WASHINGTON — Funding for a key program that helps banks do community-focused lending is idling, and reveals little signal of being deployed, as the Trump administration continues to eye the group improvement lending sector for funding cuts.
The Treasury Department has not set the wheels in movement to ship out cash in a fund known as the Bank Enterprise Award program, which provides out financial awards to banks throughout the nation. The BEA is a part of the Community Development Financial Institution Fund and permits banks to both use the funds to put money into CDFIs or interact in group lending tasks on their very own.
The BEA program held about $40 million for the FY24 spherical — a modest pot of cash by authorities funding requirements. But some banks — notably these in a few of the most closely Republican and rural areas of the nation — routinely take a whole bunch of 1000’s of {dollars} a yr from this program. The program is the just one that’s immediately geared towards banks.
This yr, there’s an uncommon delay. The Treasury Department has but to publish what’s known as a discover of funding availability, which is the first step in the course of for banks to use and obtain the funds. Without it, the program cannot transfer ahead.
It’s a primary take a look at for the Trump administration’s Treasury Department, which is supposed to disburse funds for not simply the BEA program, however a bunch of others housed underneath the CDFI Fund umbrella.
“We are very involved about the lack of motion and the prospect that congressionally authorized funding is not going to be deployed,” mentioned Jeannine Jacokes, CEO of the Community Development Bankers Association, which advocates for CDFIs. “The cash makes a giant distinction in low earnings communities. For instance, these sources assist small banks retain branches in distant rural areas, provide small greenback loans that maintain individuals from going to payday lenders, and make homeownership a actuality to a household that in any other case would stay renters.”
Timing is the whole lot
After Treasury publishes a discover of funding availability, banks have 45-60 days to use to obtain the cash. At that time, Treasury has to overview the purposes and obligate the funds. It usually takes round five-and-a-half months from the time Treasury publishes its discover of funding availability to when it broadcasts which banks will obtain the awards.
The funds lapse on September 30, 2026 — the finish of the subsequent fiscal yr. So whereas Treasury nonetheless technically has time to publish that discover of funding availability, there is not any quick plans to take action, in keeping with two individuals conversant in the matter.
In order for the Treasury Department to publish the discover of funding availability, the Office of Management and Budget — at the moment headed by Russell Vought, who additionally leads the Consumer Financial Protection Bureau on an performing foundation — has to launch the funds.
That hasn’t occurred, the individuals mentioned. And there’s motive to consider that it will not; OMB’s full yr 2026 funds does not undertaking that any of the funds in the BEA program for fiscal 2025 will probably be obligated.
Vought has in the previous advocated for the use of “pocket recissions,” the place a president proposes expiring funding cuts too late in the fiscal yr for Congress to have 45 days of session to contemplate them.
“The very Impoundment Control Act itself permits for a process known as pocket rescissions, later in the yr, to have the ability to bank a few of these financial savings, with out the invoice truly being handed,” Vought mentioned on CNN. “It’s a provision that has been not often used. But it’s there. And we intend to make use of all of those instruments.”
Treasury and OMB didn’t reply to a request for remark.
The CDFI political panorama
The CDFI Fund as a complete has discovered itself in the center of a characteristically Trumpian political battle.
The fund has strong and bipartisan assist in Congress. Sens. Mike Crapo, R-Idaho, and Mark Warner, D-Va., cohead the CDFI caucus in the Senate and have efficiently elevated the quantity disbursed to those group lenders over the years.
The motive for that assist is basically attributable to the lending portfolio of CDFIs, which spur financial development in underserved communities throughout the nation, from rural areas to city ones, and in states of all totally different political stripes. The BEA program may be concentrated in the deep South, however the CDFI Fund as a complete has a nationwide footprint.
“It’s going in every single place, which actually speaks to the bipartisan embrace of this program, as a result of actually it may be an answer in rural areas and urbanized ones,” mentioned Brett Theodos, a senior fellow and director of the Community Economic Development Hub at the Urban Institute. “Every mayor, most governors and lawmakers in Congress are inquisitive about seeing this sector do much more.”
But some in the Trump administration have taken a special posture.
Earlier this yr, President Donald Trump signed an government order eliminating the “nonstatuatory” elements of quite a lot of federal packages, together with the Treasury Department’s CDFI Fund.
The Treasury Department, led by Secretary Scott Bessent, despatched OMB a discover that mentioned all 11 packages in the CDFI are, in reality, statutorily mandated by Congress, in keeping with a doc seen by American Banker.
The White House, nonetheless, didn’t sign that it will again down on slicing down the CDFI Fund.
“The Treasury Department is contemplating quite a lot of measures to extend effectivity, together with a roll again of wasteful Biden-era hiring surges, and consolidation of important assist features to enhance each effectivity and high quality of service,” a spokesman mentioned in an emailed assertion at the time. “No remaining selections have but been made, and any present reporting to the opposite is fake.”
If the CDFI Fund goes away, or if it is considerably pared down, that does not eliminate the group lending sector completely, but it surely does diminish its development, Theodos mentioned.
“CDFIs usually work by taking a greenback of public subsidy and mixing it along with a number of {dollars} of bank debt, after which lending that,” he mentioned. “But they want that public subsidy to combine with in an effort to entry the bank debt. They have to have that fairness on their stability sheets.”
In a standard, for-profit bank, which may come from deposits, Theodos mentioned. But for CDFIs, the fund is the greatest supply of that fairness.
“So if that goes away, it does not imply these teams flip off the lights and cease all of their work, but it surely does imply that the rug is pulled out from them in the sense that they are not in a position to transfer ahead with the similar stage of development that everybody’s hoping for in the trade,” Theodos mentioned.
Warner had an change a month in the past at a Senate Finance listening to wherein he questioned Bessent on unobligated {dollars} from the CDFI Fund.
“Can you go forward and commit, sure or no, that the administration will observe the regulation and go forward and obligate the unspent … fiscal yr ’25 CDFI funds?” Warner requested.
“Senator, that is the first I’ve heard of it,” Bessent mentioned. “I’ll decide to having a solution to you by way of—”
“It’s towards the regulation to withhold appropriated funds,” Warner mentioned.
“We may have a solution to you by the starting of subsequent week,” Bessent mentioned.
Warner submitted a query for the file. His workplace says it by no means acquired a written response.
Frank Gragano contributed to this report.
