May 31, 2017

STATEMENT BY FINANCIAL SERVICES SUPERINTENDENT MARIA T. VULLO ON THE PRESIDENT’S PLAN TO DEFUND THE COMMUNITY DEVELOPMENT FINANCIAL INSTITUTIONS FUND

President Trump’s recently released budget blueprint, among other concerns, eliminates funding for the Community Development Financial Institutions Fund, which provides grants and support to Community Development Financial Institutions (or CDFIs) that promote affordable lending for disadvantaged small and micro-businesses.  This effort is an attack on small businesses and the communities they serve.

In New York, 82 CDFIs provide support to small businesses.  The CDFI program, enacted in 1994, smartly established private/public partnerships to promote lending in local communities by enabling small businesses to secure affordable funding.  Since its enactment, the program has been funded by the federal government every year.  Since the program’s enactment, New York’s CDFIs have received 418 awards for more than $310 million and 89 awards of tax incentives for more than $5.3 billion.  President Trump now seeks to de-fund the program, which would eliminate this important source of funding and damage small businesses and the local communities they serve.

Small business growth and job creation positively impact New York State’s economy.  When faced with limited or no- access to affordable credit, small businesses cannot survive.  CDFIs are able to create such access in affordable and responsible ways, but federal funding is essential.   When small businesses cannot quickly access funding from traditional sources, they are left with no option but to turn to high cost lenders, such as peer-to-peer online lenders, that would charge them excessive interest rates under obscure terms with a range of fees, trapping small businesses into a dependency cycle that is difficult to escape.

Since disbursements from the fund began in 1995, the Treasury Department has invested annually into local communities through the CDFI program, and every dollar of federal funds is leveraged 10 times through a CDFI.  It will be a grave mistake and a disastrous outcome for our small businesses if the program is defunded.  Instead of defunding the program, it should be expanded, and the private sector investment and involvement should be further encouraged and rewarded.  Our economy flourishes with the success of our local communities and the small businesses that serve our communities.  After years of the CDFI program supporting our communities, the President’s budget blueprint is a step backward.  

###