Category: NCUSIF

America is not living in a normal period of federal governmental conduct.  Trump’s largest campaign donor ($275  million) Elon Musk was given a non-legislative, non-elected temporary position. Thus informally  empowered,  his DOGE teams have gone into every federal government and some non-governmental organizations to mandate staff and program cuts.

These cuts and program closures are of Congressionally authorized programs and spending.  This is a pure power play with no oversight, accountability or  any formal authority.

It is total power without limits. In a democracy those who are appointed or elected to positions of power are called leaders.  In an authoritarian government, these individuals are called rulers.

A Fight for the Cooperative System’s Integrity

On April 16 President Trump removed the two Senate confirmed democratic members of the NCUA board. Only Chairman Hauptman, a republican whose term ends this August, remains.  There was no reason given in the firing email. Sue me if you don’t like it.  And both fired members have filed suit in federal court.

The power of both law and precedent suggest this action is illegal.  It raises substantive questions about NCUA’s authority and future.  The bottom line is credit unions are in a fight for the financial and legal integrity of their system.

Some credit unions will want to wait and see what happens before acting.  Others will delegate the burden and pay someone else to chart the way forward.  Many will just go on with business as usual.  With all the uncertainties in DC the assumption is that NCUA is at best pre-occupied, or at worst NCUA won’t dare buck Trump’s deregulation stance and stand up to credit unions.

One long-time reader suggested another approach: There is no reason to stand by this board, or jeopardize your voice by association.  They were neither effective as administrators nor wise enough to see the fog of the last administration. .  .

Why not push for the quick organization of a new board and the forward progress it might bring.  In the very least be ready to work with this administration and keep the CU agenda clear of the fall out that will follow.

That presumes a democratic, participatory system.  That is not what we have as illustrataed by yesterday’s announcement of the larest credit union liquidation in at least six years.

The Unilever FCU  Liquidation

Here are the facts last published by NCUA about this sudden $47 million credit union liquidation announced by NCUA on April 30.

At December 30, 2024, Unilever’s total assets were $ 46.7 million; net worth, $4.1 million (8.95%), virtually no delinquency on a portfolio of which 90% is real estate loans.  There are five employees, a single office, and very high average share balances ($29,400) and loans ($58,502), while serving just 1,448 members.

No conservatorship was announced. Instead an immediate takeover with no announced effort to find a merger solution.  No facts or explanation for the los was provided except to say the credit union was insolvent. What caused this sudden loss discovery? Why the instant liquidation?

The absence of any facts or reasons for acting suggests another regulatory-supervisory failure that is just being expensed away with insurance funds.

It reminds one of the situation last July when NCUA suddenly discovered that Creighton FCU had lost 20% of its value in the days right after filing its March 2024 call report.  The newly discovered loss was approximately $13 million in a $67 million FCU.  The credit union was merged with Cobalt FCU. There was no NCUSIF expense.  And no explanation of where the money went.

In the Unilever case, Hauptman, a one-person NCUA board, approved the outcome.  There is no evidence in support of this action.  Zero transparency for the members and the public.  This is what one person rule creates.  Is Unilever just the first of a series of unilateral decisions by Hauptman?

NCUA’s Defense of a One Person Board

On April 18, 2025 two days after the two board firings, the agency published an internal staff memo on the current state of the NCUA Board.  The memo was unattributed and contained no statements by any NCUA person.  It was just an anonymous assertion with these points:

Please be assured that the NCUA has precedent and standing delegations of authority in place to continue performing all operational and statutory requirements under the authority of a single Board Member. No statutory authority, internal legal opinion or other objective fact was provided to support this “assurance.”

In support of this undocumented position, the agency referenced a purported past event:

“During the Bush Administration (2001–2002), Chairman Dennis Dollar acted as a sole Board Member. He held a Board meeting, voted, and took several actions, both administrative and operational. Chairman Dollar recently stated in an article  in CU Today, “The records are in place at NCUA from 2002 that clearly establish the precedent that the Chairman can act as the Board.”

This statement is the most problematic of all.  Immediately after the board firings, Dennis Dollar called them “unprecedented.”  But a day later he claims that his prior tenure is now the precedent to follow this unprecedented event (see same article).

However NCUA presents none of the “records” that Dollar says are in place and certainly references no legal opinion.

What is even more curious is that the official NCUA 2002 Annual Report page 13 states:

Board members confirmed

The highlight of NCUA’s legislative year occurred March 22, 2002, when the U.S. Senate confirmed JoAnn Johnson and Deborah Matz, both serving as interim appointees, to join Chairman Dennis Dollar to complete the three-member NCUA Board.  

According to NCUA’s public account, Dollar’s two colleagues were indeed present, serving as interim appointees. There is no mention of his taking any action to set a precedent for one person rule to be followed in the future.

Following NCUA’s circular reasoning in citing a former board member and then that person confirming it is OK to do so, NCUA closes its staff update saying:

“It is the NCUA’s long-held view that a single Board Member constitutes a quorum when there are no other Board Members. Chairman Hauptman and NCUA’s leadership are equipped with the required authorities to continue implementing the Administration’s priorities. . . 

The memo asserts an  anonymous long-held view with zero factual, no legal reference nor any public prior event where this opinion was expressed.  The long held view is  an argument made of whole cloth.

One could just have easily asserted that in any organization’s bylaws or chartering authority where a  quorum is required, the term presumes more than a single board member is necessary to conduct business.  That is a more reasonable understanding of the quorum requirement.

So instead of clarifying Hauptman’s authority as Chairman, Vice Chairman and board member, the three-in-one board situation now, the agency presents a shallow, undocumented explanation to the staff and the public.

What’s at Stake this May Day

The rule of law is at stake.  NCUA has become a basterdized agency with no apparent legal grounding.  Fire the board and turn the agency into  one person rule,

This is the reason for the Unilever FCU unexplained liquidation is so important.  For the most consequential action the regulator can take versus a credit union is to put it out of business with no due process or public accountability.

The action was intended to demonstrate we’re really in charge now.  It is the largest liquidation in six years or longer.  A first example of how  the agency now “will ensure America’s credit unions are safe and sound.”   And if this arbitrary assertion of power can happen to Unilever FCU, it can happen to any credit union.

Credit unions today are confronting a situation where the entity charged with overseeing the legislation and regulation protecting the system, is itself acting extra-legal, unable or unwilling to even defend its current board status.   In other words the agency which enforces the law cannot defend its own legal standing.

Where are the agency’s lawyers so quick to explain the agency’s legislative interpretations?  Did they challenge the firings?  Brief Hauptman?  Were there resignations on principle if there was an obection?

Every NCUA employee took an oath to support the constitution, not a specific person in power.  Where are those individuals of courage and character in the agency?  Silence is consent.  Consent is capitulation.  That is the end of the credit union democratic experiment, unless there is a MayDay uprising starting now.

Learning when to speak up is an art in both personal interactions and leadership of a public agency.

Words are critical in times of crisis and uncertainty.  But the three NCUA board members  have embraced silence as their preferred form of leadership.

Emptying Out the Federal Government

Entire agencies in Washington and across the country are being dismantled and staff arbitrarily let go.  Every agency  including the FDIC, the FTC board  (an independent agency) and all those on which the public relies from the CDC/NIH, to the VA and Social Security are being taken apart.

These radical reductions are not about fraud or efficiency.  It is to break these agencies’ ability to deliver their basic services to the public.  Services approved and funded by Congress.   It is an attack on the core responsibilities of government and the citizens which depend on these services.

Where is the NCUA Board?

For at least the past year, the NCUA board members have been literally missing in action.  There have been extended member  absences due to medical or family leave.

Borad meetings have been routinely cancelled.  Scheduled meetings have had micro agendas such as updates on internal programs while the difficult challenges of credit union direction are ignored.  These chalenges include the growing spree of bank acquisitions and the pillaging of credit union member reserves by CEO’s in mergers,

Their inaction has been bipartisan.

The Current Uncertainty

This month the press reports NCUA has held two closed board meetings to discuss “personnel matters.”  It is obvious the agency must respond to the administration’s imperative for drastic staffing cuts.

This is an issue that affects every credit union and its members.  This is not about policy, but the abillity of the regulator to do its core job of examination and supervision.

In a democratic system, the ultimate arbiter of power are the people.  In town and city across the country individuals are rising up to protect their interests responding to the disabling of key government functions.

But no one is standing up for NCUA because there is nothing to stand up for.  No plan, no pending organization redesigns.  Total silence.

When the time comes for action to protect credit union interests, there will be no platform to defend.  The troops will have been off fighting for CDFI funds, or to modify the CFPB’s structure or a myriad of other potential changes sorted out in every other part of government.

Moreover all this time the industry will reserve its biggest efforts and in conversations with top leadership in government, protecting credit union’s federal tax exemption.

No federal government agency can save itself from a targetted effort by political leadership to tear it down.  Only the public who rely on these services can do so.   And it is happening.   Because the press and agency employees and former employees are speaking up in other purges to inform the public about what is happening.

But not so at NCUA.   This is not the time for board silence.  Rather united efforts balancing new realities with ongoing responsibilities should be presented as in everyone’s interest.

Where is that plan and the basis for credit unions and their membersto support it?

Recently I contacted the Library of Congress (LOC) to see if they had copies of Report on Credit Unions.  This monthly printed publication was begun in January 1957 and continued through the mid 1980’s.

Here is what the librarian found in the search of their records:

I am sending you the title page of the Report on Credit Unions published in January 1957–the only issue we have in the collection. I also noticed that it was cataloged as a monograph, not a serial. 

I ran another search in the Ulrich’s Periodicals Index using the ISSN number–I have attached the record from Ulrich’s as well. Ulrich’s shows a different publisher, but the original publication might have been bought at some point by CoVest Reports, Inc. listed in Ulrich’s. The serial appears to have been a bi-weekly newsletter which might be the reason it wasn’t collected by the Library.

I searched Google books and found the title mentioned in several publications:
Congressional hearing from 1963 which refers to volume 5, issue no.3, dated March 15, 1963 published by Reports, Inc., Kent, Conn.

In-plant Thrift and Loan Services by Banks and Credit Unions (1959) by Rudolf Modley – the name on the 1957 issue–cites several articles from Report on Credit Unions.  

That is the extend of the governmental records of the Report’s  “first draft of credit union history” published during  this consequential time of credit union expansion including the era of deregulation.

The Report was cited in Congressional testimony, linked above, as part of the debate during the President’s tax message in 1963.   The reference to the Report was not about taxation but rather the necessity for supporting quality supervision of credit unions citing an Illinois example.

The Absence of Historical Records

When attempting to write a brief account of Ed Callahan’s years as Chair of NCUA I learned there was no repository for trade association publications or the numerous private newsletters that tracked the industry prior to the era of online media.

CUNA Mutual had sent their records to the Credit Union Museum.   NAFCU when it closed down in 2024 apparently had no repository of their numerous magazines and weekly newsletters to chronical their founding in 1969.  Similarly I could not locate a source for CUNA’s weekly and monthly printed publications.  State league newsletters were similarly not kept.

I contacted NCUA to see if the 21 NCUA Video Network VHS tapes created in the Callahan era had been saved.  No copies could be found of these special reports which, among other recordings, included live excerpts of the first, and only, national examiner’s conference.  There were two hour long live recordings of sessions with examiners led by Rex Johnson and a Harvard Business School professor to enhance examiner analysis and supervision skills.

Why the Past Matters Now

History may not repeat itself, but it does rhyme.   At the moment NCUA leaders are confronting the challenge of becoming more focused and efficient following policy guidance of the Trump Administration.

In 1981/2 the Agency faced a similar challenge but for very different reasons.   The credit union system was in crisis.  “Survival” was the priority according to CUNA President Jim Williams when introducing new Chair Ed Callahan at the February 1982 GAC convention.

The broad policy agenda was for credit unions and NCUA to respond to the new era of deregulation.   For NCUA this meant a complete reorganization of the agency to prioritize field examinations and supervision led by the six regional directions.   The DC head office reduced the number of staff departments from 16 to 2, an Office of Programs and an Office of Administration.  The Executive Director, Bucky Sebastian, was also the General Counsel.

The recently created DC consumer examination team which planned to employ as many as 50 personnel was in turn transferred to the RD’s. Every examiner had responsibility for completing an annual safety and soundness and compliance exam for every FCU,

The result of this reorganization placed operational responsibility on the RD’s, not central office staff. It led to a reduction in agency budgets for three consecutive years along with the lowering of FCU operating fees annually.  The agency including the CLF and NCUSIF had been designed for the open competition in which the credit union system completely outpaced their banking and S&L counterparts for the decades to come.

The Relevance for Today

Instead of trauma and closed door board discussions, these 1982  changes were done openly and with clearly stated administration and policy goals.  The messages were delivered via the video network with the first tape a credit union panel discussing the challenges of deregulation.

Public board meetings were taken “on the road” with the first held in historic Faneuil Hall In Boston MA in 1982.  Weekly press releases covered both agency initiatives and credit union progress.

But finding the contemporary public record of these events is very difficult.  When the past is lost, or worse ignored, then the present is left adrift.  When there is no understanding of how past events, there is a tendency to believe that only the present matters.

When disruptions occur whether from market or economic forces or changes of administration, the tendency is to protect the status quo, the known.  This is the result of bureaucratic incumbency.   It is only human nature for those at the top of an organization or career to protect their legacy.

The best way to understand the need and inevitability of change is to know the past.  This is particularly critical if those with ultimate responsibility are not familar with credit union, let alone NCUA, history. That familiarity can not only provide lessons but olso hope that change is necessary for an even better future.

That was the outcome of NCUA’s 1981-1985 makeover.   One would hope it would be the result  in today’s NCUA leadership deliberations.

The prime agenda item for Thursday’s NCUA board is the NCUSIF’s year end audit and setting the NOL cap for December 2025.  The political context in Washington at this moment makes this  meeting critically important.

Will the public discussion reinforce the understanding of the Fund’s  extraordinary performance and its unique  cooperative design?   Will its decade long performance of insured losses below a basis point, confirm its critical role in credit union’s unique purpose in America’s financial system?

The Political Context

The 2024 external CPA  audit was released last week.   It continues to show the financial stability of the cooperative system and the strength of its unique deposit insurance model.

This track record  is especially vital in this time of an administration challenging all aspects of federal agency performance.  This includes the federal regulatory structures, including FDIC’s oversight. For some the NCUSIF’s functions appear quite similar.  Could its future also hang in the balance?

It will be vital that the Fund’s uniqueness be affirmed during this update.  Especially these three characteristics:

• A unique funding model; Every credit union member contributes directly 1 cent of their insured savings dollars to the NCUSIF’s 1% deposit base.  This member-centric capitalization is a direct copy of cooperative business design.
• Explicit statutory guardrails on fund performance: There is complete and timely transparent reporting marked by the annual  independent CPA audit and monthly public financial postings.   Statutory limits are provided on total balances and a dividend paid to the owners, when this CAP is exceeded. Premium assessments in the event of catastrophic events, are clearly defined.  Premiums have been used only three times in the fund’s 40 year history.
• The right to withdraw. If a credit union changes its charter or insurer their accumulated 1% deposit is returned. All 1%  deposits are returned if NCUA ceases to manage the fund.

How Board members present the NCUSIF’s demonstrated financial success may be crucial to its continued independence, not to mention NCUA’s.  If credit unions lose their fund in a regulatory realignment, would the singular credit union system be far behind?

Key Performance Issues

We knew yearend 2024 financial outcomes would be superb based on the November 21, 2024 NCUSIF board update as of September 30.  The yearend equity ratio is above .302%  showing the importance of the NOL cap. If it had been at its longtime cap of 1.3%, credit unions could have received a small dividend for 2024.

Will the Board’s discussion of this and other topics be anchored by full transparency, supported by real facts and the historical record versus hypothetical conjecturing?

The fund’s effectiveness is not based on its total assets, but rather, as in all insurance underwriting,  its size to relative to insured risk.  For example, the allowance account at $237 million is set aside from retained earnings.  It equals 1.3 basis points of insured savings at yearend.  Only once in the past ten years have total cash insured expense losses exceeded reserve level.

Specific areas of importance for board oversight include:

1. How will the NOL cap for December 2025 be set? This limit triggers a dividend when earnings raise the yearend ratio above this number. There was no data provided when the Board set the NOL for 2024.  It simply extended the prior year’s limit,  no analysis provided. Even the detailed assumptions used by staff in the prior two years did not support their 1.33% recommendation. Will  real numbers be provided with full details of any hypothetical assumptions? Or, might the board simply endorse the historical 1.3% cap used in the first 33 years following its redesign?
2. The greatest internal risk to the Fund’s effectiveness is the management of its $23 billion investment portfolio. Since December 2022, the portfolio’s maket value  has been less than its book, that is underwater.   The portfolio’s 2024 full year return is 2.5%. The overnight cash portion yields  approximately 4.5%.  The below book term portfolio earned just 1.92%.

Yet the fund continues to invest long in November, extending its duration risk, at a time of a reset in what a normal yield environemnt may be.  To sustain the Fund’s equity ratio a yield between 2.5-3.0% is necessary based on 40 years of actual operating results. The critical topic is what will the board require to improve the Fund’s interest rate risk management and turn around this continuing portfolio underperformance?

3. The fund’s transparency is critical to its public credibility and trust. The allowance account is determined using an “internal econometric model.”   The model’s details and assumptions should be included in the staff’s presentation.

The continued use of Federal, not private GAP accounting misleads, mischaracterizes and  distorts the fund’s actual financial standing.  The terminology and schedules used with the Fund’s accounts are totally irrelevant since the NCUSIF is not an appropriated entity.

Federal GAAP removes specific information accounts from the NCUSIF’s financial statements.  For example is the portfolio’s actual value $22 or $23 billion?  Where is the net income total?  Or  retained earnings?  These traditional GAP terms do not appear.

The federal terms and schedules used are not relevant for the NCUSIF and convey an incorrect impression that the NCUSIF is somehow a federally appropriated fund. Or red meat for an uninformed DOGE analyst.

At a minimum private GAP financial statements presentation should be presented alongside the Federal GAP.  For private GAP is how all three of NCUA’s other managed funds are presented.

I am looking forward to the meeting.   Every credit union should as well.

In a full first day of pomp, circumstance and executive orders, a new regime took over the leadership of the U.S. government.  Among the new President’s many actions was appointing Kyle Hauptman as Chairman of NCUA.  What will this mean for the agency and credit unions?

Among the blizzard of Trump’s first day executive orders were a number directed at the administration of federal agency management.   These orders included:

• The requirement for all employees to return to office five days per week;
• A freeze on hiring;
• The removal of civil service protection on senior positions.
• Ending all DEI training and policy implementation.

There were also multiple references to eliminating regulations and sending the people’s money back to them via reduced spending, and maybe lower taxes.

Chairman Hauptman’s term expires in August of this year.  Will he follow these priorities of the new administration or assert independent agency status, and therefore not bound by these initiatives?

Hauptman has a number of initial decisions that will indicate what his governing practice will be including:

• Who does he add to his team as appointees and what is their professional experience–credit unions or government employment? Or, purely political patronage?
• What is his governing philosophy? Is the job a full-time leadership responsibility for the agency, or merely a policy setting role delegating to staff all interpretation and implementation?
• What is his view of the role of the cooperative credit union system? Is the coop design unique, or just another form of financial choice in the marketplace?  How does he assess the major trends in the industry including merger-acquisitions, the buying of profitable banks and the suggestion that credit unions be taxed?

Preparing for the Role

Hauptman announced his intent to become chair posting “openings” on LinkedIn several weeks ago.   His view of credit unions and a governing agenda have never been spelled out.  His statements on policy have been in response to Harper proposals, which he has largely supported including the longest, most intrusive rule NCUA ever added to the books, Risk Based Capital.

What will be his leadership style as Chair?   How accessible will he be to the public, the press and to the credit union community?   Will he listen in conversations or deliver scripted positions?  Will he present objective and fact-based priorities or rely on general cliches about government’s role?

Can he articulate common purpose with the cooperative system founded on collaboration, or will he assert NCUA’s independence from credit union’s destiny or fate?

When problem events occur, will he respond with factual answers, send out staff to reply, or worse, just stay silent and avoid any comment as the press reports on credit union shortcomings?

People, especially those working in credit unions serving members, want to hear from their regulators.   The coop democratic structure is intended to give responsibility to the members and their chosen leaders.  Openness builds trust and confidence.  Distance undermines the collaborative advantage which is the foundation of two vital NCUA facilities: the CLF and the NCUSIF.

The Learning Challenge

For both individuals and organizations to succeed they must become learning entities.  Responding to change is more than just adding new technology or professional expertise.  It means sharing  a vision while responding to the constant changes which we all face.

The Shakespearean actor Patrick Page stated that it takes at least 30 years to become an effective performer.  Acting first requires knowing thyself, the motivations and awareness that comes from life’s experiences, relationships and multiple roles.  But just as important is understanding the same characteristics in others-especially if you intend to present their character to the public in plays.

Leaders are formed in the same way.   Leadership is not conferred by appointment to a role—no matter how deserving the individual interprets his or her selection.  It is formed in the challenges of life—the wins, the disappointments and the strivings.

Now Hauptman has the chance to show how he will learn and lead.   The fate of an industry may depend on how successful his growth can be.