written to Bessent and Congress urging support for the CDFI fund, citing its public-private partnership model as aligning with the Trump administration's goals [11]. As of this article, there is no mention of purchasing licensing rights in the context of the CDFI fund or related discussions. The White House's budget request states that remaining CDFI funding would support oversight and closeout of prior awards, maintaining CDFI certification, and support for New Markets Tax Credit administration and the zerocost Bond Guarantee Program [12].
The proposed budget cuts for the Community Development Financial Institutions (CDFI) Fund, though less extreme than initially planned, have ignited concerns among lawmakers and banking groups, who argue that the reduced funding may affect general-news sectors like business and politics. Despite the allocation of a new $100 million award program for affordable financing, primarily in rural America, critics argue that this falls significantly short of the intended funding for Community Development Financial Institutions (CDFIs) and Minority Depository Institutions (MDIs) by a bipartisan group.
