SENATE CONFIRMS PRESIDENT BIDEN’S NOMINATION OF TANYA OTSUKA TO THE NCUA BOARD

Shortly before it adjourned Wednesday evening, the US Senate by a voice vote approved the nomination by President Biden of Tanya Otsuka to the seat in the NCUA Board currently held by Board Member Rodney Hood.  Ms. Otsuka’s six year term will last until August 2029. She, as a fellow Democrat to Chairman Todd Harper, shifts the NCUA Board majority from 2-1 Republican to 2-1 Democrat for the first time since 2017.

Ms. Otsuka is going to be a very influential decisive vote between Chairman Harper as a Democrat and Vice Chairman Kyle Hauptman as a Republican. All accounts are that Ms. Otsuka was Chairman Harper’s choice and that she, as a staffer to Senate Banking Committee Chairman Sherrod Brown (D-OH), is much closer in her regulatory philosophy to Chairman Harper than she is to Vice Chairman Hauptman – although the two are reported to know each other from Mr. Hauptman’s time as a staffer to Senator Tom Cotton (R-AR).

A real interesting dynamic to watch will be whether Chairman Harper, with a solid like minded Democrat second vote, will accommodate Mr. Hauptman and seek his views in regulatory matters or whether he will push forward with his own views and Ms. Otsuka’s vote in keeping with the old NCUA three-person vote joke – How many times does 2 go into 1 on a 3 member board. The answer – as many times as it wants.

One of the telltale signs of whether Mr. Hauptman will be a policy player or a relatively ignored policy outlier will be whether he remains as Vice-Chairman once Chairman Harper has a Democrat board majority. Vice-Chairman Hauptman gained the Vice-Chairmanship with the support of fellow Republican Rodney Hood during Mr. Hood’s NCUA Chairmanship. And it has remained in place even after Chairman Harper took the gavel because the two vote Republican majority of Hood and Harper was still in place.

That dynamic has now changed with the Senate confirmation of Ms. Otsuka. After some paperwork is finalized, she should be sworn in before December comes to an end.

Will she get Harper’s vote to become Vice-Chair or will the two Democrats allow Mr. Hauptman to remain Vice-Chairman as a show of bipartisanship. Will be very telling to watch.

One thing is for sure. The Rodney Hood era on the Board at NCUA is now officially over. He has been one of, if not the single most effective NCUA Board Member and Chairmen of the last twenty years. His legacy has been and, hopefully, will continue to be significant. The unanswered question is whether Chairman Harper, with Ms. Otsuka as a second, will begin to dismantle some of the Hood initiatives that Mr. Harper did not support.

Some background from the Senate confirmation of Ms. Otsuka. One more interesting piece of inside baseball we can provide you that we thought you might find fascinating and certainly speaks to the philosophy of Ms. Otsuka as she comes on the NCUA Board.

Her nomination had been the subject of a Senate hold by Senator Tommy Tuberville (R-AL). No, she wasn’t a military general included in Senator Tuberville’s earlier holds that he relinquished a few weeks ago over the military’s policy of paying for travel of service women at a base in a state with more restrictive abortion laws to a state where the abortion laws are less restrictive in this post-Dobbs decision era.

Senator Tuberville’s hold of Ms. Otsuka had nothing to do with the abortion issue or military policy. He wanted Spencer Bachus, a fellow Alabama Republican and former Chairman of the House Financial Services Committee, confirmed to the US Export-Import Bank Board.

Mr. Bachus was being held, according to reports from our sources on the Hill because Senate holds are internal and not publicized unless the Senator chooses to announce them as Senator Tuberville did on his military promotion holds, by action of Senator Elizabeth Warren (D-MA) because he was in her view too conservative and close to the banking and financial services industry – including credit unions.

The stalemate was finally broken Wednesday night when Senator Tuberville dropped his hold on Ms. Otsuka in return for Senator Warren’s drop of her hold on Mr. Bachus.

Just another day of the Senate at work.  One of the few times we see a great deal of compromise is when it’s a matter of getting something done before they break for Christmas. Without the compromise, both Otsuka and Bachus would have had to wait for confirmation until after the first of the year without any urgency to break the deadlock.

Regardless, this background story shows you who Ms. Otsuka’s primary supporters were – Chairman Todd Harper, Senate Banking Committee Chairman Sherrod Brown and Senator Elizabeth Warren.  That is a pretty good initial indicator of where her regulatory philosophy lies.

That said, she will now be a Board Member – and perhaps will become the Vice-Chair – of an independent federal agency. While she is a Democrat appointee, she is now a free agent to vote as she deems appropriate. Once on the NCUA Board as a presidentially nominated and Senate confirmed member, any Board Member can vote as he or she desires.

If she chooses to be a loyal second to whatever Chairman Harper and his staff proposed, she can do so whether anyone likes it or not. Likewise, if she looks at each issue individually and independently, she could be a very influential swing vote that both Mr. Harper and Ms. Hauptman must convince to support their approach on individual issues.

Although Ms. Otsuka is the first NCUA Board Member that I do not personally know or have spoken with to share ideas at their request since I left the NCUA chairmanship in 2004, all reports from my contacts on Capitol Hill and at NCUA are that she has a brilliant mind and loves the intricacy of policy. She is known to do her homework and to be imminently prepared in issues that come before her.

Time will tell if she chooses the route of loyal second to Chairman Harper or an independent voice on the NCUA Board despite her party affiliation.

There have been examples of both in NCUA history. Rick Metsger was a solid second to his fellow Democrat Chair Debbie Matz during their tenure together. JoAnn Johnson was a solid second to me as her Republican colleague and chairman during our tenure together.

However, despite their shared Democrat party affiliation and even regulatory approach, Board Member Yolanda Wheat did not appreciate being expected to fully support Chairman Normal D’Amours agenda during their tenure together. The result was Ms. Wheat being a very independent vote on the NCUA Board.

Same thing happened when Mark McWatters was replaced as Chairman by his fellow Republican Rodney Hood. Although sour grapes for being ousted probably came into play in the McWatters situation, Board Member McWatters was not a loyal and steady second to Chairman Hood. He was a very independent voice and vote on the NCUA Board, sometimes siding with Hood and quite often with Mr. Harper when he was the lone Democrat member of the NCUA Board with McWatters and Hood.

The approach Ms. Otsuka takes will be interesting to watch. My expectation from what we have learned thus far is that she is more likely to be a solid second to Chairman Harper than an independent voice and vote. But she could surprise us.

Hopefully, whichever approach she takes, she will be interested in and will see the value in listening to the credit unions she will help regulate and insure. To be an effective regulator, she cannot shut herself off from the impact of her decisions on the credit unions she regulates and insures. Credit unions, and through them their members, are the most important stakeholders of NCUA and deserve to be heard and their view considered, even if not always agreed with.

The legacy that Ms. Otsuka will leave after her six years on the NCUA Board in 2029 will be determined by the choices she makes on the important questions above.

It will be interesting – and impactful for credit unions – to watch the new NCUA Board of Harper, Hauptman and Otsuka as we bid farewell to the Rodney Hood era at the agency. Best wishes, Chairman Hood. Kudos. You have left a positive mark on NCUA and the safety, soundness and innovative opportunities of the credit union industry.

I shall now exclaim as the reindeer take me out of sight until 2024, Merry Christmas to all and to all – my standard closing:

Until next time.

Dennis Dollar