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Fed Chair Yellen Praises CDFI Fund Trump Proposes to Eliminate
Friday, March 31, 2017 6:40 AM

In a speech to the National Community Reinvestment Coalition, Federal Reserve Chair Janet Yellen on Tuesday praised the Community Development Financial Institutions (CDFI) Fund that President Donald Trump wants to eliminate. She told a conference in Washington that the CDFI had helped provide funding for small business owners who don't have easy access to credit from traditional lenders, such as banks.

Trump proposed eliminating federal financing for the 20-year-old CDFI Fund in his abbreviated budget, which was put forward earlier in March, saying cutting the fund would save the government $210 million based on what's earmarked in the current fiscal year. Congress must pass any spending plans. In calling for its elimination, the Trump budget said financial institutions can readily tap private sources of capital and no longer need government help to cater to under-served communities.

But Yellen disputed that. She said small business owners at times can find it hard to get bank loans because they lack a credit history or have limited collateral. "This situation is true for many minority, women, and low-income borrowers," she said. "Nontraditional lenders, including more than 1,000 Community Development Financial Institutions around the country, help fill the gap."

The fund, which is housed in the Treasury Department, provides assistance to specialized private institutions that the government has certified to provide financial services in low-income communities and to people who lack access to financing.

Many affiliated credit unions in the Cornerstone region have CDFI certifications. "There's no doubt about the impact the grant dollars are making, not just in credit unions but in our members' lives," said Tammy Passafiume, CEO of Diamond Lakes FCU in Malvern, Ark.

Diamond Lakes is new to the CDFI program, but Passafiume sees the bigger picture as well. She says that not only are the CDFI grants important to members, but the partnerships between credit unions and other financial institutions and agencies in the CDFI program can be door openers to greater growth and community impact.

GECU, a credit union with 360,000 plus members, serves a strong, family-oriented low-to-moderate income border community that has many challenges, limited resources, and substantial needs.

“The CDFI Fund is an important investment tool for the financial well-being and growth of our community," said SVP – Chief Marketing Officer Teresa Montoya. "GECU was fortunate to receive a grant and be able leverage the grant to raise community awareness and make a meaningful difference to more than 24,000 low- to moderate-income families, saving them millions of dollars in unreasonable interest rate charges and fees from predatory lending practices. GECU’s mission is to pave the way to financial freedom. If the CDFI Fund goes away, many struggling families will suffer and some positive momentum will be stalled.”