SENATE BANKING COMMITTEE APPROVES TODD HARPER’S RENOMINATION TO SERVE ON NCUA BOARD, SETTING STAGE FOR EVENTUAL SENATE VOTE AND HIS ABILITY TO REMAIN CHAIRMAN

The Banking Committee of the Unites States Senate approved the renomination of Todd Harper to serve an unprecedented second successive term on the NCUA Board late last week by a vote of 17-7.  Although there was some opposition largely concerned about the precedent that this renomination will set and its impact on the independence of the agency by allowing a presidential administration to renominate for successive terms the board members that follow its regulatory philosophy, this committee vote with all Democrats and a handful of Republicans voting in favor of his renomination seems to indicate the very strong likelihood that Chairman Harper will be confirmed before this year is out and be able to continue serving as NCUA Chairman as long as President Biden is in office.

If he is confirmed, his term will expire in April 2027.  This means that his tenure on the NCUA Board will extend into the third year of the next presidential administration.  Because the President can designate which NCUA Board member will serve as chairman, Mr. Harper will almost certainly remain Chairman Harper as long as President Biden (or any other Democrat) is in the White House.

Were a Republican to win the presidency in 2024, he or she would undoubtedly replace Chairman Harper with another sitting board member from the president’s party in 2025.  But Mr. Harper would still remain on the board until 2027, even if he is no longer Chairman Harper.

Since he came onto the NCUA Board in 2019, if he serves until 2027 after his confirmation, Todd Harper will become the longest serving NCUA Board Member in history – as well as the longest serving Chairman if President Biden or another Democrat is elected for a second term in 2024.

Our prediction is that he will be confirmed.  The 17-7 vote in the committee clearly shows that the NCUA chairmanship and board seat is not high enough priority to the Republican minority on the Senate Banking Committee to make a major issue out of the unprecedented nature of NCUA Board immediate reappointment.   This will almost certainly spill over into the Senate at large where his confirmation is now virtually assured sometime this year.

The reason we say sometime this year is that any one Senator can put a hold on a nomination that the Senator does not support, thus forcing either a cloture vote of 60% or a delay in the confirmation until the Senator drops the hold – probably as part of a deal with another Senator on something that he or she needs a vote to support.

Our sources tell us that there is at least one Republican senator that feels strongly enough about the impact of immediate renomination to the NCUA Board by an incumbent board member to the independence of the agency that he might place a hold on the Harper confirmation vote.

Whether that transpires or not (since Senate holds are internal and not public) will be seen by whether the Banking Committee’s approval receives a fairly quick vote in the full Senate or whether it lingers without a vote for months.

Either way, Chairman Harper seems headed toward confirmation.  Even a hold will eventually be negotiated away in an agreement between members of the Senate.  The Harper renomination is well on its way, and credit unions should expect the Todd Harper administration at NCUA to be in place for several years to come.

As we have said a number of times having known Todd Harper for over 25 years, his political acumen is strong.  He is well credentialed and respected on the Democrat side of the aisle in Congress.  His political chops were certainly on display when he persuaded the Biden administration to renominate him when no NCUA Board Member has ever been immediately renominated that did not serve only a partial term after a previous board member resigned.

Therefore, Chairman Harper is going to be wielding the gavel at NCUA for at least three more years – and maybe more if the President is re-elected or another Democrat is elected.

The independence of the agency argument has not arisen to the level to put his renomination and confirmation in jeopardy.

For those who may not have been following the issue, the concern about independence of the agency is based upon the likelihood that, with this precedent of renomination being established, every NCUA Board Member will begin campaigning for his or her renomination with the sitting administration the closer it comes to the end of the term.  Playing to the favor of the administration that might renominate a Board Member and a Senate that might reconfirm him or her would begin to shift the policy decisions of a NCUA Board Member away from what might be best policy and move that decision making, in hopes of renomination, toward what might be most popular with the White House.

Whether you agree with Chairman Harper’s direction for NCUA and the credit union industry or not, it is now reality that he’s going to be the guy for the foreseeable future.

The only unanswered question is whether there will be a hold placed on the final Senate vote (probable) and when the hold will be negotiated away in return for some other priority (likely before the end of 2022).

And the policy question still remaining is whether the two Republicans on the NCUA Board, Rodney Hood and Kyle Hauptman, are willing to use their two-vote majority to provide a counterbalance to Chairman Harper’s approach when they disagree on policy.

Hood and Hauptman, as we discussed in previous Client Updates, have flexed their muscle to enact three items (the CUSO rule, the service facility rule, and the mortgage servicing rule) after putting them on the NCUA agenda over Chairman Harper’s objections.  They even were able to bring him on board, with some revisions, to the service facility and mortgage servicing rules.

Will Hauptman and Hood stick together on most issues and continue to influence policy even when Chairman Harper is opposed?

Or will a newly confirmed Chairman Harper be able to out-maneuver his two colleagues on issues going forward or split them on various votes he supports?

Once the Senate votes, his being reconfirmed as Chairman will strengthen Harper’s position.  How Hood and Hauptman respond will be truly interesting to watch and, quite frankly, determinative of where the NCUA Board heads in the next two years until Mr. Hood’s term expires and he is replaced by another Democrat appointed by President Biden who is certain to be much more like-minded with Democrat Chairman Harper than is Republican Board Member and former Chairman Hood.

Of course, with the precedent that will be established as Chairman Harper is renominated and reconfirmed for successive terms, Mr. Hood will be subject to renomination himself in 2023.  While that will not happen under President Biden, he could conceivably stay until 2025 as a holdover if the Republicans take back control of the Senate in the 2022 elections and stop another Democrat from being put on the Board.

Then, if a Republican is elected president in 2024, Hood – and even Hauptman – could be renominated and reconfirmed since neither got a full six years of the original term to which they were nominated and confirmed.

The precedent of the Harper renomination and pending confirmation will have an impact in the future – no doubt.

The NCUA Board, while perhaps not important enough for senators to get their hands messy in a confirmation fight, is still important to credit unions.

And the politics of the NCUA Board is going to be something worth watching, and certainly something impactful on credit union industry regulatory policy, over the months and years to come.

But, as of today and Chairman Harper’s vote of confirmation by the Senate Banking Committee to his renomination, he is well on his way to a second consecutive term on the NCUA Board and starting it as the sitting Chairman.

Until next time.

Dennis Dollar