The removal today of both NCUA Board members before the completion of their term is definitely uncharted territory.  But President Trump has proven he is not afraid to plow new ground to get his regulatory agenda in place.  He just a few weeks ago did the exact same thing at the Federal Trade Commission (FTC).

That FTC case will be fought out in court because the removed board members are challenging its legality, as this one may well be if Mr. Harper and Ms. Otsuka have the will and the resources behind them to fight it.

Who will win?  Time will tell, but it reinforces the prediction I made in recent presentations and Client Updates that there is going to be considerably less activist regulation from NCUA upcoming over the next few years.

At the very least the board makeup will be in a state of flux for the foreseeable future and it’s hard to enact new regulations with the validity of board actions in question.

It has always been my understanding historically that a President cannot remove a Senate confirmed board member before his or her term is up.  That is what makes these boards independent.

That said, I was also always under the understanding that a sitting board member could not be renominated for a second term until the Biden administration reversed established precedent and renominated Mr. Harper for a second successive term a few years ago.

So long established precedents have fallen now under both the Biden and Trump administrations.

Will this make the regulatory agencies like NCUA less independent?  Probably.  Is that a good thing or a bad thing?  I guess the last two presidents have proven that they want the regulatory agencies carrying the philosophy of the White House.

Elections matter and regulatory actions are impacted by those elections.  Time will tell what approach wins out.  But these are unprecedented actions that both Biden and Trump took.  The results, if they are sustained in court or if they are not, will unquestionably impact regulatory actions and the regulatory environment going forward.

Is this a precursor to regulatory agency consolidation?  Could this make it easier to consolidate NCUA into Treasury or FFIC?  Possibly.  However, Treasury Secretary Bessent has stated publicly that he is not for financial regulatory agency consolidation.  His mind, of course, could be changed by the President or by the DOGE Commission.

Consolidation would require an act of Congress since NCUA is a statutorily created agency.  So, the thing to watch there is the “big beautiful bill” Congress is working on at President Trump’s urging.  If consolidation is not included, it will likely not happen.  If it is, then the Republican majority will almost certainly support the President in approving the bill.

We have predicted the odds of consolidating the agency into Treasure are at 50-50 for several months and the odds for the loss of the tax exemption at 70-30 against.  We hold to those odds at this time.

Be watching for future Client Updates as we learn more behind the scenes on what is going on at NCUA

Until next time.

Dennis Dollar