There will certainly be quite a few Client Updates on the removal yesterday of both NCUA Board Members Todd Harper and Tanya Otsuka.  There is a lot going on regarding this action, and we will continue to keep you updated on what you need to know that we gather from our background channels in the industry, in Washington and in Alexandria at NCUA headquarters.

The primary subject for today’s Client Update is to try to answer the question of what will be the impact on the firings of Mr. Harper and Ms. Otsuka on credit unions with issues pending before NCUA such as charter changes, field of membership expansions, mergers, exam resolutions, etc.

So let me give you some background that should help with these questions about how this will impact my credit union.

First of all, I have some experience with the one-member board question.

While I was serving as NCUA Chairman from 2001-2004, at the end of December 2001 President George W. Bush terminated Democrat Board Member Yolanda Wheat’s service on the NCUA Board. I was NCUA Chairman at the time and, interestingly from a timing standpoint, the dismissal of Board Member Wheat coincided with the expiration of the recess appointment of the other NCUA Board Member at that time who was Democrat Geoff Bacino.

So, just as with the action by President Trump yesterday, the result was two NCUA Board Members leaving the board at the same time.  That left me as a one-member board while serving as NCUA Chairman.

We did not have a crystal ball in early 2002 but we recognized that, although unprecedented at the time, this could happen again,

So, to establish a precedent, I took several actions while serving as chairman of the one-person NCUA Board to create a precedent that – if this ever happened again for whatever reason – the agency would not be stymied in doing its job and could function with a one-member board until the three-member board was reestablished with future appointments.

I held a formal NCUA Board meeting while serving as the one-member board, took administrative and operational action including voting on agency matters, signed documents on behalf of the board, took personnel actions, oversaw the staff and made sure the agency fully functioned in its role as regulator of all federal credit unions and the insurer of all federally insured credit unions.

I did not feel then, and I do not feel now, that Congress – when establishing these agencies – wanted them to shut down because two board seats are vacant whether it be by dismissal, resignation, retirement, death or natural disaster.

The records are therefore in place at NCUA from 2002 that clearly establish the precedent that the Chairman can act as the board.  You just cannot have a federal safety and soundness agency unable to function.

All delegations of authority to the various departments remained in place.  Field of membership expansions were approved.  Mergers were approved.  Prohibition orders were issued.  Guidance was issued.  Exams took place.  Basically, we wanted to establish a precedent for times such as these today that the Chairman can act and the agency can fully function.

The only thing I did not do as the one-member board was to actually formally approve a regulation, although I believe that we had the authority to do so but that there was no pending regulation that required action during that two-month period.

I personally am very confident that the NCUA Chairman could act to approve or rescind a regulation if he or she chose to do so while serving as the one-member board.  We just didn’t have anything pending that could not wait a few months until a new board was appointed and sworn in.

So I chose not to set the precedent of approving a regulation, although all legal research and indications I received at the time were that I had the authority to do so.

I wanted to make sure that every other function of the Chairman, the Board and the agency could be handled by the chairman acting in the capacity of the NCUA Board in a one-member situation if this very situation ever happened again.

I feel certain that Chairman Hauptman and the NCUA staff are aware of this clear precedent and will find it helpful now that this one-member board scenario has occurred again here in 2025.  We intentionally and specifically took action to establish the precedent over twenty years ago because, well, you never know when a one-member board will occur again.

With that precedent in place, as far as credit unions with issues pending before NCUA are concerned, any such actions as exam resolutions, supervisory appeals, charter applications, field of membership expansions or mergers should not be impacted in the least by a one-member board.

All of the delegated authority to the NCUA staff and regional offices remain in place no matter who is on the board.  None of these issues as a normal course of business go before the board anyway.  They are administrative in nature and will continue unabated regardless of the board situation.

The only potential impact could be on actual regulatory actions, but I think that authority is inherent as well in a one-member board situation.  Chairman Hauptman may choose to enact regulations and set a precedent there for future situations.  Time will tell if he chooses to do so and if two new NCUA Board Members are nominated in short order by President Trump or if Chairman Hauptman serves as a one-member board for an extended period of time.

I set the precedent for all of his other authorities during this period of time and for as long as it lasts with a one-member board.  He is far from stymied.  In fact, his authority as the NCUA Board – even as the sole member – is very clear from precedent established over twenty years ago.

Some have asked about the impact of these firings on the “independence” of federal regulatory agencies like NCUA.  In reality, they have trended less and less independent over recent years.

For example, even though the law speaks to NCUA Board Members not being able to serve successive terms, President Biden appointed Todd Harper to a second successive term during his administration.  The Senate confirmed Mr. Harper even though the law was quite clear about board members being limited to one term and having to sit out before he or she could be nominated to another term as happened with Board Members Rodney Hood and Debbie Matz in the past.

So “independence” is obviously in the eyes of the beholder.  And each of the past two administrations have taken considerable action – even some that critics have claimed go beyond what the law intended to allow – that have made independent agencies like NCUA, FDIC, FTC, FHFB and others much more led by appointees in line with the administration’s regulatory philosophy.

Both the Biden and Trump administrations have made it clear that they expect these agencies to follow the regulatory philosophy of the current administration in place at the time.  It can be argued whether this is good policy or what Congress intended when it created the agencies, but it seems to be the approach by recent administrations to make these regulatory agencies more reflective of the administration’s regulatory philosophy.

It certainly shows that elections matter when it comes to regulation.

Until next time.

Dennis Dollar