- Key insights: The Treasury Department has announced the discontinuation of the CDFI fund in a notice regarding staff reductions circulated to employees on Friday.
- Future outlook: Already appropriated CDFI funds might face challenges due to a so-called “pocket recession” and could be legally contested.
- What’s going wrong: If the program—and its workforce—are dismantled, substantial funding for banks and other financial entities that lend across party lines will be lost, preventing it from reaching those in need.
WASHINGTON — Staff cuts at the Community Development Financial Institutions Fund are set to occur on Friday as part of a broader reduction strategy.
Russell Vought, who leads the Office of Management and Budget, noted on social media that these layoffs—which the Trump administration has been warning about since the government shutdown commenced on October 1—are underway. There’s no clear end in sight to the shutdown, as Democrats refuse to approve a continuing resolution that would fund the government without extending certain health care benefits, which they argue could spike insurance costs for many Americans once they lapse.
Documents reviewed indicate mass layoffs are planned for the CDFI fund.
“[Reduction in Force] This is necessary to implement the termination of Community Development Financial Institutions (CDFIs) based on a decision by the Treasury Department that their operations do not align with the President’s priorities,” the RIF notice says.
These job reductions are slated to take effect in mid-December.
Earlier this year, the Trump administration set its sights on CDFI funds. To some extent, the plan has faced immediate backlash from both political parties in Congress, owing to the bipartisan support for these programs throughout their existence.
A memo from Treasury Secretary Scott Bessent to OMB indicated that all CDFI programs are legally mandated, suggesting that they can’t be terminated via executive order.
Despite this, the OMB’s notice suggests the Trump administration is still moving ahead with plans to cut the funds necessary for CDFI operations.
Mr. Vought has championed using what he calls “pocket recessions” to redirect funds previously allocated by Congress for programs the executive branch opts against. According to existing laws, the president can propose budget cuts to funded programs by making a request to Congress, which then has 45 days to respond. Yet, since these proposals often come late in the fiscal year, Congress may not have adequate time to address them.
Last month, there had been hints that CDFI might receive some form of reprieve. OMB had told attendees at a conference that it was committed to allocating CDFI funds. The Treasury also announced a provision that would allow financial institutions to exclude climate change-oriented loans from the list of activities eligible for funding; they also removed criteria based on race or ethnicity from the eligibility definition.
Going forward, CDFIs won’t be considered for funding based on these criteria in their applications, which may impede their eligibility.
The deadline for submitting these additional applications is set for October 27, but it may be pushed back due to the ongoing government shutdown. At that time, OMB had not specified a timeline for awarding the previously appropriated funds.
