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US Community Development Capital Initiative (CDCI)

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Abstract

The United States Department of the Treasury responded to the Global Financial Crisis with an economy-wide stimulus package called the Troubled Assets Relief Program (TARP). Within the portion of TARP's budget dedicated to bank investments, about $570.1 million was disbursed to community development financial institutions (CDFIs)--specifically, banks and credit unions (depositories)--in a program called the Community Development Capital Initiative (CDCI). Through the CDCI, Treasury provided capital to CDFI depositories, encouraged them to lend to small businesses, and promoted other community-oriented goals. The CDFI depositories issued either preferred shares or unsecured subordinated debentures to Treasury at low (2%) interest rates for the first eight years, and high (9%) rates thereafter. Two of the 84 participating CDFI depositories remained in the program as of October 2020. Only one recipient failed. The financial health of participating CDFI depositories is viewed to have generally improved after the investments were conducted. In late 2016 and early 2017, 26 of the participants were allowed to pay back Treasury capital at a discount usually 7% or 8% beneath notional value.

Suggested Citation

  • Kulam, Adam, 2021. "US Community Development Capital Initiative (CDCI)," Journal of Financial Crises, Yale Program on Financial Stability (YPFS), vol. 3(3), pages 786-820, April.
    • Handle: RePEc:ysm:ypfsfc:333434
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    File URL: https://elischolar.library.yale.edu/cgi/viewcontent.cgi?article=1207&context=journal-of-financial-crises
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    References listed on IDEAS

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    More about this item

    Keywords

    capital injection; Community Development Financial Institution; Community Development Capital Initiative; Global Financial Crisis; TARP; US Department of the Treasury;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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