NCUA CHAIRMAN TODD HARPER CONFIRMED BY THE US SENATE FOR AN UNPRECEDENTED SECOND TERM ON THE NCUA BOARD

NCUA Chairman Todd Harper was confirmed by the United States Senate on a 59-40 vote yesterday, making him the first NCUA Board member in history to be nominated and confirmed to back-to-back terms on the three-member board.

While some in the Senate had claimed such a nomination to successive terms was not only unprecedented but actually disallowed under the current Federal Credit Union Act, you must give political credit to Chairman Harper who was able to convince the Biden White House and the Democrat majority in the Senate that the fact he did not get to serve an entire six-year term in his previous tenure made him eligible to serve again with a successive nomination to another term.

Interestingly, the reason he did not serve a full term previously is that former NCUA Chair Debbie Matz served part of the term as a holdover before she resigned from the Board – after her actual term expired. No NCUA Board Member that we can find in history served the entirety of a six-year term because, frankly, the nomination and confirmation process is just not efficient enough to get new board members approved before the end of the term they will be filling.

So, there are always holdovers. And, with this precedent, anyone nominated and confirmed to the NCUA Board that gets less than six years in their term is now eligible for renomination and confirmation.

In fact, because Chairman Harper’s term actually expired in April 2021, he is now getting again less than a full six-year term with his confirmation in June 2022. Therefore, by this precedent, a case could be made that he may be eligible to be renominated again in 2027 if President Biden is re-elected.

Likewise, current Vice-Chairman Kyle Hauptman and Board Member Rodney Hood were nominated and confirmed to terms that had some of the time expired as well. Both are, by this precedent, eligible for renomination if a Republican wins the White House in 2024.

But, the precedent notwithstanding and despite some concerns in the Senate about the impact of NCUA Board reappointments on the independence of the agency, you must give credit to the political acumen and Capitol Hill connections of Chairman Harper to have pulled off this renomination and confirmation.

His 25-plus years in Washington have left him well connected. And, as a political observer who has himself been nominated and confirmed to the NCUA Board by a President of one party (President Clinton) and been designated as NCUA Chairman by the President of another party (President George W. Bush), I know how many political hurdles must be cleared to get a presidential nomination and Senate confirmation.

It cannot be done unless you have good political instincts, great contacts, and an influential support base. Whether you agree with Chairman Harper’s approach on NCUA issues or not, he has proven himself to be a master political operative and will end up perhaps serving as the longest member of the NCUA Board in history.

WHAT TO EXPECT FROM THE NCUA BOARD NOW THAT CHAIRMAN HARPER HAS A NEW SIX-YEAR TERM TO SERVE

The answer to what to expect over the next couple of years from newly confirmed Chairman Harper will actually be answered by his two colleagues on the NCUA Board and what happens at the polls this November.

As all of our Client Update readers know, the NCUA Board is an exception to the rule at most federal regulatory agencies in the second year of a presidential administration.

Whereas most boards and commissions now have a majority of Democrats serving who were nominated by President Biden and confirmed by the Democrat majority in the Senate, President Trump and the Republicans filled two slots during the time the GOP controlled the White House and Senate.

With six-year terms that overlap presidential administrations, that gives a Republican majority on the NCUA Board at least until August 2023.  In August 2023, Board Member Rodney Hood’s seat on the board comes up for renomination. In August 2025, Vice Chairman Kyle Hauptman’s term will expire. Until those two seats are filled with a Democrat in one of them, Chairman Harper will have to sell at least one of his Republican colleagues to support any regulatory proposal, agency action, budget allocation, premium charge, or strategic agency direction that he wants to see.

Thus, he will have to compromise to get a second vote. At least he will have to compromise until August 2023 when President Biden could nominate another Democrat to join Chairman Harper and create a new Democrat majority on the NCUA Board.

That’s where the election in November comes in. If the Democrats maintain control of the Senate that will have the role of confirming any Biden nomination to the NCUA Board in 2023, that nominee will certainly come early next fall and receive quick confirmation in order to give Chairman Harper the Democrat majority he would like in order to really make his mark on the agency.

However, if the Republicans take back control of the Senate, they could refuse to confirm a Biden nominee to replace Rodney Hood in 2023. In that event, unless he leaves for another opportunity, Board Member Hood could remain as a holdover member of the NCUA Board through the 2024 elections.

So, the direction of NCUA as an agency will be an interesting dynamic to watch over the next eighteen months.

Will a renominated and confirmed Chairman Harper be able to drive more regulatory and budgetary policy at NCUA now that he has another term in front of him?

Will he be able to get a second vote on more activist regulatory proposals, such as the not-well-received succession planning proposal that would give NCUA a role in the hiring and retention plans of credit unions in their executive ranks where Vice-Chairman Hauptman joined Chairman Harper in outvoting Board Member Hood 2-1?

Or will Hauptman and Hood refuse to provide a second vote for some of Chairman Harper’s most often mentioned priorities such as a NCUSIF premium, an expanded consumer protection division within NCUA, increased agency staffing, a climate change regulatory priority, and more robust cyber security rules?

At the very least, may the Hauptman-Hood duo force Chairman Harper to revise and downsize some of those priorities?

Time will tell.

There is no doubt from their public comments that Chairman Harper is much more of a regulatory activist than are the much more free-market based philosophies of Vice-Chairman Hauptman and Board Member Hood.  However, the power of the gavel and control of the board agenda – which are held by Chairman Harper – are a strong starting point to dictate issues and approach.

It will be interesting to watch how the three NCUA board members interact and interrelate on policy issues. The Harper renomination and confirmation certainly strengthens his hand in promoting his agenda.

Expect to see Chairman Harper pushing hard at budget time for a larger NCUA budget with additional staffing for consumer protection in hopes of making the consumer protection division of NCUA into a mini-CFPB for credit unions below $10 billion in assets that are not therefore examined by the CFPB itself.

He will also be promoting a NCUSIF premium as he has consistently stated his belief that the equity level in the share insurance fund should be closer to 1.5% than the current equity level that fluctuates around 1.3%. While there have not been sufficient losses to justify such a premium, Chairman Harper has stated his intention to push to strengthen the equity level requirement while “the sun is shining” and credit unions are doing well.

Some type of climate change initiative is almost certain to come from Chairman Harper, whether by rewarding credit unions that go green in their lending or construction projects or potentially punishing those that do not. What a climate change agenda at NCUA might look like depends solely on what kind of second vote the Chairman can negotiate. But expect to hear more about climate change and NCUA under the newly confirmed Chairman Harper.

And, of course, he will be pushing for a much larger and activist agency through an increased budget. Hood kept agency budget increases to a smaller percentage during his recent tenure, and Chairman Harper (then a board member) was very critical that the Hood budget was hamstringing the agency from being able to effectively supervise the credit unions NCUA regulates and insures.

Finally, in the arena he is most likely to get support from one or both of his Republican colleagues because it is an issue that cuts across party lines even though it will bring about a major expansion of agency authority, expect to see a robust cyber security rule with resultant supervisory authority for extensive cyber exams. This could well come during 2022.

We will, as always, keep our eyes on NCUA for you and report through our Client Updates. We try to provide you with the type of “inside baseball” at NCUA that you don’t get from the trade press.

We appreciate the opportunity to work with you.

Until next time.

Dennis Dollar