The biggest questions surrounding
Instead, the former chairman’s departure has raised concerns about the process in which he left, the direction the regulator might move going forward and whether the agency can recapture a spirit of bipartisanship and collaboration.
The former NCUA chairman resigned from the panel on Friday, one day after
The board hasn't been in this sort of situation for more than two decades, noted one longtime NCUA insider, noting that former chairman Robert Swan
was pushed out during the Clinton administration and Yolanda Wheat was installed as a recess appointment. That led to a lawsuit which Swan lost and set a precedent that after a term expires, the person in that seat serves at the pleasure of the president.
Rules that permit a board member to be removed only for cause "are meant to protect the agency's independence," noted Eric Richard, principal at CU Counsel in Wasington, D.C., who served as executive vice president and general counsel at CUNA from 1997 to 2015. "That doesn't change just because a term has ended."
Hood released a statement on Nov. 23 thanking McWatters for his time at NCUA but declined to be interviewed for this story.
The seat isn't expected to be vacant for long. Kyle Hauptman, Trump's nominee to fill McWatters’s seat, is expected to receive a confirmation vote in the Senate before the end of this year.
“It’s hard to see how this is too disruptive to what would have happened anyway,” said Steven Reider, president of the consulting firm Bancography. “Basically he’s leaving a couple weeks early, and one of those weeks is a holiday week where I assume there’s no business pending.”
Hauptman could be confirmed as soon as next week, which would give him time to get ready to participate in the agency’s Dec. 17 open board meeting. However, with McWatters gone, a Dec. 2 public budget briefing will likely only include Hood and board member Todd Harper, who has already indicated he won’t support the proposed budget in its current form. If Hauptman is confirmed, it’s safe to assume some sort of budget will move forward when the board votes on the budget during its Dec. 17 meeting.
What’s less clear is what the board looks like come January. President-elect Joe Biden is widely expected to elevate Harper, a Democrat, to the chairmanship, but with Hauptman and Hood already seated, many of the issues Harper might hope to advance could be dead on arrival. The agency is not believed to have ever had a chairman from the minority party.
Another unknown is how an already tense relationship at the agency might be impacted by those changes. It’s not uncommon for board members to clash, but Rick Metsger, a former chairman who served alongside McWatters, noted that clashes in the last year have been different.
“It appears to be that there are more [and] it appears to me from the outside to be more of a power and control struggle from the current chairman to the rest of the board, as opposed to necessarily specific disagreements about policy. And that is something that is different,” he said.
Metsger recalled that he, McWatters and then-Chairman Debbie Matz “all had disagreements," but "we worked on those disagreements and we moved the ball forward because that’s our job. But we didn’t have the type of conflict in terms of the operation of the agency that appears to exist today.”
Despite the fact that McWatters and Hood are both Republicans, some have suggested the tenor at the agency under Hood is partly a trickle-down effect from the Trump presidency and its win-at-all-costs mentality. Hood drew criticism last year after being photographed with the president and appearing in a video on the White House’s Twitter feed
Because Hauptman has worked for Sen. Tom Cotton, the controversial Arkansas Republican, some have expressed concerns that the agency could become increasingly polarized.
“In general, boards such as this and [the Federal Deposit Insurance Corp.] have been less partisan in nature; these have historically been industry-specific appointments versus political appointees like an ambassadorship sometimes uses,” said an industry expert who asked to remain anonymous in order to speak candidly. “However, in the current [administration] we’ve seen much greater use of partisanship in all kinds of appointments. [Hauptman] worked for Sen. Cotton, who is one of the most ideological members of Congress and I’d assume his staff is similar. So yes, I’d expect someone from Tom Cotton’s world to be less amenable to anything bipartisan.”
Others, however, were quick to shoot down the idea that NCUA can’t still be a place of bipartisanship and collaboration, noting that previous boards have had a variety of squabbles, and those disagreements were frequently less about politics than personalities — factors which can’t be screened for during nomination and confirmation processes.
“There are plenty of opportunities to work collegially and have good personal relationships when you don’t agree on policy issues,” said Matz. “It depends on the individual and it’s not fair to pre-judge.”
The transition from Trump to Biden could also signal a return to normalcy that is felt at smaller agencies such as NCUA. Terms on the board don’t line up with presidential elections, noted Reider, which can help lessen political influence there.
Like FBI directors and Federal Reserve governors, some heads of agencies have longer terms “designed to transcend presidential terms,” Reider said.
He added, “We can hope the new member will embrace that spirit, though that remains an unknown at present.”
Metsger offered optimism for a change at the agency.
“We’re changing administrations in two months,” said Metsger. “I’m hopeful that division [on the NCUA board] will be mitigated by the new administration. That would be my hope and I’m sure that’s the hope of the credit union system. What is happening right now is unfortunate.”
Jackie Stewart and John Reosti contributed to this report.
This story was updated at 9:40 P.M. on Dec. 1, 2020.
