DFC Bill Quadruples Taxpayer Risk to $250B, Targets China, and Axes Development Officer Role

The new DFC Modernization Act of 2025 is shaking up the U.S. International Development Finance Corporation (DFC), the agency that uses U.S. government backing to fund development projects abroad. In short, this bill tells the DFC to stop playing it safe, crank up the risk, and aggressively counter strategic rivals like China and Russia. The bill raises the DFC’s equity investment limit from 30% to 49% and, critically, increases the maximum amount the U.S. government can be financially on the hook for—its contingent liability cap—from $60 billion to a massive $250 billion (Sec. 402). This means the potential financial exposure for U.S. taxpayers is more than quadrupled as the DFC is pushed to make riskier, politically driven investments.

The New Mandate: High Risk, High Stakes

This legislation isn't subtle about its goals: it’s about foreign policy first. The DFC is now explicitly directed to take on substantial financial risk and even accept losses on individual investments if it helps unlock major private capital or achieve big foreign policy wins (Sec. 2). This means the DFC will be using tools like partial guarantees and first-loss coverage to lure private companies into projects in high-risk sectors like infrastructure and critical minerals, especially to counter state-directed financing from rivals. For U.S. companies, this is a clear invitation to enter markets they might have previously avoided, backed by a significant government safety net. The bill formalizes this strategic focus by creating a list of “Countries of Concern”—including China, Russia, Iran, and Venezuela—which are explicitly excluded from certain DFC support (Sec. 101, Sec. 406).

Where Your Tax Dollars Could Go

The biggest takeaway for the average person is the massive jump in the potential financial risk. When the DFC guarantees a loan or provides insurance, it’s the U.S. government—and ultimately the taxpayer—that pays if the project fails. By raising the liability cap to $250 billion, the DFC has the green light to pursue a much larger portfolio of strategic, high-risk projects. Furthermore, the DFC is gaining financial independence by creating a Revolving Equity Investment Account (Sec. 302). Any money the DFC earns from its equity investments (like fees or profits) goes straight back into this account, ready to be reinvested without needing annual Congressional approval. This creates a self-sustaining funding source for the DFC’s equity portfolio, increasing its flexibility but also reducing direct oversight on how those specific earnings are spent.

Streamlining the Bureaucracy (and Centralizing Power)

The bill also makes significant changes to the DFC’s internal structure. It reduces the size of the Board of Directors and, notably, eliminates the position of Chief Development Officer (Sec. 203). This is a big deal because the CDO was supposed to ensure that projects met development goals, not just financial or political ones. By striking this role and centralizing the power to select and appoint all officers and employees under the Chief Executive Officer (CEO), the bill concentrates significant control over the DFC’s strategic direction and staffing in one person. While this might streamline operations, it removes a key check on the CEO’s authority and signals a clear shift in priority from development outcomes toward strategic competition and risk management (Sec. 202 changes the focus of the Chief Risk Officer from 'audit' to 'risk'). Finally, in a technical cleanup, the bill repeals the entire European Energy Security and Diversification Act of 2019 (Sec. 407), wiping out any specific mandates related to that previous legislation.