After years as a staffer and then a board member, Todd Harper finally has the gavel at the National Credit Union Administration.
As expected, President Joe Biden this week elevated Harper, a Democrat, to the
As chairman, Harper will have the power to determine which issues make the agenda for agency board meetings, but he’ll hardly have a free pass to push any pet projects. As the panel’s only Democrat, he faces the possibility of being outvoted by the other two board members. In the Q&A below, he discusses how he plans to manage that, which topics might come before the board, where his priorities for the industry lie and more.
Responses have been edited for length and clarity.
CREDIT UNION JOURNAL: Can you talk a bit about your regulatory philosophy and what credit unions should expect while you’re chairman?
TODD HARPER: You can really sum up my regulatory philosophy with an acronym: F.I.R.E. I think that good depository-institution regulators need to be fair and forward-looking; innovative, inclusive and independent; risk-focused and ready to act expeditiously when problems arise; and lastly they need to be engaged appropriately with all stakeholders in order to develop efficient and effective regulation.
Once the rules are on the books we need to apply them fairly. That doesn’t mean that the rules have to be the same for all the players, it doesn’t mean we can’t have flexibility maybe, say, in terms of size or sophistication or other elements, but once we have those rules we need to apply them fairly. I really, really stress the need for the agency to be forward-looking. When the [coronavirus] crisis first started, one of the things I found was really, really important was the liquidity function because we didn’t know what was going to happen initially in terms of Congress passing the economic-impact payments, nor necessarily how people would be pulling their money out of the market. I was worried about the liquidity events coming down the line. Those two factors really resulted in an influx of deposits but at some point in time going forward ... there’s going to be a spending spree and money is going to flow out of the system relatively quickly. We’re going to have a potential double-edged sword at that point of not only liquidity but also we’ll finally start to recognize the true losses on the loans that have been masked in part by the provisions Congress has passed related to foreclosure, as well as on [troubled debt restructuring]. We can’t quite get a full picture of what’s happening but when those provisions expire we’re really going to see the impact on the system, so there will be both a capital and liquidity problem there.
One thing I was really pleased to have worked on with the former chairman [Rodney Hood] was on creating this new financial innovation unit within the agency. … We have to recognize that technology is changing the industry and I think in all honestly consumers are going to consume their financial services in a very different way after this crisis. We’ve definitely seen an increase in online transactions and mobile transactions and we need to be making sure we change our rules and change our programs to allow for that innovation. We also internally have to innovate. I’m really looing forward this year to finally being able to roll out the new MERIT supervision system. It’s going to be a state-of-the-art supervisory program. I know that other agencies have been looking to us for their programs [and] it’s going to give us much better analytical tools and allow us to do our job much better.
I think we need to stay hyperfocused on issues of economic equality and justice, and I would add that this is an area in which board member Hood and I share a lot of common ground. We are both deeply committed to this issue, and I’ve also heard [NCUA Vice Chairman Kyle] Hauptman speak out on this issue. We’ve got to recognize that we have centuries of systemic racism and the pandemic has exacerbated some of the problems out there, and we need make sure that credit unions live their mission of serving people of modest means and reaching all audiences.
As the only Democrat on the board, you could potentially be outvoted by two Republican members. How does that change your approach to the chairmanship and what issues make it onto the agency’s agenda?
I don’t know that it changes my approach. … What we should be looking for in the financial services world is letting the best ideas prevail. There have been many issues on which Rodney Hood and I have agreed. Out of 160-some votes we’ve taken together, he and I have agreed on 90% of them. So there’s a lot of areas to find common ground. We both believe cybersecurity is a priority. We both supported the proposed and
One areas where you have not found common ground that you’ve spoken a lot in the past about the
Leaders sometimes need to take a role of helping to see a problem and then bring people along to understand that it’s a problem. I very much view what I’ve been doing the last couple of years as helping to shine a light on a problem we need to take a look at and an issue we need to fix. Good leaders sometimes have the responsibility to find an issue and to help make people aware of it. For me the issue is consumers, regardless of their provider of choice, need to know they’re receiving the same level of supervision, and the fact is the NCUA — unlike our sister banking agencies and some state agencies as well in the credit union system — does not conduct a separate compliance review for consumer financial protection. I do think we have made some progress with the agency. One of the things that we’ve been working to do is for those limited issues that we look at each year at credit unions that we examine and supervise, we’ve been working to develop some analysis about what we’re finding. I’m hoping to be able at some point in the near future to talk about some of the results of that work, but we’re definitely finding that there are issues out there.
When I’m talking about consumer financial protection, what I want to make sure is that we don’t one day have a black eye in the credit union system. The failure of one credit union to effectively put in place consumer financial protection laws could actually lead to a black eye for many more institutions because it could create a perception that credit unions aren’t doing what they need to be doing. I view this as an education effort. We did
Good ideas and good policies take both sides coming together or even many other sides coming together. … It takes time for ideas to get understanding and take root and for the right solution to come up, and that’s what I’m going to stay focused on.
You indicated during the most recent debates over the budget that more needs to be done to prepare for possible safety and soundness issues in the year ahead resulting from the pandemic. What ideas do you have on how the agency can better prepare for potential issues at credit unions in 2021?
We’ve got to smartly, pragmatically and expeditiously address the economic fallout related to COVID-19. One of the things we can do is make sure we’re deploying our resources so we’re ready when the problems start to hit or, even better, getting in before the problems hit and working with the credit unions to resolve them.
We also need to be smartly staffing up. One of the things we talked about at the board table was bringing back people [from retirement] who can help us during this period. We also should be exploring how we can use contracted services so our examiners can focus on more specialized problems.
You indicated during the budget discussions that some of the folks who are qualified to return to those roles might not actually be interested in doing so. How do you address that?
I am worried about that and I know our Office of Human Resources is working with each region to identify those people who may come back. If we don’t have a lot of takers on that, and we may not have a lot of takers, we need to then pivot to the contractor side of the equation more quickly, because you can’t set up systems overnight and make sure you’ve got the right people in the right places. Moving an agency is like moving a ship; it takes time to change the course of direction. So if we know we don’t have those people early on, we need to pivot quickly and go to Plan B with contractors, and if we don’t have enough contractors we need to work to make sure we identify other ways to help address the problem.
Some in the industry have suggested Congress should expand the board to five members, including the possibility of adding a requirement that at least one board member have experience within the state credit union system. Would you support those sorts of reforms?
I’ve spoken in the past on this issue. I believe a board benefits from more viewpoints at the table. I think the addition of a state regulator to the NCUA board would be a positive development. I have long talked about [the National Association of State Credit Union Supervisors] being our partner, and I have regular calls to talk to our state-regulator counterparts quite often. I do think that could improve decision making at the agency. I do know the [Federal Deposit Insurance Corp.] has had five people on its board. One other thing I like about the five-person board is it allows two board members to meet and talk and have better discussions about policy matters than are currently allowed under the Sunshine Act.
Ultimately, though, this is an issue I have no intention of pushing and it’s a matter really for Congress to decide on what to do.
