Money Is Power, and NCUA Is About to Have None

News & Insights

Once again credit unions are gaming the system, this time by trying to defund their own regulator. Large credit unions pushed for several provisions in a new financial deregulation bill that would allow them to assess NCUA’s budget, and basically enable them to shame the NCUA into cutting parts of the budget the industry feels are “unnecessary.” So, in a nutshell, large credit unions would essentially regulate their regulators. What a country!

And the large credit unions definitely aren’t fooling anyone with their spin on why the hearings will be a positive step for the industry. The president of CUNA, Jim Nussle, was quoted saying “We believe there is immense capacity for NCUA to reduce its footprint.” While large credit unions claim the hearings will help ensure NCUA isn’t overspending on things like travel expenses and executive salaries (which is extremely hypocritical considering “nonprofit” credit union executives are making millions), it’s obvious that this is just a ruse for a larger attempt by large credit unions to slash NCUA’s budget and make any robust oversight and regulation impossible.  Determining how much money NCUA is given to do its job is a pretty good way for the regulated to regulate the regulator. 

This isn’t the first time large credit unions have tried to rein in their own regulator, either. First, they delayed the Risk-Based Capital Rule, which requires large credit unions to ensure they are adequately prepared for any future economic headwinds, and then they delayed it again… because… why not?  But a hostile takeover of NCUA’s budget would take it to a whole new level.

As we’ve seen in recent stories, NCUA is known for its lax stance towards misbehaving credit unions. The agency continuously turns a blind eye and condones the blatant mission creep of credit unions that puts not only their customers at risk, but also taxpayers in general. If there is even any real oversight still being done by NCUA, with even less money and incentive to do their job, it might all be thrown out the window entirely.

Even former NCUA leadership is recognizing the ridiculousness of the proposal. “It is like letting the fox guard the henhouse. It is an attack on the core of independent oversight,” said Debbie Matz, past-NCUA chairman from 2009 to 2016.

NCUA is the only financial regulator to be subject to oversight hearings held by the very institutions they oversee! Why are we letting large credit unions that claim to be “not for profit” but break the rules over and over again regulate their own regulator?

This gross overreach is just the latest in a growing list of reasons Congress needs to re-evaluate the tax status of large credit unions.