NCUA’s Harper: Firings laying groundwork for Fed dismissals

He jabbed at credit union trade groups, for “not coming out loudly” to advocate for his and Otsuka’s reinstatement. Republican lawmakers have pushed for multi-member boards to lead some agencies instead of a single head — that idea has been floated for the Consumer Financial Protection Bureau. But officials have “not been rushing to my defense,” Harper said.

The NCUA can continue to handle essential functions, such as conducting examinations, with a one-person board, Harper said. But without a quorum of two members, the board cannot vote to implement any policy changes or approve new enforcement actions.

On Wednesday, the NCUA liquidated Unilever Federal Credit Union, which had $46.6 million in assets. If the same were to occur with a larger credit union, board votes would be needed, Harper said.

“There’s a real question out there, if it requires a board vote, what can happen?” he said. “There might be some institutions where it’s more slowly to get resolved, which could compound the problem over time.” 

Additionally, rulemaking comes to a “grinding halt,” he added.

Amid the firings, the NCUA board has been weighing pressing issues: At a meeting set for May 22, the board planned to discuss a downsizing effort that will see the agency lose “a significant number of staff,” Harper said. Some 220 employees at the 1,200-person agency have accepted voluntary resignation offers, Bloomberg Law reported last week. 

The NCUA had already taken steps to effect a downsizing – which Harper said he voted for in a closed board meeting – when the Department of Government Efficiency set its sights on the agency, Harper said. DOGE met with career staff at the agency, and only briefly with Hauptman, Harper noted.

“How are we going to restructure the agency? What should the normal operating level be set at for the share insurance fund?” he said. “After all, if you have fewer examiners and fewer people, there are going to be fewer exams and there’s going to be greater risk.”

Harper noted there are nine credit unions with CAMELS ratings of 4 and 5 that have more than $500 million in assets, and another 69 credit unions of that same size that have a CAMELS rating of 3, Harper said. CAMELS stands for capital adequacy, asset quality, management, earnings, liquidity and sensitivity to market risk. An ordinal scale — 1 being the best to 5 being the worst — is used by regulators to evaluate a financial institution’s overall condition.  

Cumulatively, that group of credit unions has about $112 billion in assets, and “these are the credit unions we need to spend more time at and look at closely. And we need the eyes there,” Harper said.  

Harper’s “deeply concerned” with the NCUA’s ability to closely supervise those credit unions as the agency is downsized and loses retiring staffers. “That’s my worry,” he said. 

When asked about credit union taxation – given growing calls by bank trade groups to repeal tax exemption for credit unions because it allows credit unions to offer higher purchase prices for bank acquisition targets – Harper said he’s seen “a weakening in the position on [Capitol] Hill,” noting credit union taxation was included in a list of options for funding tax legislation. 

He also referenced a bill passed in Washington state last month that would tax transactions in which a state-chartered credit union acquires a bank.

“You’re seeing sort of some rumblings of this ‘don’t tax my credit union’ starting to break away,” he said. “I see that credit unions are in the most perilous place that they’ve been on the taxation issue in the 25, 26 years that I’ve worked on credit union policy issues.”

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