LAS VEGAS—The firing of two NCUA board members has created great uncertainty for credit unions in both the near term over what the move means for regulations and rulemaking, and the longer term—could NCUA be swept under another regulator, leading to an “existential threat” to cooperative finance in the U.S.?

Those questions were examined during a panel that was hurriedly put together at the NACUSO Reimagine Conference on the same day the firings of Todd Harper and Tanya Otsuka were first reported by the CU Daily here.

The panelists included Zach Pfister, who has worked on the Hill and for CUNA and who is now an attorney with Brownstein Hyatt Farber Schreck, LLP’; John Kolhoff, senior vice president of policy and supervision with NASCUS and the former state CU regulator in Michigan and Texas; Jason Stverak, chief advocacy officer with the Defense CU Council, and Gordon Holzberg, legislative advocacy director with America’s Credit Unions. The discussion was moderated by Brian Lauer of the firm Messick Lauer & Smith.

It should be noted there remains great uncertainty around numerous questions the firings have raised (see related reporting here), and that fears—such as NCUA being merged into another regulator—would require an act of Congress, among other things, to ever happen.

But even with all that, numerous concerns and views were expressed here as credit unions seek answers about their futures.

The Larger Issue

“I think the larger issue is we need to pivot as an industry and not worry about the window dressing of people getting fired or if court cases are going to happen, but this opens the door in our opinion, in my opinion, to the threat we’ve been all thinking about—regulatory consolidation,” said DCUC’s Stverak. “Whether it’s the Project 2025 play book or Elon Musk and DOGE…the threat may be that they just say, ‘We just got rid of two NCUA directors and do we even need you anymore? We could just throw you under an agency over at Treasury.’ My worry is that a former Chase executive or Goldman Sachs executive will become the credit union regulator. That is, frankly, scary, and that’s where I think we need to draw that line in the sand as an industry—to protect a strong and independent NCUA.”

An Existential Threat?

Asked by the CU Daily whether moving NCUA under a Treasury department or the FDIC would be an “existential threat,” Stverak said he believes it would be.

“I think it’s a first step that opens that door to say, ‘OK, why do we need two insurance funds, two sets of regulations, two sets of exam teams,” he said. “Credit unions are different. We’re cooperative and collaborative. I come from an area of the country that would not have electricity were it not for co-ops. We would not have banking services in many parts where I grew up if not for credit unions, and to have someone (regulate CUs) who has lived in the banking world– it’s like you’re trying to combine apples with computer chips.”

NASCUS’ Kohlhoff, stressing he was sharing his personal opinion, observed, “We live in really strange times, so who can say for sure. But I just don’t see (NCUA and the FDIC) being paired. I think there’s going to be enough concern on both sides. Besides, banks don’t want credit unions on their side. I think there’s enough credit unions that are out there in the world that it would be a logistically harder time if we put (them) under one umbrella…I just don’t see it, but we live in weird times.”

‘Hard to Wrap Your Head Around’

Pfister reminded the Trump administration is still within its first 100 days, and added that it’s “hard to wrap your head around (the) announcement. There’s kind of been a conflation of developments in credit union world.”

While credit unions are at a “bit of an existential crossroads here,” he said the industry is also in “good position” on Capitol Hill with strong bipartisan support.

“This only emphasizes the need for that continued boots on the ground advocacy,” he said, pointing to the threats to the credit union tax exemption that have been renewed this year, as well as the attempts to eliminate the CDFI Fund and the Greenhouse Gas Reduction Fund, which has allotted more than $2 billion for CUs to be distributed through Inclusiv.

“Most recently we woke up to the news (Wednesday) that the administration is seemingly probably illegally doing away with two board members, which presents its own challenges,” he said. “The general consensus is they don’t have a quorum, which means that they don’t have the ability to proceed with rulemaking. That may seem like a somewhat positive development on some fronts, but it’s also a double-edged sword because from the proactive sense, where we have an administration that has promoted the idea of regulatory relief, which credit unions have long embraced, we may be at a technical glitch on that front because they may actually not be able to help on that in the future.”

A Question for the Courts

Kolhoff, who has experience working at state regulatory agencies that oversaw banks and credit unions—in Michigan, banks and credit unions were overseen by the same department, while the Texas CU Department is a completely independent unit—said he is still “absorbing” the news coming out of NCUA, adding it is now a question for the courts to decide whether the two NCUA board members can be dismissed.

He reminded that state regulatory agencies are still the prudential regulators for more than 2,000 credit unions, although for those federally insured they still face federal oversight. “Obviously, we’re concerned about the uncertainty this creates,” said Kolhoff, adding that among those uncertain issues is what becomes of rulemaking at the federal level, and what do FCUs do if they want to appeal a CAMELS rating or are seeking an FOM change.

And then there is the uncertainty that all of NCUA’s recent rules enacted under a Democratic board may be reversed, he noted. 

“Regulators don’t like unstable or uncertain times,” he reminded. 

Not a Surprise

DCUC’s Stverak, who authored an op-ed on the firings of the board members that appears in the CU Daily here that calls for NCUA to remain independent, said the moves being made by the Trump administration shouldn’t surprise anyone, as it had signaled all along what its plans were.

The removal of Democrats who were FCC commissioners earlier this year also indicated the administration might do the very same thing at other independent agencies. 

“I am thankful for the team at NCUA. We’re not going to worry about the share insurance fund… We are still going to have a functioning agency.

That said, Stverak is calling on credit unions to come together to defend credit unions and educate Congress about why a separate, independent regulator was created by the Federal Credit Union Act in 1934. He said many congressional staffers—often twenty-somethings whose tenures are short—have no idea what a credit union is. 

Fortunate to be a Presence in DC

America’s Credit Unions’ Holzberg said the firings and the threats to NCUA make clear how fortunate credit unions are to have a strong presence on Capitol Hill, where CUs have “bipartisan relationships, deep relationships with members of Congress with their staff.”

But clouds remain, including the huge budget reconciliation bill working its way through Congress that President Trump is pushing hard. Credit unions remain worried the CU tax exemption or some other threat might be included in what is expected to be an enormous piece of legislation.

What About Regulatory Consolidation?

Among those threats is the sweeping of NCUA into a Treasury agency or even the FDIC. But NASCUS’ Kolhoff tamped down some of those worries, saying it wouldn’t just be credit unions opposed to such a consolidation, but bankers, too.

The reason, he said, drawing on his experience at the state level, has to do with the different demands of the different types of institutions, the differences in numbers of CUs and banks, operating fees, and more. All of that creates a lot of administrative work and likely disagreement over whether costs are being calculated correctly. 

In Texas, he said, the separate bank and credit union departments kept things “much cleaner and greener.” He added that a DOGE-like effort in Texas is attempting to push up the sunset date for the Texas CU Department from 2035 to 2031 (Texas requires its credit union law to be renewed) so that it aligns with the sunset date for banks.

At the federal level, a merging of insurance funds would come at a cost to credit unions, where the bank fund’s reserve ratio is set at 2%, vs. the NCUSIF’s 1.3%. The higher premiums charged to CAMELS 2-5 CUs would come at an especially high cost to CUs that just can’t afford it, he cautioned. 

Overall, said Kolhoff, credit unions are just “different animals than banks,” but likely wouldn’t be recognized as such by a bank regulator. 

The Chevron Doctrine

Meanwhile, while the news is all about the firings of the two NCUA board members, Kolhoff noted the Supreme Court decision to overturn its long-held position on Chevron deference—in which courts generally deferred to regulatory agencies—has sent many issues back to states for decisions and rulemakings. 

He noted, for instance, there are approximately 40 bills in 30 states that address interchange, “because they couldn’t get through on the federal side.”

Illinois, for instance, has enacted a new law on interchange.

“I will say this, and it’s my own personal opinion, credit unions are very unique in the lack of homogeneity that we have within the industry,” he said. “There’s not a lot of difference between a bank federal charter in New York and a bank state charter in  California because of the insurance rules…Credit unions have significant differences in their authorities state by state by state, whether it’s field of membership or lending origination.”

He also reiterated NASCUS’ position that the state charter is critical to innovation and experimentation, pointing out that shared branches happened first at the state level, as did derivatives authority.

“If we made everything the same it would be an extreme disservice to consumers across the country.”

The Uncertain Future

Looking at what has taken place politically, Pfister noted there have been ever-wider pendulum swings in Washington over the last 15 years or so, which is why parties that hit the trifecta—control of the White House, Senate and the House—seek to get as much done as they can while they can. Many Republicans, he noted, are well aware another election is less than two years away, and the outcome could swing Congress to the Democrats. There has also been a lot of turnover in Congress, he reminded.

“Even though credit unions have had this long-standing historic sense of support on Capitol Hill, every time you go up there you are meeting with somebody else,” he said. “And if you think there is a learning curve with credit unions, imagine what the learning curve is when you walk in and ask them if they know what a CUSO is.”