By Ray Birch
WASHINGTON—The Trump Administration on Friday began carrying out large-scale federal layoffs—formally known as reductions in force (RIFs)—marking the first mass terminations of federal employees during a government shutdown in modern U.S. history.
But among the most consequential developments for credit unions and community lenders was news that the Treasury Department’s RIF has reportedly eliminated all staff of the Community Development Financial Institutions (CDFI) Fund—a move that could effectively shut down the federal program altogether.
Multiple reports describe the layoffs as “substantial.” According to POLITICO, Treasury was preparing to terminate roughly 1,400 employees Friday under White House direction. The confirmation came as White House Budget Director Russell Vought declared on social media that “the RIFs have begun,” a message later confirmed by the Office of Management and Budget. Bloomberg Law reported that thousands of additional layoffs were underway across multiple departments, including Health and Human Services and Commerce, calling the firings part of an effort to make the shutdown “as painful as possible” for Democratic constituencies.
News reports Saturday put the number of fired workers at 4,000.
Jason Stverak
CDFI Fund Reportedly Gutted
For credit unions, the apparent elimination of the CDFI Fund has raised immediate concern. The program, long regarded as a cornerstone of community development finance, supports many credit unions serving low-income and underserved areas through grants, certifications, and access to capital.
“Firing every CDFI Fund employee threatens the very communities CDFIs were created to serve,” said Defense Credit Union Council Chief Advocacy Officer Jason Stverak. “The Defense Credit Union Council strongly urges the Treasury Department to reverse this decision. CDFIs are lifelines for low-income, rural, and military families—and DCUC will continue leading the fight to protect them.”
America’s Credit Unions President/CEO Jim Nussle warned that the move could have sweeping consequences.
"We have seen reports that the Treasury RIF has eliminated all CDFI Fund staff. After a win in the Senate-passed NDAA, cutting this staff would effectively cease the operations of the fund and significantly impact CDFI credit unions and communities across the country. We urge Congress to swiftly come to an agreement on funding, and will monitor the RIF impact on credit unions and their members,” said Nussle.
Jim Nussle
Nussle added that the broader fallout of the shutdown is mounting rapidly.
"The consequences of the shutdown are ramping up. As they have demonstrated since before the shutdown began, credit unions across the country are working however they can to support their members through this hard time," he said. "We will continue to provide insights and resources to credit unions to help them effectively support their members, and we encourage federal workers and those impacted to reach out to their local credit unions to see what kind of support may be available.”
The Treasury Department, according to POLITICO, defended the move in a letter obtained by the news outlet. Treasury Associate Chief Human Capital Officer Michael Wenzler wrote that the elimination of positions in the fund was “necessary to implement the abolishment of the CDFI, which is based upon the Department of the Treasury determination that its programs, projects, and activities do not align with the President’s priorities.”
‘Improper And Shortsighted’
Cathie Mahon
CDFI and community finance advocates reacted sharply. Cathie Mahon, president and CEO of Inclusiv, called the apparent dismantling of the fund “incredibly shortsighted.”
"Catalyzing at least $8 in private funding for every federal dollar, the CDFI Fund has earned strong bipartisan support for its effective use of federal funds," Mahon stated. "Despite these achievements, the Trump administration has used the shutdown as a pretext to shut down the Fund, as Reduction In Force notices have been issued to all Fund staff. This is not only improper, as the Fund has a statutory mandate to fulfill, it is also incredibly shortsighted and harmful economic policy. It will reduce community lenders’ ability to provide the safe and affordable capital and financial services people and small businesses need during times of economic uncertainty and mounting financial distress.
"CDFI credit unions have played a vital role in supporting economic well-being in low-income, rural, urban and reservation-based communities, and the CDFI Fund must be allowed to continue its vital work to certify lenders and disburse Congressionally appropriated funding," Mahon said.
Credit Union Leaders Call for Swift Resolution
At the Defense Credit Union Council, Stverak said his organization is “disheartened” by the reports of the Fund’s dismantling.
"This underscores the urgent need for Congress to resolve the funding impasse as soon as possible. Defense credit unions and others rely on the CDFI Fund’s support to continue serving underserved communities across the nation," said Stverak, adding that DCUC has distributed detailed guidance to its member credit unions on how to contact Senate leaders to oppose the CDFI Fund’s elimination, including a sample letter they can send.
Earlier, Stverak emphasized that DCUC has been working closely with credit unions since before the shutdown began.
“Since before the shutdown began, DCUC has been working closely with its member credit unions to ensure that anyone affected receives the help they need,” he said. “If you’ve been impacted or have concerns about how this might affect you financially, reach out to your credit union—they’re ready to assist during these uncertain times.”
Stverak said he was not surprised by the administration’s escalation.
Adam Turmakhan
“The administration was clear that layoffs could occur if the shutdown continued. I’m not shocked or surprised we’ve reached this point as we enter week three,” he said.
Broader Financial Stability Concerns
CUToday.info reported Friday—ahead of the RIF announcements—that experts were already warning the potential layoffs could weaken regulatory oversight and increase systemic risk across the financial system. In that report, TurmaFinTech CEO Adam Turmakhan cautioned that “slashing capacity at key regulators will only leave more room for risk,” potentially setting the stage for another banking crisis.
“Federal layoffs at critical watchdogs could bring about another crisis of a similar, if not greater, magnitude,” he said.
Brandy Bruyere
Regulatory experts agreed. Brandy Bruyere, partner at Honigman LLP, noted that “financial institution regulators have already lost people with significant tenure and knowledge.” She warned that fewer examiners and reduced oversight could stretch risk management resources and delay early intervention when institutions begin to struggle.
Uncertainty For Credit Unions And Regulators
CUToday.info previously reached out to NCUA to determine whether its independent funding structure might shield it from RIF directives, but the agency has not responded.
With thousands of federal employees now facing unemployment and the CDFI Fund’s future in question, credit unions are again serving as financial first responders—rolling out emergency loans, skip-a-pay programs, and hardship relief to help affected members weather the disruption.
For now, analysts say, the scale and duration of the layoffs—and whether the CDFI Fund can recover from the loss of its staff—remain uncertain.