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Does Trump Know NCUA Has Zero Board Members? — Transcript

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0:00This is Mark Trikle with another episode
0:01of With Flying Colors. This is an an
0:03emergency episode on Wednesday the 12th
0:06of August. Why am I doing this? Because
0:10NCUA has zero board members. In history,
0:14NCUA usually
0:1699% of the time has three.
0:19Occasionally, they have two.
0:22They've had one on a couple of
0:24instances, but the most obvious and
0:27telling instance recently was Kyle
0:29Hauptman being the only one after Trump
0:31fired
0:32Otsuka and Harper
0:35what, over a year ago now. I'm going to
0:37walk through what's going on, but
0:40it hasn't really been covered in the
0:42press
0:43uh as to the fact that there are zero.
0:45And that's because I don't think they
0:46quite understand because Congress has
0:49put somebody in, that doesn't mean they
0:52are in. And NCUA has not updated their
0:54website to say that Kyle Hauptman is
0:56gone, even though I have it from good
0:58sources he resigned this week, and he
1:00was sworn in at his new job. So, I don't
1:03know if his commitment was I'll stay
1:05until the Senate nominates Cruise and he
1:08felt it was time to go. I think he left
1:10NCUA and the Trump administration in a
1:12lurch. That's just my take as a former
1:15insider on the outside looking in. I
1:18think it's a bad look. Zero uh is not
1:21good. Fortunately, NCUA has a robust set
1:24of delegations that were in existence
1:27when I was there. Most of those
1:29I believe I know are still in place. And
1:32I'm going to walk through what it means,
1:34what it doesn't mean for NCUA and credit
1:36unions. Now, funny story, uh a lot of
1:39times I can tell when one of my podcasts
1:42get circulated around NCUA cuz the what
1:45do I want to say, the downloads are
1:47vastly higher on some of the ones that
1:49go into inside baseball at NCUA. The
1:52industry likes hearing that, but I can
1:54tell when a couple of my uh subscribers
1:56are NCUA folks and they send it around
1:58to their friends at NCUA cuz there's not
2:01a lot of people at NCUA that understands
2:03how the delegations actually actually
2:04work. There's not a lot of people at
2:06NCUA left, particularly after the
2:09buyouts, that have anything to do with
2:11when there were one board member back in
2:13the uh Dollar administration, of course.
2:15We have the Hauptman era, but I'm going
2:18to jump into what this all means, but a
2:20zero is not a good thing.
2:23So, how do we get here? Over the last
2:25couple of weeks uh over the last week,
2:28um as a reminder, Hauptman's term ended
2:30August 25th. Uh there are 6-year terms
2:33at NCUA that really don't mean anything
2:35now I as long as the
2:38um legal actions recently about the
2:41firings at other agencies and Harper and
2:44Ostrowski, if Harper and Ostrowski don't
2:45win uh their appeal, uh we're going to
2:48be in an era when a president comes in,
2:50they fire the ones that are there, and
2:51they bring others in. But, having zero,
2:54the act says the board will do X, Y, and
2:57Z, and staff can't do that. So, there
2:59are things
3:01that theoretically cannot be done while
3:03there are zero board members, and and
3:05I'll walk through that. But, so,
3:07Hauptman's term expired in August of
3:082025,
3:10a year later, August 7th of 2026, just
3:14last last week, uh the Senate confirms
3:17uh John Cruise to take over
3:19presumably as chair, right?
3:21Cuz he's going to be the only one, and
3:23the deal cut was Hauptman said he would
3:24stay until Cruise was in.
3:26To me, that's kind of like the uh the
3:28Seattle Seahawks
3:30uh when they could have beaten the
3:32Patriots, and they could have uh they
3:34could have run the ball from the 2-yard
3:36line, but they decided to get cute and
3:37throw a pass, and it got intercepted,
3:39and they ended up losing the game in the
3:40Super Bowl. To me, that's what
3:42Hauptman's uh
3:43deciding to leave on a Saturday really
3:45is. Now, will the agencies survive it?
3:48Probably. Will press get attentions of
3:51bankers to show that this is a little
3:53bit of uh what they always accused
3:55NCUA's of as the Keystone Cops. I really
3:58wish Hauptman had sucked it up and
4:00stayed instead of getting over to his
4:02newer job where he's making a few
4:04dollars more. But again, you know, I
4:06don't know his life. I don't know what
4:09he's dealing with personally.
4:11One half week or a week or two weeks
4:13less
4:14of the higher pay so that there could
4:16always be a board member in place. Seems
4:18like something
4:20a prudent person, a person that cared
4:22about the industry would do. All right,
4:23enough about that. Kyle's gone. We're
4:25just waiting for Cruise.
4:27Enough said on that. So, Hauptman
4:29departs. Like I said, August 10th. He
4:31resigned and he took the oath to become
4:33a board member of the PCAOB
4:35at at a ceremony at the SEC. So now,
4:38we're waiting for a ceremony at NCUA,
4:40but we can't get to that yet cuz the
4:42paperwork isn't done. And I think that's
4:44what the press is missing.
4:45So again, the seat is unfilled waiting
4:48for Cruise to come in. Tick-tock. I'm
4:51sure Larry Fazio is fielding a lot of
4:53questions from
4:55within and without of NCUA. Larry's the
4:57current executive director and there are
5:00some delegations that theoretically
5:01would say he could run the agency as the
5:04board, but I don't think that applies.
5:06And I'll get into that here shortly.
5:08So the the math, there's three
5:10authorized, two two are required for a
5:12quorum and you can get into that whole
5:15were the 11 regulations that Hauptman
5:17finalized last week were are they
5:20legitimate because they didn't have a
5:22quorum? Some people say a quorum of one
5:24is one. NCUA's regulations say you need
5:26to have two to vote on something. So,
5:29I don't think anybody's going to contest
5:30that cuz it's deregulations and why
5:32would anybody who has an interest
5:35contest it unless it was a consumer
5:37compliance type group. But anyway, I
5:38digress.
5:40And now, members currently qualified to
5:42serve are zero because again, they're
5:44waiting for paperwork from the White
5:45House, which can can get political. It
5:48can get slowed down. And
5:51we're going to have to wait and see, you
5:52know, what happens. By the time I post
5:54this today, who knows? Maybe Cruz will
5:56be in. But that's why I'm doing this one
5:58as an emergency cuz it it shelf life is
6:00going to be between now and whenever
6:02Cruz and the White House get their ducks
6:04lined up. So, the Senate confirmed, that
6:06was done. Then what happens is there's a
6:09commission that is issued. And what
6:10happens is it gets signed by the
6:12president, whether that's electronically
6:14or otherwise. I'm not going to get into
6:16that debate. Wink. And the document
6:18comes over, it goes to the NCUA's SKIF,
6:22this secured compartmentalized
6:24information facility.
6:26The General Counsel at NCUA is the
6:28person that's in contact with the White
6:30House to find out that that someone is
6:33coming over, that the documents are
6:35coming over. And then the the head of
6:38security will bring it up to General
6:40Counsel and or the Chief of Staff. And
6:42now the Chief of Staff, interestingly,
6:45right now, Sarah Bang, it's my
6:47understanding, left NCUA the last day of
6:49July.
6:50And Nate Croger, who is the acting Chief
6:53of Staff, a political appointee, Sierra
6:55Robinson is another political appointee
6:58over in Public Affairs. Often times what
7:00happens when a party
7:02when there's a new board member who
7:03becomes chair, they either look from the
7:06schedule Cs that they have, which are
7:08political appointees that have to be
7:09approved by the White House,
7:11not by Congress, but by the White House.
7:13Each agency has a number of schedule Cs
7:15that they are allowed to fill.
7:18My recollection is each board office has
7:20two.
7:21And then the chairman has four or five.
7:26Which is an alarmingly not a a
7:27shockingly large number for an agency of
7:29NCUA's size, but it's been that way for
7:32forever. So, what happens is the new
7:34person will come in. They've either
7:36identified someone they want to be their
7:37Chief of Staff that they will then get
7:39approved through NCUA, or they'll pick
7:42from the people that are there, which I
7:44believe would be narrowed down to Nate
7:46and Sierra. I've heard some rumblings
7:48that that
7:50and I know historically what happens is
7:52those C's start to fight for that
7:53position. Just like at any organization,
7:55you know, you're running a credit union,
7:56you got three VPs, you got your CFO,
7:59and yeah, you you announce the position
8:01and you you have peers competing against
8:04each other. That's what happens in the
8:05schedule C world typically. And my guess
8:08is both those people probably want to be
8:10the chief of staff instead of being in
8:11charge of public affairs, which is the
8:14OIAK office. So, right now, it looked
8:16like Hauptman preferred Kroger because
8:18he was the acting chief of staff when he
8:20left over Sierra Robinson, but I could
8:23be wrong on that. That just could have
8:24been that they rotated it and each one
8:27of them did two months. I don't believe
8:28though that that's what No, it couldn't
8:29have been that because cuz Sierra Bang
8:31just left. So, anyway,
8:32when I was at NCUA at the end of the
8:34Clinton administration, Yolanda Wheat
8:37worked hard to get Norm de Moore fired.
8:40And Yolanda came in for a cup of coffee,
8:42one or two months, as chair of NCUA, and
8:45she got that paperwork moved at
8:48at the White House
8:49office of personnel by hiring five or
8:52six people from that office to get the
8:54documents moved. And there were some
8:56politics going on that I won't get into
8:58here. If we're ever chatting at a
8:59conference, I can explain it to you.
9:01There's some real inside baseball, but
9:03Wheat basically
9:06these are my words got influence with
9:08the White House press to get her
9:10appointed as chair because she said,
9:12"Okay, if you do that, if you move that
9:14paper, get it moving for me, I will hire
9:15you you you over here at NCUA for a
9:18month or two or as as long as I can keep
9:20you here because Clinton was on his way
9:21out. His term was up, etc., etc." The
9:24commission has to come from the White
9:26House, has to be signed by the
9:27president. That's the bottleneck, right?
9:30We we're seeing in the press that they
9:31have to have the oath of office signed.
9:33Excuse me, the oath oath of office where
9:35he raises his hand and usually it's the
9:38general counsel who swear him in but
9:39sometimes they'll bring in other people
9:41to swear him in. It'll happen at NCUA's
9:43boardroom typically. They'll invite all
9:45their political friends and this is an
9:48exciting day for the person getting
9:49sworn in. You know, it's it's very cool.
9:51But that before that can happen, the
9:53paperwork has to move from the White
9:55House to NCUA saying the president has
9:58named Cruise the chair and has signed
10:01off on the paperwork so that he can
10:02start.
10:04Hopman didn't wait until that happened.
10:06He didn't. So NCUA is kind of in no
10:08man's land right now. Here here a little
10:09bit kind of not in no man's land and you
10:11can assume it's going to be resolved
10:12quickly but you know, in the Trump
10:14administration who knows. Sometimes
10:16things happen real quick under the
10:17mantra of Elon Musk Silicon Valley move
10:21fast and break things and sometimes they
10:22move slow. Hopefully this moves fast.
10:25So
10:28the finish line only uh
10:33only now only after the oath of office
10:36does the is the seat filled and then can
10:39they come in and serve as chair.
10:41What the statute permitted the Federal
10:43Credit Union Act lets a member keep
10:45serving after a term expires until a
10:47successor has qualified. That provision
10:49is why the outgoing chairman was able to
10:51stay a full year past August 2025 and
10:55had he stayed it would have covered this
10:56gap but he left too soon. What actually
10:59happened? He left 3 days after the
11:00Senate vote before a successor
11:02qualified. The vacancy isn't something
11:05the statute foresaw. It's the product of
11:07Hopman's departure
11:09and it could have been avoided if he had
11:11waited a few days, a few weeks,
11:13whatever. But you know, again board NCUA
11:16board members pay
11:18is capped at essentially what crop
11:20Congress makes and Hopman is getting a
11:22big raise at his new position and that
11:24may have influenced him. Who knows?
11:25There may have been something behind the
11:27scenes that led him to believe he had to
11:29leave. But in any event leaves NCUA in a
11:32predicament. So,
11:35the agency was built to kind of handle
11:37unique situations like this. So, again,
11:39the Federal Credit Union Act establishes
11:42what the board can do. And it can only
11:45be the board unless they delegate
11:46things. And And I viewed the delegations
11:48of authority as as my Bible, my
11:51equivalent of my NCUA Bible when I was
11:53there. Here's what this office can do.
11:55There Here's what I can do. Here's what
11:57the board has retained. Here's what the
11:58chair can do. And
12:01there's a lot of delegations that build
12:03into uh what can be done by staff and
12:07what can't.
12:09So, here's what what keeps NCUA running.
12:12The delegations uh allow, for exams and
12:14supervision, field staff keep examining
12:16and supervising on the normal cycle. It
12:19allows for That means you can still have
12:21doors and findings issues. That means
12:23you can still have letters of
12:24understanding, which are the first step
12:26towards formal formal administrative
12:28actions.
12:30The regional directors have the
12:31delegated authority to take temporary
12:33cease and desist orders, not permanent,
12:35but temporary cease and desist orders.
12:37And that really doesn't matter cuz they
12:38don't do that that much. The FDIC does
12:41cease and desist orders much more than
12:43NCUA, and that's more of a cultural
12:45difference than a a real functional
12:48difference, in my opinion. Charters and
12:50mergers can go on. And this is actually
12:52I I typed this out I I typed this out
12:55wrong. Resolutions, conservatorships and
12:57liquidation authority actually sits with
12:59the board. So, you can't end a
13:01conservatorship, you can't make a
13:03conservatorship without uh an NCUA board
13:05member. Quite frankly, I think it was
13:07risky for NCUA to conserve credit unions
13:09with one board member because, again,
13:12is one a quorum? But, that's a the story
13:14for another day. So, what stops
13:17rulemaking? There will be no rules. Uh
13:19NCUA just did a dump of
13:22That's probably not
13:24the best word to use. The NCUA just
13:26issued 10, 11, 12 final regula-
13:29regulations from their the big project
13:32they did. Most of those are changing
13:33happy to glad. I'm I'm going to be
13:35working on a podcast
13:37uh in the next few days walking through
13:38those, but indirect loans, there was a
13:41good change there and a couple other
13:43good changes, but Kyle Hauptman, before
13:45he left, got all of those done as final
13:48presuming that uh he has the ability to
13:50do a board action of one,
13:52but appeals appeals to the board cannot.
13:55So, if you have appeal that's about to
13:56go to the board, it could be slowed down
13:59until Cruz gets on. And then when he
14:01gets on, he's going to be drinking water
14:02from a fire hose, right? He has to learn
14:04the agency. Everybody and his brother's
14:07going to want to come in and meet him.
14:08He's the only one. Uh being chair is not
14:11an easy job at NCUA, very time-consuming
14:13for the staff. Uh and often time what
14:16happens if someone serves as a board
14:17member and a chief of staff for that
14:20board member and they become chair, uh
14:22they find out the difference between
14:23being a board member and being the
14:25chair. It is huge. So, he's going to
14:27come in. I mean, he's a smart guy from
14:29what everybody says. He knows the
14:31financial world, and so that part will
14:33be easy, but the nuances of NCUA and
14:35he'll be relying on heavily on the
14:37executives that are left. Hopefully, he
14:40taps into the breadth of the the wisdom
14:42of crowds at NCUA and just actions that
14:45are delegated above. So, there's actions
14:47NCUA can take uh staff can take to
14:49resolve losses in credit unions of
14:51certain dollar amounts. If they're
14:52bigger than that, they have to come to
14:54the board. So, that would be probably
14:57why the rumors are that they've made
14:59their decisions on Jackson area. I
15:00haven't seen the final decision on where
15:02that's going, but the decision to allow
15:05that to be
15:07merged or purchased in a purchase P&A
15:09purchased and assumed to another
15:10institution uh acknowledges a loss that
15:14staff doesn't have the ability to do.
15:15So, I'm sure Hauptman signed off on that
15:17before. Asset guarantees, which they
15:19don't do very often, are not allowed.
15:21Appointments and removals or promotions
15:24of senior personnel, people are going to
15:26be locked in their positions until Cruz
15:28comes on. And no no budget changes
15:31beyond the $50,000, I believe, that the
15:34executive director can reprogram. So,
15:36but they have a budget. They're probably
15:38under budget cuz they got rid of so many
15:39staff. But it's a little bit of kind of
15:42like flying around the airport hoping
15:44nothing bad happens and you have enough
15:46gas to land the plane.
15:48So, the one that reaches uh your
15:50members, theoretically, if you were
15:53going to appeal, it goes from the
15:54examiner to the regional office to the
15:56supervisory review committee. Uh you can
15:59take it to the office of examination and
16:01insurance in there in along that path. I
16:04don't recommend that. And then
16:05ultimately to the NCUA board. Now,
16:07I'd be shocked if somebody appealed
16:09today and it worked through all the
16:10timelines before Cruz came on. That
16:13would be real dysfunction at the White
16:14House and I don't think that's going to
16:16happen. My guess is Cruz will be on
16:18before the end of the month, maybe
16:20before the end of the week. But without
16:22without a board, appeals can't be
16:24decided upon by the board, right?
16:27There's the separate cloud of Ozkaya and
16:30Harper who have continued to sue. And
16:33theoretically, they could come back on.
16:34I think everybody thinks that the way
16:36that the Supreme Court and the courts
16:38are working right now, that they're
16:40going to be told no, you were fired and
16:42Trump had the authority. But
16:43theoretically, they could come back and
16:45join Cruz at some point in time. And if
16:48that happened, I'm sure they'd be there
16:49the next day assuming they weren't out
16:51of the country.
16:53But they'd get there immediately and
16:55they would you'd end up having the
16:57wisdom of crowds of three board members
16:58that the Federal Credit Union Act had
17:01suggested would be the case. Uh there is
17:04this final slide I have here. The agency
17:07runs fine without a board until it
17:08doesn't. And that's kind of like like
17:10Mike Tyson said, it's great to have a
17:11plan, but when you get punched in the
17:13face,
17:14the plan ends.
17:16Uh I I
17:17I quote a a song off What's the sound of
17:20one hand clapping as it relates to
17:22to NCUA having zero board members. And
17:26in that regard, there's another Elton
17:29There's an Elton John song. That first
17:30one was Van Morrison. There's an Elton
17:32John song called Too Low for Zero. And
17:35uh
17:35yes, NCUA is too low for zero and they
17:37have zero. So, I'm going to stop sharing
17:39my screen here and I wanted to hit one
17:41other
17:42item that
17:44some people are saying does allow the
17:46NCUA board and staff to take action.
17:54There is a delegation that I don't have
17:57in front of me, but I'll paraphrase from
17:59when I was at NCUA. And I've had some
18:01conversations with some people that
18:03think that this delegation is in play
18:05now with zero board members.
18:07And I would argue unless unless they
18:09made a change recently to this
18:12delegation and then that change would
18:14have been made by one board member, so
18:15it probably
18:16could be contested. There's a delegation
18:19that was put in place
18:21presuming that there was a national
18:23emergency
18:24that like 9/11 and a plane went down and
18:29however many board members
18:31were
18:32on the board were no longer available,
18:34whether they died in a plane crash and
18:37there were or there was only one and
18:38that person died in a plane crash.
18:41Which speaks to it being a national
18:43emergency. So, in a national emergency,
18:47whoever is highest up the chain can
18:49exercise everything the board normally
18:51keeps to itself, right?
18:54The chain runs
18:56from the chairman to the vice chairman,
18:58then whichever single member would
19:00remain. So, if there are things that the
19:03act For example, the act says the
19:05chairman is the spokesperson of NCUA. If
19:07the chairman died in a plane crash, then
19:10the vice chair would take over those. If
19:12the chairman and vice chair were driving
19:14in a car together and they were in comas
19:17on their deathbed, then the third board
19:19member would take over what the board
19:21could do and what the chair could do.
19:24You could then you get into that whole
19:25debate of what's a uh
19:27what they could do as far as a
19:29regulation and which would require board
19:31of two and a quorum and all that. But,
19:33if none of those people are there, it
19:35falls to the executive director who can
19:37push that authority further down as
19:39needed to keep the agency running on a
19:41day-to-day basis. But,
19:44this is not a national emergency. This
19:48is a paperwork issue. This is Helman
19:51shouldn't have resigned until the
19:53paperwork was done. This is the White
19:55House just has to sign paperwork. This
19:58is not a national emergency. So, the
20:00things that this
20:02delegation contemplates is not something
20:05that that Larry Fazio, the executive
20:07director, can do, in my opinion, because
20:09there is no national emergency. It's
20:12just a stupid decision
20:15to let somebody or somebody resigning
20:18not understanding how the flow went.
20:20Somebody resigning because they were
20:21ticked off that they had to stay there a
20:23year and they wanted to get their
20:24paycheck higher. Somebody resigning
20:27because they had a real life situation
20:29and felt like they needed to move over
20:30there.
20:32I don't know. It just It's just commit
20:34no minor blunders is one of my favorite
20:36quotes. This minor blunder of leaving
20:38too soon could have material impacts on
20:41InsurAce. It might not. Cuz again, by
20:44the time I
20:45click end recording and upload this,
20:47maybe Cruise will be on board. All
20:49right, that's enough on this. I also
20:51have a podcast coming out on those 11
20:53final regulations.
20:54I've got one slotted for an analysis of
20:57the recent recent
20:59merger data that InsurAce has and I've
21:00got some really cool guests coming up as
21:02well. I hope your summer is going as
21:04well as mine. And I if you're listening,
21:07I want to thank you for listening. If
21:09you're watching, I want to thank you for
21:10watching. I hope you will do again soon.

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