THE CHAIRMAN TODD HARPER ERA BEGINS TODAY AT NCUA

As we have all expected since election day 2020 resulted in a President Joe Biden, the NCUA Board was going to see a chairmanship change shortly after the Biden inauguration.

Today was that day as Democrat Board Member Todd Harper was designated as NCUA Chairman effective immediately.

This is the normal course of business when a presidential administration changes and a different party assumes the White House.  One of the first and easiest things for a new president to do is to replace all agency heads from the other party and designate someone already serving on that agency’s board to assume the chairmanship.

This action is called a chairmanship designation and, as long as the individual designated is already a presidentially nominated and Senate confirmed member of the board, it does not require another nomination or senatorial confirmation.  It can take place with the stroke of a pen.

That action occurred today, only five days after President Biden was inaugurated.

Two things are obvious by this quick action.

One, Todd Harper has very strong Democrat credentials and was able to mobilize his political contacts within the party to get NCUA moved up the list of chairmanship designations so that it happened within a matter of days.

(For comparison sake, I was designated as Acting Chairman at NCUA on February 6, 2001 by President Bush – seventeen days after he was sworn in.  I thought I did pretty well with all of my Republican contacts getting designated so quickly by an incoming president of my party, but I have to take my hat off to Chairman Harper that he was able to get his designation so quickly.  Again, his Democrat bona fides are obviously quite strong.)

Two.  The political dynamic is much more decisive today in the desire of one party to exorcise agency heads from the other party following an election.

Obviously a sign of the times, but President Biden was quick to take every action possible to remove Trump appointees and reverse Trump policies – just as Trump did in 2017 following his inauguration to replace President Obama.

We are in a very divisive political environment.  The quick action to try to maximize the new administration’s impact over federal agencies – even independent ones like NCUA – is an indicator that every four years the political divisiveness is growing more and more in this country.

Sad.  But it is a reality.

And Chairman Harper was the beneficiary of that quick action by the Biden administration to designate a new Democrat chairman at NCUA within the first five days of the new administration.

Again, this is a credit to the political skills and contacts of now Chairman Harper.  Knowing how difficult presidential appointments are to achieve, I must take my hat off to his political acumen.

STILL A DIVIDED NCUA BOARD DYNAMIC

What will be interesting to see in the months ahead is how Democrat Chairman Harper gets along with the two Republican board members he will be serving alongside.

Former Republican Chairman Rodney Hood now becomes Board Member Rodney Hood.  Republican Vice-Chairman Kyle Hauptman will remain as the board’s vice-chairman unless he is replaced by a majority vote of the NCUA Board that is controlled by him and fellow Republican Hood.  It is unlikely that will happen.

So, Chairman Harper has the gavel and the increased gravitas that comes with being chairman.  He is the official spokesman for the agency.  He gets to fill the congressional and public affairs positions representing the agency on Capitol Hill and to the media with his appointees.

The chairman also supervises the NCUA executive staff on behalf of the Board.  And, perhaps most importantly, he will have somewhat control over what policy items are placed on the NCUA Board agenda and will chair the board meetings.

I say “somewhat” when I discuss the chairman’s authority over the agenda.  The reason is that he can put anything on the agenda he desires.  But – and this is a big “but” – he must have two votes to get anything he puts on the agenda approved.

Therefore, even though the chairman can put anything he wants on the agenda, without a second vote he is only setting himself up to be able to publicly debate the issue and then have the proposal die for lack of a second.

And, to add to the challenge, there is a little known (but very real) provision in the board’s delegation of authorities that allows two board members to put anything on the agenda that they agree should be added – whether or not the chairman is supportive or if he does not agree to put it on the agenda himself.

This is what will be fascinating to watch over the next few months while Chairman Harper is presiding over a board with a majority control by members of the other political party.

While most NCUA Board actions are fact-based and not philosophical in nature, there are about twenty percent that are very much philosophical.

Can Chairman Harper persuade one of the two Republicans on the board to support him on some of his initiatives?  What type of compromises may be required to bring about that bipartisan support?

Will Board Members Hood and Hauptman stay united on their issues?  Will they compromise with Chairman Harper to get him to put some of those issues on the agenda with unanimous support?  Will Chairman Harper compromise to make that happen?

Will the two Republicans override the Democrat Chairman and put issues on the agenda that he does not support?  Will we have 3-0 votes through compromise or have month after month of ongoing 2-1 votes with the board overruling the chairman?

And how does Chairman Harper’s term expiring in April 2021 affect that dynamic?  Will he remain as a holdover after his term expires, thus making him somewhat of a lame duck with a board majority from the other party that has terms running to 2023 (Hood) and 2025 (Hauptman)?

It is going to be very telling to watch.

A number of Hood-Hauptman proposals were passed by the board, with Harper voting no, during the December 2020 and the January 2021 board meetings.   Will Hood and Hauptman continue to push them?

Can they get Harper on board?  Will they override him by putting them on the agenda and outvoting him – even though he is the spokesman for the agency that will have to defend those actions before Congress and the public.

One thing is certain.  What is happening at the board meetings in coming months will reflect what is happening much more dramatically behind the scenes in setting the board’s agenda.

If there is compromise and 3-0 votes at the board meetings, that means Harper, Hood and Hauptman are compromising and allowing give-and-take to bring them together.  The agenda battles will be minor if there is true working together between the three H’s that make up the NCUA Board.

If we begin to see more and more 2-1 votes at board meetings with Harper on the losing side, that means the behind-the-scenes battles over the agenda are brutal.  Compromise and civility will have given way to pure power plays over policy that could give rise to dysfunction when the board constantly overrides the chairman to the point where he is a mere figurehead who reigns but does not rule.

This serves no one well.   Not Chairman Harper.  Not the NCUA Board.  Not NCUA.  And certainly not the credit unions they regulate and insure that need strong leadership at NCUA as they face a challenging and competitive marketplace dramatically impacted by a worldwide pandemic and resulting economic disruption.

It is my sincere hope that Chairman Harper, Vice-Chairman Hauptman and Board Member Hood find a way to work together to create a regulatory environment that is safe and sound but also flexible enough to allow their regulated credit unions to adjust to a marketplace and economy that is incredibly challenging today.

This can be done.  During my first year as NCUA Chairman in 2001 I served as a Republican chairman with two Democrats as my board colleagues.  I was outnumbered if you look solely at partisan affiliation.

However, with good leadership and a willingness to work with – and not against – my colleagues to find areas of agreement and good policy, we were able to pass the RegFlex regulation, initiate public budget briefings for the first time in agency history and repeal the CRA-Lite CAP regulation before it went into effect from its enactment two years before.

There are some excellent policy proposals that are awaiting final action at NCUA.  And there are some other areas that need attention as well.

Hopefully, partisanship will give way to partnership with the three NCUA Board members.  The key will be accommodation, compromise, and give-and-take.  It will have to come both from Chairman Harper and his two colleagues.

I will be optimistic until actions tell me otherwise.  But this is going to be a time of either great achievement or great disappointment at NCUA with the current board lineup.  I am hoping for the former.  But as is the case in any contest, it is up the players and how they approach it.

THIS SCENARIO IS A NCUA STAFFER’S WORST NIGHTMARE

Put yourself in the place of a NCUA career executive staffer today.

Your supervisor is now the new Democrat Chairman Todd Harper who has voted against a very high percentage of the most recent policy decisions of the agency under the previous Republican Chairman who supervised you until today.

The Chairman supervises you on a day-to-day basis as you work to implement and further the very policies that he voted against.

The Board that the Democrat Chairman supervises you on behalf of consists of a majority from the Republican party that does not share, at least in the months since Kyle Hauptman has joined Rodney Hood on the board, Chairman Harper’s philosophical direction for the agency.

The Board, with two votes, can change your position through an agency realignment – even though the Chairman will be supervising you in the new position you could get assigned to by the board.

When the chairmanship and the board majority are in the same philosophical or party hands, a NCUA executive staffer has no problem playing to the wishes of the Chairman and board majority.

But, when they are in different hands, it is a much tougher play.

It is going to be a tough straddling act for many on the senior executive career staff at NCUA – some great folks who I hold in very high regard.

They will, by necessity, have to work with and daily further the wishes of a Democrat Chairman.  Yet, they can count to two and realize that the Republican Board can outvote the Democrat Chairman any time they cannot work things out.

Tough situation indeed.  My hope is that the staff becomes a force for driving compromise and give-and-take among their two vital audiences – the Chairman and the Board majority.

But, again, even if staff pushes for a middle ground (which they do not always do because of a tendency of regulators to default to a position of more regulation, not less), the decision of whether they work together will be made by the Chairman and his two Board colleagues.

Stay tuned.  It is going to be fascinating to watch.

Until next time.