Bill Summary
The proposed legislation amends the Community Development Banking and Financial Institutions Act of 1994 to enhance liquidity for community development financial institutions (CDFIs) by providing capitalization assistance. Key provisions include:
1. **Increased Assistance**: The bill allows the Fund to provide funds for various purposes, such as purchasing loans from CDFIs, offering guarantees or loan loss reserves, and enhancing overall liquidity for these institutions.
2. **Expanded Eligibility**: Organizations eligible for assistance will include those primarily focused on community development, not limited to CDFIs, thereby broadening the scope of potential beneficiaries.
3. **Prioritization Criteria**: The Fund will prioritize organizations that demonstrate experience, capacity to increase loan origination, and those that serve diverse geographic areas or address significant unmet financial needs.
4. **Increased Funding Limits**: The maximum amount of financial assistance available has been raised from $5 million to $20 million, eliminating the previous restriction on the duration of assistance.
5. **Reporting Requirements**: The Secretary of the Treasury will be mandated to submit annual reports to Congress detailing the use and impact of the Fund, including metrics on loans and guarantees provided, their effects on the competitiveness and liquidity of CDFIs, and the overall contributions to community development.
Overall, this legislation aims to strengthen the financial stability and operational capacity of community development financial institutions, facilitating greater access to capital for underserved communities.
Possible Impacts
Here are three examples of how the proposed legislation could affect people:
1. **Increased Access to Capital for Underserved Communities**: By providing capitalization assistance to community development financial institutions (CDFIs) and other organizations, the legislation aims to enhance liquidity. This could enable CDFIs to offer more loans, particularly to low-income individuals and communities that have historically faced barriers to accessing financial services. As a result, people in these communities may find it easier to secure financing for homes, businesses, or education, improving their financial stability and opportunities for growth.
2. **Strengthened Local Economies**: The legislation prioritizes organizations that demonstrate the ability to increase loan originations or expand services. By bolstering CDFIs, which often focus on local economic development, the funding can stimulate job creation, support local businesses, and foster community development projects. This could have a direct positive impact on residents by creating employment opportunities and improving local infrastructure, thus enhancing the overall quality of life in the community.
3. **Enhanced Financial Resilience During Economic Downturns**: The provision of guarantees, loan loss reserves, and other forms of credit enhancement is designed to promote liquidity for CDFIs. This can help these institutions withstand economic fluctuations and maintain their lending operations, ensuring that individuals and small businesses continue to have access to credit even during challenging economic times. This stability can be crucial for individuals who may otherwise struggle to secure financial support during downturns, thereby protecting them from deeper financial crises.
[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[S. 2718 Introduced in Senate (IS)]
<DOC>
119th CONGRESS
1st Session
S. 2718
To amend the Community Development Banking and Financial Institutions
Act of 1994 to provide for capitalization assistance to enhance
liquidity.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
September 4, 2025
Mr. Warner (for himself, Mr. Crapo, Ms. Smith, Ms. Lummis, Mr. Peters,
and Mrs. Hyde-Smith) introduced the following bill; which was read
twice and referred to the Committee on Banking, Housing, and Urban
Affairs
_______________________________________________________________________
A BILL
To amend the Community Development Banking and Financial Institutions
Act of 1994 to provide for capitalization assistance to enhance
liquidity.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. CAPITALIZATION ASSISTANCE TO ENHANCE LIQUIDITY.
(a) In General.--Section 113 of the Community Development Banking
and Financial Institutions Act of 1994 (12 U.S.C. 4712) is amended--
(1) by striking subsection (a) and inserting the following:
``(a) Assistance.--
``(1) In general.--The Fund may provide funds to
organizations for the purpose of--
``(A) purchasing loans that are originated by
community development financial institutions, loan
participations, or interests therein from community
development financial institutions;
``(B) providing guarantees, loan loss reserves, or
other forms of credit enhancement to promote liquidity
for community development financial institutions; and
``(C) otherwise enhancing the liquidity of
community development financial institutions.
``(2) Construction of federal government funds.--For
purposes of this subsection, notwithstanding section 105(a)(9)
of the Housing and Community Development Act of 1974 (42 U.S.C.
5305(a)(9)), funds provided pursuant to such Act shall be
considered to be Federal Government funds.'';
(2) by striking subsection (b) and inserting the following:
``(b) Selection.--
``(1) In general.--The selection of organizations to
receive assistance and the amount of assistance to be provided
to any organization under this section shall be at the
discretion of the Fund and in accordance with criteria
established by the Fund.
``(2) Eligibility.--Organizations eligible to receive
assistance under this section--
``(A) shall have a primary purpose of promoting
community development; and
``(B) are not required to be community development
financial institutions.
``(3) Prioritization.--For the purpose of making an award
of funds under this section, the Fund shall prioritize the
selection of organizations that--
``(A) demonstrate relevant experience or an ability
to carry out the activities under this section,
including experience leading or participating in loan
purchase structures or purchasing or participating in
the purchase of, assigning, or otherwise transferring,
assets from community development financial
institutions;
``(B) demonstrate the capacity to increase the
number or dollar volume of loan originations or expand
the products or services of community development
financial institutions, including by leveraging the
award with private capital; and
``(C) will use the funds to support community
development financial institutions that represent broad
geographic coverage or that serve borrowers that have
experienced significant unmet capital or financial
services needs.'';
(3) in subsection (c), in the first sentence--
(A) by striking ``$5,000,000'' and inserting
``$20,000,000''; and
(B) by striking ``during any 3-year period''; and
(4) by adding at the end the following:
``(g) Regulations.--The Secretary may promulgate such regulations
as may be necessary or appropriate to carry out the authorities or
purposes of this section.''.
(b) Emergency Capital Investment Funds.--Section 104A of the
Community Development Banking and Financial Institutions Act of 1994
(12 U.S.C. 4703a) is amended by striking subsection (l) and inserting
the following:
``(l) Deposit of Funds.--All funds received by the Secretary in
connection with purchases made pursuant of this section, including
interest payments, dividend payments, and proceeds from the sale of any
financial instrument, shall be deposited into the Fund and used--
``(1) to provide financial assistance to organizations
pursuant to section 113; and
``(2) to provide financial and technical assistance
pursuant to section 108, except that subsection (e) of that
section shall be waived.''.
(c) Annual Reports.--
(1) Definitions.--In this subsection, the terms ``community
development financial institution'' and ``Fund'' have the
meanings given the terms in section 103 of the Community
Development Banking and Financial Institutions Act of 1994 (12
U.S.C. 4702).
(2) Requirements.--Not later than 1 year after the date on
which assistance is first provided under section 113 of the
Community Development Banking and Financial Institutions Act of
1994 (12 U.S.C. 4712) pursuant to the amendments made by
subsection (a) of this section, and annually thereafter through
2028, the Secretary of the Treasury shall submit to Congress a
written report describing the use of the Fund for the 1-year
period preceding the submission of the report for the purposes
described in subsection (a)(1) of such section 113, as amended
by subsection (a) of this section, which shall include, with
respect to the period covered by the report--
(A) the total amount of--
(i) loans, loan participations, and
interests therein purchased from community
development financial institutions;
(ii) loans that support affordable housing
construction; and
(iii) guarantees, loan loss reserves, and
other forms of credit enhancement provided to
community development financial institutions;
(B) the effect of the purchases and guarantees made
by the Fund on the overall competitiveness of community
development financial institutions; and
(C) the impact of the purchases and guarantees made
by the Fund on the liquidity of community development
financial institutions.
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