NCUA in Transition: “Wrongful” Firings Stymie Credit Union Watchdog

This story is still developing. Check back often for additional updates

(4/18 @4:20 EST Update). The National Credit Union Administration released today the following message to all employees on the current state of the NCUA Board:

“On April 17, the NCUA received confirmation that President Donald J. Trump terminated the positions of Todd Harper and Tanya Otsuka. Please be aware that Todd, Tanya, and their staff are no longer employed with the agency. We thank them for their service.

“The departure of two of our three NCUA Board Members has led to speculation within the credit union industry and trade press about the NCUA Board’s ability to exercise authority with the presence of only a single Board Member. Please be assured that the NCUA has precedent and standing delegations of authority in place to continue performing all operational and statutory requirements under the authority of a single Board Member.

“It is the NCUA’s long-held view that a single Board Member constitutes a quorum when there are no other Board Members. Chairman Hauptman and NCUA’s leadership are equipped with the required authorities to continue implementing the Administration’s priorities and fulfilling our mission of protecting the system of cooperative credit and its member-owners through effective chartering, supervision, regulation, and insurance.

“Together, we will ensure America’s credit unions are safe and sound, address any unnecessary regulatory barriers to their prosperity, and provide excellent service to the public.”

(4/17 @ 2:00 EST Update) Read economist Rebecca Ryan’s opinion on the news here -“NCUA Disruption Sparks Future-Focused Strategies for Credit Unions“

(4/17 @ 12:30 EST Update) Read  Brian Lauer of Messick, Lauer and Smith’s legal opinion on the news here -“NCUA Turmoil: Political Winds Batter Credit Union Regulation“

(7:45 pm EST Update) According to an article in USA Today , White House press secretary Karoline Leavitt stated, “President Trump is the chief executive of the executive branch and reserves the right to fire anyone he wants.”

(3:44 pm EST Update) Henry Meier, Esq. provides his thoughts:

While the firing of Todd Harper and Tanya Otsuka is understandably sending a jolt through the credit union system, it is not surprising. Since his first days in office, President Trump has openly questioned the constitutionality of independent agencies and the NCUA was not going to avoid this scrutiny. As a legal debating point, a strong argument can be made that the Supreme Court will overturn Supreme Court precedent in this area and hold that independent agencies such as the NCUA are unconstitutional. The public’s response to the policy implications of this shift remain to be seen. Just as there is no Republican or Democratic way of filling a pothole, is there really a Democratic or Republican way to ensure the safety and soundness of a member’s savings? 

While the actions taken against Harper and Otsuka are a big deal within the industry, they may be a lead up to the president seeking to place the Federal Reserve Board under the direct control of the Executive Branch. Even as he has moved aggressively against most other independent agencies, he has moved more cautiously in relation to the Federal Reserve. For instance, in the Executive Order taking control of independent agencies, the monetary functions of the Federal Reserve Board were exempted. The ultimate question is if the President will seek to exercise direct oversight over interest rates and the implementation of monetary policy.

On a practical level, assuming that they are both replaced with Republican appointees, credit unions may quickly see the consequences of this decision in the form of a dramatically reduced emphasis on separate consumer protection examinations, much more flexibility to charge overdraft fees, and perhaps even a greater emphasis on making the examination process less burdensome for credit unions. Conversely, it is, of course, possible that the two appointees will not advocate forcefully for the NCUA to remain a standalone agency.

– www.henerymeieresq.com

(3:39 pm EST Update) “America’s Credit Unions has consistently supported a strong, independent regulator for our industry. While today’s news brings a bit of uncertainty to the NCUA, credit unions can rest assured that America’s Credit Unions will continue to engage the Trump Administration and Members of Congress on the unique structure and needs of credit unions to ensure the industry can effectively serve its 142 million members and support a thriving national economy,” said America’s Credit Unions President/CEO Jim Nussle.

Original Article

A political earthquake has struck the National Credit Union Administration (NCUA), the vital regulatory body overseeing the nation’s credit unions. The abrupt and controversial removal of Board Members Todd Harper and Tanya Otsuka has left the agency with a single member, Chairman Kyle Hauptman, effectively freezing its ability to implement new policies and igniting a firestorm of concern within the credit union industry.

The unexpected shake-up took a dramatic turn with a blistering statement from ousted Board Member Todd Harper, posted on his LinkedIn feed. Harper vehemently denounced his dismissal as “wrong,” “politically motivated,” and a direct assault on the bipartisan framework designed to safeguard credit union members and their deposits.

“The decision of the White House to fire me before the completion of my term is wrong,” Harper declared, arguing that the move “violates the bipartisan statutory framework adopted by Congress to protect credit union members and their deposits” and “undermines the independence, balance and important work of the NCUA.”

Harper’s forceful words underscore the gravity of the situation, raising critical questions about the future stability and impartiality of the agency tasked with protecting over 140 million credit union members. “If a President can fire an NCUA Board member at any time, how will we maintain public trust in our nation’s financial services regulatory system?” he questioned.

His statement highlighted his six years of service and bipartisan leadership as Chairman, lamenting that his “ill-conceived and politically motivated decision to fire me before the end of my term upsets that important regulatory balance and will harm consumers.”

The Defense Credit Union Council (DCUC), a key advocate for credit unions serving military and veteran communities, had earlier issued a statement acknowledging the departures. While expressing gratitude for past collaborations, DCUC President/CEO Anthony Hernandez emphasized the council’s commitment to a “strong and independent NCUA” and the protection of the National Credit Union Share Insurance Fund (NCUSIF). DCUC Chief Advocacy Officer Jason Stverak echoed this, stressing the need to preserve the “unique status of credit unions.”

However, Harper’s explosive statement injects a new level of urgency and concern into the industry’s response. The fact that Harper, initially appointed by President Trump and later designated Chairman by President Biden, received bipartisan Senate confirmation for a term extending to 2027 underscores the unexpected and potentially politically charged nature of his removal.

NCUA Grounded: Regulatory Freeze and Industry Anxieties

With only Chairman Hauptman remaining, the NCUA is now operating under a severe constraint. The Federal Credit Union Act mandates at least two board members to implement any new actions, effectively putting a freeze on new rules, regulations, and policy changes. While the agency can continue its supervisory and examination duties, this paralysis on new initiatives creates a period of significant regulatory uncertainty for credit unions.

Implications for Credit Unions: Navigating the Limbo

The unprecedented situation at the NCUA presents a complex landscape for credit unions:

• Uncertainty in Planning: Credit unions may face challenges in strategic planning without clarity on future regulatory direction. Initiatives requiring NCUA approval or guidance could be stalled.
• Increased Scrutiny on Existing Rules: With new actions on hold, the focus may intensify on the enforcement and interpretation of existing regulations.
• Advocacy Takes Center Stage: Organizations like DCUC and America’s Credit Unions will likely ramp up their advocacy efforts to ensure the new appointments to the NCUA board are individuals who understand and support the credit union model and the importance of an independent regulator.
• Potential for Political Influence: Harper’s accusations raise concerns about the potential for political motivations to influence the NCUA’s direction, which could have long-term implications for the industry’s operating environment.

The coming weeks will be critical in determining the future of the NCUA and its relationship with the credit union industry. The swift appointment of qualified and impartial board members will be paramount in restoring stability and ensuring the agency can effectively fulfill its mission of protecting credit union members and promoting a sound and vibrant credit union system. However, the lingering questions raised by Harper and Otsuka’s forceful departure cast a shadow of uncertainty over the path forward.