ALEXANDRIA, Va.–One month after being fired by President Trump, and several weeks after having filed a lawsuit against the Trump Administration to be returned to their positions, former NCUA board members Todd Harper and Tanya Otsuka spoke with the CU Daily about how they view the prospects of that litigation, what’s happening at the agency, where they think trade groups and certain credit unions have been mistaken, and how they view the fact they have become a part of American history.
Below is a look at some of what was discussed.
The CU Daily: Where do things stand with you now?
Otsuka: I think where we stand is where we have stood from the beginning, which is that I think Congress has set up the NCUA in a board structure to make it an independent agency, because independence is so important to making sure that our financial system is stable and that people are confident in it. From my standpoint, I don’t think much has changed. We both care so deeply about the safety of the financial system and people’s financial well-being, and the independence of the agency is such an important part of that.
Harper: I’m optimistic. The law is on our side. Congress purposely set up a board structure at the NCUA. I believe that the courts will decide in our favor as we move forward through this process As Tanya also said, it’s incredibly important to maintain the independence of our regulators, because when you insert politics into them we know that bad results can happen. Case in point, the savings and loan crisis.
If you look at our lawsuit, in the 1978 amendments that created the board (Congress) took away the right of the president to remove the administrator. We are here for set terms and I intend to finish out serving out my set term.
The CU Daily: Both of you have experience on the Hill—did you ever think you would see such a scenario as what we’re seeing right now?
Otsuka: Not really. I think there’s always been an understanding on both sides of the aisle that boards and commissions with set terms (that) the people that are in those positions serve regardless of administration. They answer to Congress, they work with their counterparts on whatever their respective board or Commission is.
It is unprecedented, legally, practically and, I think, traditionally.
Harper: Certainly, independence has been at the core of the understanding of what financial regulation should be about overall. I know that when we worked as recently as 2008 on what would become the new creation under the Housing and Economic Reform Act, the Federal Housing Finance Agency, there was wide agreement across both parties about what the (statutes related to independence) would require.
For me, it’s a little—no, it’s not just a little, it’s a lot shocking–that we are where we are. But at the same time, too, if you look at what Project 2025 called for, it called for consolidated regulation, and certainly, taking out two members of the NCUA board makes it easier to move to that.
That should cause every credit union concern and it should especially cause credit unions’ lead trade organization to be concerned. They’ve called for a board at CFPB for years and now when they don’t have a board at the NCUA they seem to be sitting on their hands. They can’t have it both ways.
The CU Daily: As the CU Daily reported (here), America’s Credit Unions has indicated that at least for now it plans to remain on the sidelines in this litigation. Are you surprised?
Harper: That is their mistake. I will say Inclusiv has understood the importance of it. Inclusiv has come out loudly, they understand. I think ACU is not serving its members well by coming out and speaking out in favor of our restoration.
The CU Daily: When you were both notified of this decision by the White House, how long was it before you began thinking about taking legal action?
Otsuka: For me it was a bit surreal. I tucked my kids into bed and at some point later that night I checked my e-mail and saw an e-mail from the White House. It occurred to me relatively quickly—again, because I feel so strongly about the importance of independence and the safety of the financial system and people’s confidence in the financial system, that we might we might have to challenge this attempted removal.
Harper: I certainly did start thinking about it immediately. It is not an easy decision to make, to bring the lawsuit. But we have, one, terrific lawyers that made me feel confident. Two, I felt we have the law on our side. And three, it’s important that we stand up for the rule of law and maintain the independence of our institutions.
I’ve spent 25 years-plus working on financial services policy issues. I care deeply about credit unions. I care deeply about this agency as a regulator, which had multiple successes in recent years, including navigating a liquidity crisis, putting in place new cyber security protection rules, and putting in place standards for risk-based capital.
(We reached) most of our decisions in a consensus way in which there were multiple decisions. Congress intended in the (FCU) Act for us to have multiple voices on the board so that we could have those debates and have those considerations. So, for me, ultimately it came down it was the right thing to do.
(For additional details on the lawsuit, go here.
The CU Daily: How long was it before Holwell Schuster approached you about representing you in this case?
Harper: It was within a matter of days. We were certainly talking to them within the week overall.
The CU Daily: NCUA intends to host a board meeting May 22 with one board member. What are your concerns?
Harper: Both of the items on the agenda are informational. One is on the current health of the share insurance fund, how it’s performing, what we’re seeing in terms of both troubled credit unions…We’ve certainly seen a dramatic rise in the amount of CAMELS code threes in recent years.
I think that they can go on with the briefing, but we will be missing having important policy discussions such as, for example, the board is also going to be talking about (the agency’s) downsizing effort and that is an effort that Tanya, Kyle and I negotiated together. People have been selecting which (exit) plan works for them.
There are going to be some key questions that need to be asked about the future of the agency. For example, if you have fewer examiners you’re going to be conducting fewer examinations. If you’re conducting fewer examinations there are greater risks to the Share Insurance Fund. How do we potentially reposition or restructure? Those are going to be important questions that have to be asked and answered and require a board to vote on. A quorum of one person can’t make those decisions, they can only continue on with the essential functions of the agency.
We do need a board. So, ultimately Tanya and I do need to be back, ideally as soon as possible and before the June meeting so that we can start having those discussions. Where do we set the Normal Operating Level given the increased risk? How do we restructure the agency to accomplish the agency’s mission with fewer people? And what is the future of the agency?
Otsuka: They may be going forward with the May board meeting, but the fact that it’s informational and the fact that it’s public doesn’t take away from the fact that Todd and I and the full board should be there to discuss these issues.
I mean the Share Insurance Fund is one of the most important jobs of the NCUA.
We maintain that we should be active participants. Our job is to participate in board meetings regardless of whether they’re just informational or public.
The CU Daily: Are you concerned that NCUA will lack adequate staff as a result of this downsizing?
Otsuka: I’m concerned. We were already a very small agency. We already did a lot with little. There were already staffers who we were doing more than just one job. There was recently an article on the high number of people that are departing the agency and now there are calls for volunteers to take on more work and apply their skills in different ways across the agency until they can figure out how to proceed.
So, I think seemingly based on reporting there is already cause for concern about the amount of staff that are able to carry out the NCUA’s responsibilities.
Harper: I would fully agree with Tanya. We are fairly thinly benched at NCUA. In many places we only have one person who is the expert on the matter and if you lose that subject matter expert, how do you replace that?
Another issue: our federal employee viewpoint survey results…saw tremendous improvement…(but) one area where we always show weakness is ‘My workload is manageable.’ With fewer people it’s going to be less manageable, there’s going to be the greater risk for burnout, and there’s going to be greater risk that we don’t do what we were intended to do.
Otsuka: That’s not to say anything about the staff at the agency. They are very smart and dedicated and talented. But you can’t ask people to do the impossible; there’s only so many hours in the day.
The CU Daily: America’s Credit Unions has sent a letter to OMB in which it outlined some of the rules it would like to see rescinded, such as succession planning and cybersecurity reporting. Does that concern you?
Harper: It doesn’t come as a surprise that America’s Credit Unions wants to cut regulations. Is it a disappointment that they want to? Yes, because quite frankly, on that cyber security rule, for example, 70% of the reports–more than 700–had to deal with third party vendors. Our system is at greater risk without having these rules in place in order for us to know where the holes are so that we can go and fix them.
Secondly, on succession planning, America’s Credit Unions complains all the time about the numbers of credit unions going away and here’s a rule that is specifically in place to help credit unions continue and to plan for their futures. There was just a story the other day about a large credit union that is paying out a large amount of money to its executives to merge into another credit union, because they want to go away.
We must have succession planning. The rule we did is not overly burdensome. It is scaled depending on the size of the institution. What’s more, we had unanimous agreement on that rule.
Otsuka: Issuing regulations is something that is vested in the authority of the NCUA board. I also think regulations, guidance, all of these things that in some ways may be viewed as quote/unquote ‘burdensome.’ There are also plenty of ways in which they are helpful and provide guidance for the industry. I think it cuts both ways. Regardless of which way it cuts, it’s vested in the authority of the board and it benefits from public comment and stakeholder input.
The CU Daily: Following your comments to the Brookings Institution, the CU Daily published an op-ed from a CEO that was very well read in which he pushed back and suggested some of your comments weren’t supportive of credit unions. How do you respond when you hear that kind of criticism?
Harper: I went to the Inclusiv conference on my own dime in Cleveland and I received multiple standing ovations. My father started a credit union and his father started a credit union. Credit unions run in the fabric of my family. I believe deeply in the mission of cooperative credit.
There are those that may be veering away from that mission of cooperative credit with, perhaps, naming stadium deals (that involve spending) millions of dollars? Who gets those box seats? Not the members. There some credit unions that are buying planes to fly their executives. I’m sorry; I’m a federal government employee. I’ve had to fly coach my entire career.
There are some credit unions that are straying away from the mission and part of our job of being a regulator is to be a steward for the industry. I believe deeply and passionately that most credit unions are doing the right things. I see it even in some of our largest credit unions. But there are those that are pushing the envelope and making themselves more and more like banks and part of my job as a regulator is to sound the warning alarm so that people can come back to reality and hopefully focus on what the mission of the system is–to meet the credit and the savings needs of members, especially those of modest means. That’s a quote from the Act.
The CU Daily: If the court upholds the firings, are we in for a future scenario of wild swings of regulation? Say, for example, the next president is a Democrat who fires all the Republican board members?
Harper: You will see wider and wider swings back and forth. Having a stable board with staggered terms expiring every two years allows people to build up institutional knowledge, allows boards to evolve with different people as they come on board. Business likes stability. I don’t care whether you are a credit union or a bank or a grocery store or a car maker–you want to have some stability because you don’t want to have to be widely changing your accounting plans from administration to administration.
The CU Daily: Not to overstate it, but have you ever had a moment to pause and think that you’re participating in American history here, that this is precedent setting, it’s historic?
Otsuka: I don’t know that I have really thought about it in those terms. Look, I’m a I’m a career public servant. I’ve spent most of my time working either at an agency or on the Hill, all of it in the spirit of public service. I view this position and my career—and it sounds cheesy—but as a patriotic duty.
While this decision to stand up for the NCUA’s independence, to stand up for the safety of our financial system was difficult because it requires us to challenge our attempted removal, I think it’s I think it’s the right thing to. Standing up for the rule of law is an inherently American principle.
Harper: I have given some thought as to how historic this is and what it might maintain for the future.
Tanya was let go on the (April) 15th. I didn’t learn until the 17th for sure that I was let go. That following weekend was Easter Sunday and I went to church. While I do believe in God, I’m not overly religious. But the the minister spoke of Dietrich Bonhoeffer, who was a leader in fighting against the Nazi regime and ultimately gave his life in that quest. As I listened to the minister, and I’m not saying that I’m going to certainly die on this, but what I am going to say is that that it hit home for me just how historic this moment is.
It’s not an easy decision to make in terms of I’m going to challenge the United states president. But it was the right decision to make. I’ve gotten nothing but love and support–overwhelming love and support–for doing it because people understand it’s the right thing to do.
