Cowardness is contagious.  So is courage.

Last week I received along with others on his distribution list, the following retirement announcement from Joe Adamoli, Office of External Affairs and Communications:

This is a reprint of a March 6, story by WTOP news radio for Washington, D.C. This is typical of many reports interviewing current employees.

One must wonder how NCUA staff is feeling and thinking about their future.  For credit unions who have federal employees as members, now is the time to reach out and prepare a helping hand.   Remember, these are the owners, not customers.

‘Morale is not great’: US Fish and Wildlife worker says she’s bracing to be fired

Some U.S. Fish and Wildlife Service workers were recently advised by a superior to ensure they have their latest pay stubs and whole records saved, in the event they’re among the next federal workers to be fired.

Workers would only have 30 minutes to compile everything in the event their access card is deactivated. It’s better to be prepared, he told staff, than to be fired and have personal items remaining in the office afterward.

As President Donald Trump’s administration and the “Department of Government Efficiency,” make changes to the federal workforce, some staff members at the U.S. Fish and Wildlife Service are on edge.

They’re keeping bags near their desks so they can be prepared, according to one worker who grew up in Southeast D.C. and currently works for the agency. She asked not to be named in order to speak freely.

“It’s just hard to imagine what it’s going to be like to walk away from this,” she said.

The agency oversees biosecurity, helping to determine what animals and plants should be brought to various parts of the country. Workers are also tasked with protecting endangered species and upholding the Endangered Species Act. A worker preventing an animal infestation of planes and parts was among those who was fired, she said.

But recently, she said, 20% to 30% of her colleagues have lost their jobs, putting that mission in jeopardy. Their access cards stopped working, and they received a termination letter that cited poor performance, she said.

When the deferred resignation offer came out, she overheard one of her coworkers asking whether he should trust the message. She advised him not to, but another colleague recommended she tone down the skepticism.

Some agencies have pushed back on some of the administration’s directives, she said, and the Fish and Wildlife Service has had meetings about how to handle memos and executive orders.

“Our meetings are like, ‘Well, let’s take some mindfulness time. We all have to care for you,’” she said.

She and her colleagues have also taken issue with the way some of the administration’s memos have been worded.

“’You’re a drain on the public, and they voted, they’ve made their choice clear, and they don’t want you,’” she said. “I mean, that’s essentially the way these memos open.”

DOGE’s approach, she said, starts from the assumption that there are too many workers, “and we’re just going to fire people, and that’s going to solve the problem.”

She’s tried offering some of her desk items to her colleagues, but they won’t accept, fearful that they might not have a desk soon.

“The morale is not great,” she said.

In the midst of all the uncertainty, “I don’t expect to be employed.”

 

Ryan Tracy is a former Wall Street Journal Reporter and now a freelance financial reporter.

His interview with Chair Kyle Hauptman in February was published February 28, in the Capital Account, a paid subscription service. The full interview was provided by NCUA’s public affairs office as  published in the newsletter.

The Q and A is very candid and covers most of the top regulatory issues from taxation, to bank purchases and OD fees.  Hauptman is asked about his future plans.  There were no questions on the state of the industry or specific credit union performance topics.

Please post your reactions or questions you might like to see asked in the comments section at the end of the article.

The Writer’s Introduction

Friday Q and A: This is a singular moment to be in charge of a financial regulator. In just five weeks, the president has issued a flurry of orders to federal agencies, calling on them to reduce their staffing, bring employees back to the office and start running all their major actions through the White House. The very idea of an “independent agency” has been called into question.

This week, we sat down with one of the new Trump administration officials grappling with those directives. Kyle Hauptman was tapped by the president soon after the inauguration to head the NCUA, where he’s been on the board since 2020.

The promotion doesn’t exactly mean he’s fully in charge: The other two members are both Democrats, putting him in an unusual spot. Still, Hauptman is no stranger to jobs that come with challenges. His office decor includes a frame preserving two of his old business cards, one from Lehman Brothers where he worked until 2008 and another from Mitt Romney’s ill-fated campaign for president.

Hauptman’s response to Trump’s executive orders is pretty simple. He plans to comply. But he also explains how the credit union overseer’s track record is a bit different than other financial watchdogs. . . One top goal: stamping out regulation by enforcement. What follows is our (lightly edited and condensed) conversation.

The Q and A

(subheads added)

Capitol Account: How do you describe the NCUA for people who don’t know what it is?

Kyle Hauptman: When I’m at conferences, like with fintech, I say it over and over again: `You know what the FDIC is for banks?’ It’s like that, except that we insure about 4,500 credit unions – and are the regulator for about two-thirds of those…The rest are state chartered. There’s about the same number of credit unions and banks in America…but there’s 10 times as much money in the bank system…There’s no such thing as a trillion dollar credit union.

Hauptman’s Prior Career

CA: How did you get into this job? You worked in finance earlier, and then on Capitol Hill.

KH: I’m a career switcher, and one of those people who is finally doing what they should be doing. I was a bond trader for years. I was mediocre at it…My first love was always policy and politics.

CA: You were working at Lehman Brothers when it filed for bankruptcy in 2008? Did that drive you back to Washington?

KH: Being at Lehman during the collapse reignited my interest in policy, [by seeing] just how D.C.-dependent those final weeks and months and days were.

How Hauptman Views the Chair’s Role

CA: You’re now the chairman of a three-person board, with the other two members being Democrats. How are you approaching it?

KH: This place wasn’t all that partisan to start with, but it definitely changes some of my priorities in terms of what’s feasible. There’s some internal things that I think we can get done. I’ve noticed with all the executive orders, talking to other agencies, that some of them vest a lot of power in the chair. [The NCUA] is more board-centric.

CA: How are you handling Trump’s executive orders?

KH: We’re just going through them one by one, complying. Not trying to get in the news.

CA: Is the sheer volume of the directives overwhelming?

KH: We do what we have to do. They provide some opportunities for us too.

CA: One of the orders tells independent agencies to run their rules and legal interpretations through the OMB. Some people have described that as a sea change. How do you assess it?

KH: My plan is to comply…My guess is for the short term, the administration would probably like any rules that I put through. On the other hand, I don’t know, given [that] I’m a minority chairman, there will be particularly impactful rulemakings happening or ones that would be controversial.

NCUA Staff Changes

CA: How are NCUA employees handling the return to office mandate?

KH: We’re a little different than other agencies…the majority of our staff is what the government calls mobile workforce. Meaning they’re not supposed to be in an office.

CA: What’s their job?

KH: Examiners. They’re in all 50 states…They’re not supposed to be in a chair at a desk any more than a park ranger or a lifeguard at a national seashore… We only have three physical offices in this country, Tempe, Austin and here.

CA: How many people work in your Northern Virginia headquarters?

KH: Put aside contractors, I believe about 650…We’re about 1,200 employees [overall].

CA: This is the first week workers at NCUA are back full-time. What are you hearing?

KH: It’s definitely a change for some because, outside of the Covid period where the office was literally locked…anybody who wanted to be in the office always could. So [the return] would only affect those who obviously didn’t want to be.

CA: Do you think you’re going to lose people?

KH: Possibly…I don’t have any data yet.

NCUA and Trump Policy

CA: What’s your view on how NCUA fits in with the administration’s broader push to streamline the administrative state?

KH: At least at the financial regulators, there’s a perception [that] some of them got out over their skis versus what they were statutorily required to do. We are above all things an insurer. So as an insurer, we don’t have any incentive to do [things like] regulation by enforcement.

CA: What do you mean by that?

KH: We have no interest in having credit unions have reduced capital, which is what would happen if you fine them $50 million for something. They may deserve it, but they’re down $50 million in capital. That’s the same as $50 million of loans that went bad they had to write off. Some of the problems I think the administration is trying to root out were less of an issue here.

CA: Industry has spent the past four years complaining about the Biden financial regulators taking an enforcement-first approach. Do you see that changing now?

KH: There [are] two kinds of regulators: honest ones and ones that do regulation by enforcement…Myself, and I know some of my new colleagues who are running other regulators believe that in America, the sequence of events is: Write rules, then enforce them.

CA: Have you run into other agencies doing things that you’d call regulation via enforcement?

KH: There was a settlement between the [CFPB] and Wells Fargo. And in the settlement, Wells Fargo had to, regardless of state law, deal with auto loans a certain way…Our examiners and credit unions were saying, okay, is this the new policy?

CA: Was it?

KH: I asked the CFPB…What do I tell my examiners, and what do we tell the credit unions? And the answer was, ‘Send them the Wells Fargo settlement and a link to our supervisory priorities.’

CA: The upshot is they should have issued a rule?

KH: Not one employee of any regulator would think it was fair, if you got pulled over for a speeding ticket and said, ‘What’s the speed limit, officer?’ And he said, ‘Oh no, there’s no speed limit posted. A year ago, someone you never heard of got a ticket and you were supposed to be aware of how that applied to you.’ That’s not how it’s supposed to be.

On Digital Assets

CA: What do you think of how the NCUA approached digital assets over the last few years?

KH: I’m proud that we are not part of [or] even talked about in Operation Choke Point 2.0 [concerning debanking allegations]. No one’s mentioning us.

CA: How about on the policy side?

KH: We put out two pieces of positive guidance, which during the last four years were two more than anybody else put out…The other banking agencies put out something that caused a lot of harm. [The policy] said you must get written notice of non-disapproval before engaging in – and then it had a fairly broad list – distributed ledger technology, digital assets. I know that banks went pencils down.

CA: Are you in favor of credit unions dabbling in digital assets?

KH: I’m pro-what this country’s about, which is people innovating and experimenting. There’s going to be problems…Every country in the world has auto fatalities. Only some of them have auto industries. The negatives that come from new technologies are certainly going to exist. I don’t mean to minimize them…but the worst thing that can happen is to get all the downside and very little of the upside.

On OD Fees

CA: Your Democratic predecessor set a new requirement, which you opposed, that larger credit unions publicly disclose the income they receive from overdraft fees. Will you change that?

KH: That is my goal.

CA: Isn’t more transparency a good thing?

KH: There [are several] constituencies for publicly putting the gross dollar amount [out]. Number one are journalists, to write click-bait articles that are often devoid of any business or economic sense. The second is people who get political benefit for claiming they’re helping consumers. The third would be law firms that want to charge money. I’m not aware, as a fiduciary of our Share Insurance Fund, that my job is to do the bidding of any of those three groups. We like non-interest income.

CA: What’s your take on the efforts to cut so-called junk fees?

KH: The people promoting these policies will be last in line to help you when you’re short on money…Government itself far and away charges the highest late fees if you’re short on money. Treats you the worst. And it’s not even close.

CA: What’s the impact on credit unions?

KH: Some have eliminated [overdraft] fees entirely, and that’s their prerogative…What they don’t need is somebody [in] the nation’s capital trying to shame them one way or the other.

On Mergers

CA: Credit unions have been buying more and more banks, a trend that has provoked a lot of opposition, especially from community lenders. How does the NCUA deal with mergers?

KH: Our sole role is [to determine]: does the acquisition present a threat to our insurance fund?

CA: The banking industry says that these deals underscore how credit unions get too many tax and regulatory exemptions.

KH: With banks and credit unions, I don’t get involved in any of that back and forth. If the president had, four years ago, suggested I work at the FDIC instead of here, I would’ve considered that. But unless you have more pull than I do. you don’t get to pick and choose what appointments come your way.

CA: So you’re staying out of the fight?

KH: Banks have significant advantages over credit unions, and credit unions have advantages over banks. Banks have higher interest rates that they’re allowed to charge. Credit unions have a lower interest rate cap. Banks can use stock, which is the preferable way to do acquisitions. We know this because 90 percent of bank acquisitions are done using stock.

On Taxation

CA: What about the tax issue?

KH: Some credit unions wind up having as much tax paid as banks. Because if they distribute all of their net income to their members, then that’s basically an S Corp. They’re all paying individual income tax on that…A credit union has an advantage in that if they retain some of that, they don’t pay corporate income tax on that. However, by definition, the issue…has lessened with a 21 percent corporate income tax rate, rather than 35.

On Fields of Membership

CA: There have also been a lot of complaints about credit unions expanding their field of membership – the legal definition of who can join the institution.

KH: Some states like New York have very broad fields of membership. They make it very broad: If you are a mammal that walks upright on your hind legs and you live in the state, you can be a member. That’s a state issue. That’s their prerogative.

CA: What’s your take?

KH: As a general matter the further you get from a focused community, you lose the credit union touch. Because the reason that…delinquencies are lower for what looks like a certain credit risk is because it’s inside the community – a fellow church member, a fellow member of your immigrant community.

CA: What’s an example?

KH: There are nine, I believe, ethnic Ukrainian credit unions…40 percent of their customer service calls are in Russian or Ukrainian. The Ukrainian refugees coming over since the war [don’t speak] English, are unemployed, credit invisible. Everyone would turn them down…The Ukrainian credit unions not only are giving them checking accounts – share accounts is what they call them – but unsecured credit cards. And these folks are doing what new immigrants have always done. They’re driving for Uber Eats and hustling and doing jobs – and they have lower delinquency rates than the average…That is the credit union difference right there.

On His Future Plans

CA: Your term ends in about six months, that’s a pretty short time to be in charge. Do you want to be reappointed?

KH: I think there are a lot of great candidates out there that deserve a shot.

CA: What does that mean?

KH: I don’t plan on leaving for the foreseeable future…The person I took over the seat for was there 17 months after the term ended…I’m going to assume I’ll stick around as long as feasible for my replacement to come. I would be flattered, but I’ve made clear that I’ll do something else with my life and that there are other people who deserve a shot.

CA: What do you do when you’re not running an agency?

KH: I have a 4-year-old who keeps me busy…He comes in here once in a while, and he’s figured out which offices have candy and which ones don’t.

The annual Governmental Affairs Conference in Washington is the largest and, many would say, the most important convening of credit union leaders.

In the nation’s capital, attendees from around the country will hear from their congressional representatives.  And from all three NCUA board members on the state of agency policy.

Today’s Washington is not a kind place. Tens of thousands of public servants  have been summarily fired.  Many remaining are at best uncertain and at worst fearful for their personal and professional futures.

The pretense of eliminating waste has been quickly demonstrated to be a political fraud.  An unelected,  billionaire, Elon Musk, who recently used a chainsaw to present his approach to responsibility is in charge of this political stunt.

Trump’s purpose is not governmental efficiency. Rather it is  eliminating any federal role that acts as a check and balance over the animal spirits of the “free market” and its billionaire oligarchs.

The NCUA Board’s Opportunity

Institutions, no matter how well funded and designed, cannot in themselves be constraints on abuses of power.  Or destruction of the democratic process.

It is the people who are appointed as well as those who are elected that must exercise this critical responsibility.

For credit unions, their immediate representatives are the three-person NCUA board responsible for the agency’s management.  That is why their views  are so important.

What credit unions want to hear is how they are interpreting their responsibility having taken this oath of office:

I, [Hauptman, Harper, Otsuka] do solemnly swear  that I will support and defend the Constitution of the United States against all enemies, foreign and domestic; that I will bear true faith and allegiance to the same;  that I take this obligation freely, without any mental reservation or purpose of evasion; and that I will well and faithfully discharge the duties of the office on which I am about to enter. So help me God.  (emphasis added)

The US Constitution requires the practice as explained in this 2019 article:

The reason is simple – public servants are just that – servants of the people. After much debate about an Oath, the framers of the U. S. Constitution included the requirement to take an Oath of Office in the Constitution itself. 

Article VI of the Constitution says, “The Senators and Representatives before mentioned, and the Members of the several State Legislatures, and all executive and judicial Officers, both of the United States and of the several States, shall be bound by Oath or Affirmation, to support this Constitution .  

The author, Jeff Neal,  states the intent:  One purpose of the Oath of Office is to remind federal workers that they do not swear allegiance to a supervisor, an agency, a political appointee, or even to the President. The oath is to support and defend the U.S. Constitution and faithfully execute your duties. The intent is to protect the public from a government that might fall victim to political whims. 

Where Political Power Lies

The three NCUA board members’ remarks in this current effort to concentrate political executive power in one person will be telling.

Will they simply state their role is to “comply” with the administration’s numerous directives of unlimited executive authority over an independent agency?

Or might they simply state their role as guardians of the NCUSIF purse and “protectors of the taxpayer” is their highest duty?

Or will they simply ignore reality and give an AI-like generated talk on regulatory priorities?

NCUA board members’ press interviews and comments at last Thursday’s public board meeting suggest they are still uncertain what their stance should be. One can understand their personal jeopardy and hesitancy to speak up.  In their remarks, all three were like  bipartisan deer frozen by the Trump administration’s headlights shining on all federal agencies.  The sense of an overriding mission was at best formulaic.

But as the board members look out over the thousands of attendees in the convention center, they will see where their responsibility and true power really lies.  It is with the people.  For the grassroots may be slow to mobilize but will be unstoppable when activated for purpose.

The political temptation is to always seek a middle way, a consensus.  All Americans and the rest of the world saw last Friday that we no longer live in “normal times.” When a leader of the free world visited the Oval Office and was publicly scolded by the President and his colleagues for not being “grateful,” for not having any “cards” to play, for “threatening WW III,” we know we are not living in normal times.

The people to which NCUA board members will be speaking at GAC and beyond hold the ultimate authority.  How will they fulfill their oath of office?  The circumstances are not easy, but leadership in crisis is what the Constitution depends on.