Editor’s Note: This column was first published at www.chipfilson.com and appears here with permission.
By Chip Filson
By a 6-3 vote, the conservative majority of the Supreme Court ruled the President had authority to fire members of independent agency boards established by Congress to be partially shielded from total presidential direction.
The decision overturned almost 100 years of precedent. It means President Trump’s firing of NCUA board members Todd Harper and Tanya Otsuka will be upheld by lower courts where the case is on hold. Trump may then choose to select two new board members to join his recently nominated Chair, John Crews, a Republican working in the Treasury Department. Or, he could leave the positions vacant.
This event and its consequences will be greeted with mixed reactions by credit union supporters. But history can also provide us perspective to the current moment. And more importantly, point the way forward.
Not the First Time for President’s Firing NCUA Leadership
On March 10, 1976, Administrator Herman Nickerson, Jr. of the National Credit Union Administration testified before the Senate Banking Subcommittee on Financial Institutions, chaired by Senator Thomas McIntyre, regarding S. 1475. The hearing focused on proposals to restructure the NCUA from a single-administrator agency to a multi-member board.
Nickerson testified that a single-administrator structure left the agency highly vulnerable to political pressure, stating that under his “day-to-day” tenure “you don’t know whether you’re going to take a position that would be your last day in office or not.” He argued that a three-person board would provide better long-term stability and continuity for regulating federal credit unions.
In the hearing Nickerson was asked about his vulnerability to being fired, and Sen. McIntyre confidently responded by assuring Nickerson that “it would never happen.”
Merely two hours after the hearing concluded, President Gerald Ford summoned Nickerson to the White House and fired him without cause.
March 19, 1976, Office of the White House Press Secretary
NOTICE TO THE PRESS
The President has accepted the resignation of Herman Nickerson, Jr., as Administrator of the National Credit Union effective upon the appointment and qualification of a successor. He was appointed on Sept. 15, 1970. There is no successor to announce at this time.
Three-Person NCUA Board Legislation Approved
Sen. McIntyre was reportedly shocked by the firing. He used the incident as a stark, real-time example on the Senate floor to successfully argue that the NCUA must be restructured into a multi-member independent board to protect its leadership from sudden political retaliation.
This hearing served as a major catalyst in the legislative shift that eventually established a multi-member, bipartisan board to govern the agency.
(Sources: Rosemary Hardiman, then a reporter for CUIS, Gerald Ford Library, AI search for hearing summary)
Today’s Response and the Future of Credit Unions
The three person, independent NCUA board was intended to moderate the extreme policy fluctuations that would be caused if every president could choose to appoint new regulators who would then implement whatever policy priorities he wanted.
In contrast, the theory supporting independent agency status was to ensure experienced, knowledgeable board members would be appointed to protect and promote the public interest not partisan political agendas.
Only two NCUA board members could be from the same party. In theory this assured some public debate or even opposition in policy and agency oversight.
The theory worked for NCUA’s first two chairs, Larry Connell and Ed Callahan. Both were experienced state regulators with direct knowledge of credit unions. While other board appointments would appear more like political sinecures, agency leadership was in expert hands.
The Assumption Ends
The assumptions of industry expertise and apolitical chairs ended with the appointment of Sen. Roger Jepsen (defeated in a re-election effort) to succeed Callahan in 1985. Since then, rarely have NCUA chairs had regulatory or credit union experience, with the exception of JoAnn Johnson from Iowa.
Johnson had been superintendent of credit unions for the state and joined the NCUA board in 2002, becoming chair from 2004-2008. After returning to Iowa, she was again superintendent of Iowa’s credit unions until her retirement in May 2017.
The vast majority of NCUA board appointments have had little to no credit union affiliation. NCUA’s board appointments have been filled with former congressional or agency staff members seeking continued federal employment. Some have had strong professional credentials (Mark McWatters), but virtually none had prior credit union associations or knowledge.
Credit unions have long abandoned efforts, individually and as a system, to identify and promote knowledgeable individuals for NCUA positions.
Rewarding Loyalists
Both Democratic and Republican administrations have used NCUA board seats to reward political loyalists versus those with credit union credentials.
In practice, the theory of the independent agency with expert leadership acting in the best interests of credit union members has rarely happened Instead, NCUA board appointments have become a backwater for those seeking the prestige, or sometimes the spoils of a political appointment.
The Future of Federal Credit Union Regulation
Just as in 1976, there will be a reaction to the current political excesses and NCUA’s increasing impotence shaping the future of the cooperative system.
The agency may become a department with a single administrator within Treasury, like the OCC, and the NCUSIF merged with the FDIC.
The future may be a more cooperative and innovative state support system. NCUA may be caught up in a sweeping federal government reform post-election or post Trump.
Chip Filson is a former executive with NCUA and a co-founder of Callahan & Associates. He can be reached at ChipFilson.com.
