Sen. Alsobrooks Questions Treasury Secretary Bessent on CDFI Bank Funding and Deposit Insurance

Deposit Insurance and Small Banks

• 💡 Senator Alsobrooks advocates for a bipartisan market structure bill, emphasizing the need to protect innovation and community banks.
• 🎯 She highlights that 60% of small business loans and 80% of agricultural loans come from community and regional banks, citing a partnership with Senator Hagerty on legislation to expand deposit insurance for business checking accounts.
• 🔑 The discussion addresses the cost of expanding deposit insurance, with a reference to FDIC Chairman Travis Hill's testimony suggesting it would not increase premiums on small banks and would have minimal impact on large banks.
• 🧠 Secretary Bessent agrees that small banks are crucial for Main Street and notes that overregulation and moral hazard have led to a 50% disappearance of small banks since the Great Financial Crisis.
• ⚠️ He explains that during financial stress, deposits flee community banks for larger ones due to perceived safety, impacting lending capacity through the fractional banking system.

CDFI Funding Delays

• 📌 Senator Alsobrooks expresses concern over the delayed release of congressionally appropriated funds for Community Development Financial Institutions (CDFI banks).
• 💬 She specifically mentions two Maryland CDFIs that rely on the Banking Enterprise Award (BEA) program for credit and financial services in distressed neighborhoods.
• ⏳ The White House Office of Management and Budget (OMB) has withheld the notice of funding availability for the BEA program since March 2025, preventing CDFI banks from applying for crucial funding.
• ✅ Secretary Bessent affirms his support for CDFIs as a key component in supporting Main Street America and states he is awaiting release from OMB to proceed with funding distribution.
• 🚀 He expresses eagerness to move forward once the notice is released, assuring that statutory duties will be followed.