Trump wants to cut entire staff of the Community Development Financial Institution

A federal judge has temporarily blocked the Trump administration from firing thousands of federal workers during the shutdown.

Among those the president is attempting to terminate as part of a sweeping downsizing of the federal workforce is the entire staff of the Community Development Financial Institutions Fund. That program supports mission-driven lenders operating in rural, tribal, and otherwise underserved parts of the country.

Last year, it awarded over $400 million in grants and loans to those institutions.

In Louiseville, Kentucky, entrepreneurs having trouble raising seed money can turn to a loan fund called LHOME.

“We work with those small businesses that are simply not in a position to go to traditional banks,” said CEO Keith Talley — usually because of credit issues. “Service businesses, retail, restaurants, trucking firms. You name it and we’ll take a look at it.”

LHOME is able to work with these borrowers, in part, because of help from the CDFI Fund. Talley said LHOME has won grants from the fund, but its certification as a government-backed CDFI lender matters more.

“That certification helps when we are applying for loans from other funders,” he said. “And they like knowing that there is a third party that’s making sure that we, as a CDFI, are lending in the neighborhoods and doing the type of lending that we said we were going to do.

Without that federal support, Talley said raising capital to support entrepreneurs in Louisville could get a lot harder.

“The CDFI Fund has leveraged a lot of money from the private sector that wouldn’t be invested otherwise,” said Michael Swack, an expert on community lending at the University of New Hampshire who helped get the fund off the ground during the Clinton administration. “It’s an example of a government resource that expands available resources in financial markets.”

That’s why members of both parties have supported the fund for the last 30 years, Swack said, adding that states that get the most per-capita support are rural and red.

Without anyone to run the CDFI Fund, Swack said some newer and smaller lenders that rely on it would fold; others would have to scale back in communities where capital is already hard to come by.

“And if the fund were eliminated, those gaps would widen. It’s hard to say by how much,” he said.

“It would be devastating,” said Pete Upton, who heads up the Native CDFI Network.

The CDFI Fund is a major supporter of everything from mortgage lending to green energy development on tribal lands, he said. “I think Native CDFIs, we’re successful because we know the communities we work within.”

They cater their services to Native borrowers’ needs in ways big commercial banks won’t, Upton said.

He’s hopeful that lawsuits by federal workers’ unions and pushback from Republicans in Congress can stop the CDFI Fund from being eliminated.