President Donald Trump’s federal budget plans include slashing the Community Development Financial Institutions Fund, according to a New York Times report Monday. The newspaper says it obtained documents that show the fund “would be all but eliminated.”
A U.S. Department of Treasury program launched in 1994, the CDFI Fund has a $258 million budget, which Time calculates “costs about $0.79 per American.” It supports lending by community development financial institutions — banks, credit unions, loan funds that prioritize revitalizing struggling communities. (There are more than 1,069.) Many CDFIs provide loans to and community development support for groups working in poor neighborhoods that are typically left behind by traditional financial institutions. From Oakland to Cleveland, CDFIs provide capital to companies creating well-paying jobs. In an October budget address, Chicago Mayor Rahm Emanuel signaled the intent to invest $100 million into neighborhoods through CDFIs.
The CDFI Fund also administers the New Markets Tax Credits initiative, which announced $4.1 billion for major urban areas in the U.S. in September. As Oscar Perry Abello reported then for Next City, “all organizations receiving NMTC funds … are required to maintain accountability to low-income communities. The NMTC application includes questions about the applicant’s process for determining if a proposed investment aligns with low-income community priorities and how this process affects investment decisions.” CDFI Fund Director Annie Donovan told him, “The communities that need this program, that are benefiting from this program run the spectrum. It’s an economic engine, stimulating economic development, and that’s not something that’s red or blue.”
A drastic cut by Trump would be felt by CDFIs and the low-income communities they serve, and Tuesday, James R. Klein, president of the CDFI Coalition released a statement about the possibility.
“We were disappointed to read these press reports, and we hope they are premature,” Klein said. “The communities that receive financial assistance through the CDFI Fund are precisely the communities President Trump seeks to help, including hollowed out inner-city neighborhoods and economically distressed rural communities.”
Because they can target the specific needs of an individual community, CDFIs provide more than loans.
Take Urban Partnership in Chicago, which took over the assets of ShoreBank in 2010.
“Like all certified CDFIs, Urban Partnership is required to target at least 60 percent of its services and lending in low- to moderate-income neighborhoods,” Oscar Perry Abello wrote in another article last month. Since it began, its reported $300 million of originated loans have helped to create upwards of 5,000 jobs.
But one of Urban Partnership’s goals is to chip away at local gang membership by providing other financial options.
“Believe it or not, gang-banging is not as lucrative as it used to be in the old days,” Darrell Hubbard, chief banking officer at Urban Partnership told Abello. “A lot of the young gang members have said, ‘If I had the ability to have a job that paid me $20,000-$30,000, I would have an option, I would consider getting out of the game.’”
Rachel Dovey is an award-winning freelance writer and former USC Annenberg fellow living at the northern tip of California’s Bay Area. She writes about infrastructure, water and climate change and has been published by Bust, Wired, Paste, SF Weekly, the East Bay Express and the North Bay Bohemian.