NCUA In Transition: “Wrongful” Firings Stymie Credit Union Watchdog

While the firing of Todd Harper and Tanya Otsuka is understandably sending a jolt through the credit union system, it is not surprising. Since his first days in office, President Trump has openly questioned the constitutionality of independent agencies, and the NCUA was not going to avoid this scrutiny. 

Henry Meier, Esq., provides his thoughts:

While the firing of Todd Harper and Tanya Otsuka is understandably sending a jolt through the credit union system, it is not surprising. Since his first days in office, President Trump has openly questioned the constitutionality of independent agencies and the NCUA was not going to avoid this scrutiny. As a legal debating point, a strong argument can be made that the Supreme Court will overturn Supreme Court precedent in this area and hold that independent agencies such as the NCUA are unconstitutional. The public’s response to the policy implications of this shift remain to be seen. Just as there is no Republican or Democratic way of filling a pothole, is there really a Democratic or Republican way to ensure the safety and soundness of a member’s savings? 

While the actions taken against Harper and Otsuka are a big deal within the industry, they may be a lead up to the president seeking to place the Federal Reserve Board under the direct control of the Executive Branch. Even as he has moved aggressively against most other independent agencies, he has moved more cautiously in relation to the Federal Reserve. For instance, in the Executive Order taking control of independent agencies, the monetary functions of the Federal Reserve Board were exempted. The ultimate question is if the President will seek to exercise direct oversight over interest rates and the implementation of monetary policy.

On a practical level, assuming that they are both replaced with Republican appointees, credit unions may quickly see the consequences of this decision in the form of a dramatically reduced emphasis on separate consumer protection examinations, much more flexibility to charge overdraft fees, and perhaps even a greater emphasis on making the examination process less burdensome for credit unions. Conversely, it is, of course, possible that the two appointees will not advocate forcefully for the NCUA to remain a standalone agency. 

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