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The CU2.0 Podcast
This podcast explores contemporary, critical thinking and issues impacting the nation's credit unions. What do they need to be doing to not just survive but prosper?
The CU2.0 Podcast
CU 2.0 Podcast Episode 354 Lobbyist Elizabeth Ergubian on NCUA's Future, Quo Vadis
Buckle up, there may be turbulence on this ride.
On the show today is Elizabeth Eurgubian , now a lobbyist in Washington DC but who just a few months ago served as NCUA Director of the Office of External Affairs and Communications and Policy Advisor to Chairman Harper. That’s an important position at NCUA - it’s a political appointment.
Before that she was deputy chief advocacy officer at CUNA and before that she was a vice president and a lobbyist for ICBA.
She knows Washington DC and she especially knows the lobbying intricacies involving credit unions and community banks.
This episode was recorded the day before NCUA chairman Kyle Haputman revealed the staff reorganization plan for NCUA which is a slightly deeper staffing cut than Eugubian predicted but that makes her predictions for NCUA operations with a smaller staff even more chilling.
Bottomline: she says everything will take longer at a slimmed down NCUA, an agency she says was thinly staffed before this 20+ percent staffing cut.
Along the way Ergubian gives a short course on how to lobby effectively and offers insights into the likely future of NCUA (will it stay independent?), the credit union federal tax exemption, and credit union examinations in a slimmed down NCUA.
Listen up.
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SPEAKER_00:Hi, and welcome to the CU2.0 podcast with big new ideas about credit unions and conversations about innovative technology with credit union and fintech leaders. This podcast is brought to you by Quillo, the real-time loan syndication network for credit unions, and by your host, longtime credit union and financial technology journalist, Robert McGarvey. And now... The CU 2.0 Podcast with Robert McGarvey.
SPEAKER_03:Buckle up. There just may be turbulence on this ride. On the show today is Elizabeth Ergubian, now a lobbyist in Washington, D.C., but who just a few months ago served as NCUA's Director of the Office of External Affairs and Communications and Policy Advisor to Chairman Harper. That's an important position at NCUA. It's a political appointment. Before that, she was deputy chief advocacy officer at CUNA. And before that, she was a vice president and a lobbyist for ICBA. She knows Washington, D.C., and she especially knows the lobbying intricacies involving credit unions and community banks. This episode was recorded the day before NCUA Chairman Kyle Hauptman revealed the staff reorganization for NCUA, which is a slightly deeper staffing cut than Urgubian predicted. But that makes her predictions for NCUA operations with an even smaller staff more chilling. Bottom line, she says everything will take longer at a slimmed-down NCUA. An agency, she says, was thinly staffed before this 20% staffing. Along the way, Argubian gives a short course on how to lobby effectively and offers insights into the likely future of NCUA. Will it stay independent? She sure hopes so. Also, the credit union federal tax exemption and credit union examinations and a slimmed down NCUA. Listen up. You bring an unusual resume to the table.
SPEAKER_01:Yes, yes. I always like to share the experience because it is kind of unique.
SPEAKER_03:What makes your resume even more unique is that you worked for the Antichrist before you went over to work for CUNA.
SPEAKER_01:There's a lot of comparisons I have with that as well. I started my career at the Federal Reserve Board. working in banking law. And the division I worked with at there was the Consumer Financial Protection Office that oversaw pretty much all the consumer financial protection regulations in the U.S. or the vast majority of them. This is at the Federal Reserve. That office eventually, and the office had like 15 attorneys. That office eventually was what became the CFPB. So the CFPB, that tells you the degree of difference between what the CFPB was versus what was prior to Dodd-Frank. It was just a 15-person office at the Fed. That then became a whole agency. But I started my career at that office and worked there for four and a half or so years. I wanted to get some industry experience because I thought, you know, I'm only seeing one side of the story. I got to know what's happening on the other side too, to really be thorough in my career. And so I worked in-house at Sally Mae, a student lending company, and I worked for them as well as their bank. They had a bank that serviced a lot of their loans. So I was a counsel attorney for both the Sally Mae in terms of all their private student lending products. And also I worked for the bank as well. And I did that for a couple of years. And one of the things I loved about Sallie Mae in that position was some of the advocacy work I did. I actually went and lobbied the Fed on a few issues dealing with student lending regulations. And I thought, this is kind of the fun stuff. I really like this. I'd like to do more of this in my career, the advocacy side. And so I left Sally Mae, which worked for the Independent Community Bankers of America. They were looking for a regulatory attorney, one that could help on consumer financial protection issues, which was what I was trained in, and also work on compliance as well as advocacy. So I left and went there for several years, and that was during the time of the financial crisis, Dodd-Frank. So I was very involved in a lot of those regulatory issues, extremely involved. So that brings me to my point. And I always tell credit unions this. When things are going bad in terms of– and you can even get a little bit political and say– you know, the Democrats are in power, you know, and at that point, and I'm not, I'm apolitical. I'm a lobbyist, an attorney. You, you, you, everybody's your friend when you're in a lobbyist in DC. So I'm not taking sides here, but typically if you're in the industry, you have a Democrat president, you have a Democrat Congress, both houses, and you're, you're following the, one of the worst financial crises in U S history and, That's not a good time to be in the industry in terms of what regulatory changes are going to occur. You got to fight for tailored regulatory changes because you don't want regulations that are really meant for the larger institutions to impact the smaller ones like community banks and credit unions so that they are out of the market. They can't compete anymore. And that was a big issue during that time. So. At that time, and when you have a political situation like that, the banks like to be friends with the credit unions. They really do. They want credit unions on their side in that. They want to be standing next to them when they go into a member's office or a regulator's office. See, look, I'm next to the credit union. See, we're buddies. We're on the same side here. Because the credit unions give banks credibility in arguing for fewer regulatory changes. So when I worked at ICB, I did work closely with with NAFQ and CUNA on a variety of regulatory issues that would be problematic for smaller community-based financial institutions. And at that time it was particularly the mortgage rules. There were a lot of really comprehensive mortgage regulations because that was the issue with the financial crisis. And we all had to be at a coalition and we all had to work together because this was gonna be real heavy stuff. And it was mostly the community-based institutions that were working closely together. And then the larger banks, Eventually, you know, their lobbies eventually, you know, went off on their own because they realized, well, these rules aren't going to be great for us, but they're going to be worse for our competition, which is the smaller institutions. So we'd rather have them. So we really had to work together. So that gets to the point that when you have a political situation like that, the banks and the credit units could be BFFs. And if you're working for a community bank lobby, you really want the credit unions with you. You want to say, oh, look, see, we're together because that gives your argument credibility. Now, fast forward, and if that changes to a political environment, maybe like now, that's when you're going to see maybe more attacks on the credit union industry by the banking industry, particularly community banks, because they don't need them anymore. So I knew credit union lobbyists because of that. because of my work at ICBA. And I also knew some folks over at CUNA at the time. They were going through some changes. They had a new CEO, Jim Nussel. They had done some restructuring and they wanted to have a different approach to their regulatory office. And they approached me and I took the position there to lead the regulatory advocacy department there. And that's how I ended up going there. It
SPEAKER_03:all makes sense to me because I thought for a long time that Community banks have much more in common with credit unions than they do with the big banks. Yes. Chase could give a hoot about either of them. They're not relevant. Chase doesn't think about them at any moment during the course of a day. The enemy for both credit unions and community banks are the big banks and the fintechs. It's pretty simple.
SPEAKER_01:That's correct. And at that time, like I said, the mortgage regulations. Now, what ended up becoming... regulatory changes by the CFPB, they weren't great, but they could have been so much worse for the industry, especially community-based financial institutions. And we were all sort of in a coalition working together, including with the large bank lobby. And eventually toward the end, as we were getting closer to getting some changes made, then they're not returning our phone calls. and they're not returning my emails for meetings and whatnot. I'm thinking, well, gee, we had this great coalition going on, and now the big bank lobby isn't, you know, they're sort of ghosting me, you know? And that's why, because there was a realization that, okay, you know, some of these provisions are going to be really problematic for our large banks, but they're going to be worse for these other institutions. And maybe that's a good thing. So we really had to fight it on our own. And like I said, the pain that could have been felt at that time is far, you know, it ended up being far less than what it could have been. And that's something to note because there's a lot of lobbying that goes on behind the scenes that you don't see. You don't see it on LinkedIn. You don't see it, you know, highlighted with a grip and grin picture, but it's happening. And that's the most significant lobbying, the stuff that you don't see.
SPEAKER_03:Years ago, I worked for a very big Washington, D.C. trade association. I was not a lobbyist, but I knew lobbyists. And those guys worked five days a week, not just when legislation was being considered. And they had hellacious, hellacious restaurant and bar bills.
SPEAKER_01:See, they're not like me. I'm cheap. I like to go to Five Guys. If I have a meeting, I'm like, we're meeting at Five Guys. I just want
SPEAKER_03:a burger. This industry was probably more appropriate that the expensive steakhouses were always a good idea.
SPEAKER_01:Yeah. See, credit union lobbyists, we're a little on the cheaper side. But no, I get what you mean. Yeah. You know, especially in the older days, it was a lot more about the wedding and dining and that sort of thing. And then eventually it evolved to where that was not. going to be the way to lobby anymore. And you had to be more creative. And also, you know, you're working for a trade association. Sometimes you don't have the funds to have that kind of access. You have to go into other routes. And of course, there were campaign finance rules as well that changed things. So lobbying has definitely evolved into a different type of position now.
SPEAKER_03:The one thing that's consistent, I think, is that back then what these guys were trying to do is build relationships with people. And at that moment in time, they thought the easiest way to build relationships was over a martini or over a steak.
SPEAKER_02:Yep.
SPEAKER_03:Even today, though, the key thing is building relationships. You can't just go knock on a member's door or a senior staff person saying, I got to talk to you about this tax exemption thing. He's going to say, who the hell are you? Why are you here? Yeah. You've been knocking on his door, taking him out for coffee at Starbucks for six months or six years. He'll talk to you for a few minutes.
SPEAKER_01:That is a great point. I didn't tell you where I'm working now. I'm at Atlas Advocacy now. I'm a partner, and this is a government relations firm. We do lobbying for all different entities, including financial services, credit unions, whatnot, credit union trade associations. That's what I do now after leaving the NCUA, but you raise a very good point in that How is access achieved now? And I will tell clients, and I don't think they always get it. I say, look, I live a mile from the Capitol building and I don't think people understand. I have for the last 18 years, same house. I don't think people realize what that entails. I don't almost have to try a lot of times to have access. I just exist and I have access. I go to pick up my kids at school. The family that carpools with me, They work for an agency I lobby. You know, there's all of these types of relationships that happen when you live in the community with which you work that just happen organically without you even attempting, without you putting a lot of effort in. So that is a serious advantage, whether you go with whatever firm that someone hires, to have someone that's that local, not in the suburbs. I mean, you are right there. We can bring members of Congress to our home for a cocktail after work, which we've done before, because we're right here and you're in a nice home to chat. out for a little while. We're able to do that. And we do do things like that. That is extremely, extremely valuable. And it's effortless. It doesn't take any time or strategic thinking or anything. It just can happen organically. It's very helpful to be centrally located in DC. I guess that's what I'm saying. But to your other point, don't go to a member or regulator when you need something. And so many people will do that. Like, well, we need this. So let's go ask this member for this. OK, you should have been having that relationship before you go with the ask, because if you're only going with the ask, you want to establish those relationships ahead of time before you have to make the ask. So now you have the relationship. It's kind of like in The Godfather, that first scene. Where the one individual goes to the godfather. I don't know if you've seen this. I'm guessing you have. Yeah,
SPEAKER_03:right, right. You know, he's like a funeral parlor.
SPEAKER_01:Right. And he's coming in and saying, I need you to help me with this. He's like, you're how come I'm only seeing you now? Like my wife is your son's godmother or whatever you how come you don't visit? Like, how come I'm only seeing you when you need something? And it's a little bit like that with anything, with regulators, with members of Congress, with whomever you're working with, other trade associations. You want to establish those relationships early on and have a foundation. So when you do have that ask, you have that capital, you have that relationship already established.
SPEAKER_03:I totally agree. It's also why I'm a long-time skeptic of QNSGAC and walking the hill. Because if I'm sitting here and I said, who the hell are you? I mean, it's never seen you before. Why are you knocking on my door? But
SPEAKER_01:yeah, yeah, you have to the meeting. And let's say you are going in for a first time. You got to know that's the appetizer. That's not the full relationship. If you're going into a meeting to meet a member for the first time or a regulator for the first time on an issue to establish that relationship, you establish it, you say what your issues are, but no, that's not the end of the story. You're not done. You're not like, oh, I met with the member. Okay, I guess I did my lobbying. No, there's follow-up. That relationship has to be maintained through follow-up, through offering yourself as a resource, helping them do their job better so they may help you on another occasion. That's all extremely important. And it gets to the point you made that lobbyists lobby every day of the week. They're not off when everybody else is off. They are always working. Even in times that are down, you're not saying, oh, there's no big bills happening. I'm going to take a break and go to Vegas for a while. No, you're like, okay, how can I use this time to build my foundation for when I am going to need something? Because it's always going to happen. That day is always going to come. So you're either cashing in or you're building the foundation. You're using the time to either build or cash in.
SPEAKER_03:I know he's now retired, but a successful lobbyist who had one skill. He was a pretty good golfer.
SPEAKER_02:Golf is long. It's a long game.
SPEAKER_03:There were a couple members that various clients wanted to get some messages across to. And golf takes about four hours for 18 holes. Yeah. And he would go out and have four hours playing with a member in a foursome. There'd be two other people in there. And he wouldn't spend all four hours talking about his issue. Of course not. But it would be raised in the course of the game. And the member would listen to him. Exactly. Switch gears, NCUA. What the heck is happening there? I have a feeling that... I'm sitting in Langley at the CIA trying to figure out what's going on in Tehran. And the truth is, I have no clue. No clue. People tell me, oh, I think this is going on at NCUA. And I have no clue. I don't think they have a clue either.
SPEAKER_01:Yes, I mean, I would agree with that. I'll give you a little context here too, so that you could kind of understand my viewpoints about it. So I told you how I got to CUNA and I worked there for several years and I was approached, I was obviously always lobbying the NCUA. I lobbied Todd Harper all the time, Chairman Hood, all of these individuals I was speaking with regularly and had regular meetings with. We didn't always do like a grip and grin link post, because like I said, some of your most valuable meetings are the ones that aren't you know, advertise. Sometimes regulators don't like that. They don't want you to necessarily do that. So they show who everyone they're meeting with constantly. Sometimes you do have these phone calls that occur and interactions that occur that are not highlighted. And I say that because I want folks, you know, in the industry to really understand that. I think some people look at LinkedIn and say, oh, look at these grip and grins. Look at this person at the White House. Oh, that means they have access because there's a grip and grin at the White House. That's not what that means. It's nice. It's a pretty picture. But let me tell you, the most significant meetings are the ones that aren't going to have the grip and grit. That's just FYI. So that's just my way of educating folks on that. But let me get to the point. I had frequent conversations with folks there because I was a lobbyist and that's what I did. And again, I used myself as a resource. I wasn't just asking. I was also, if I knew of any information, I might share that with them. If I heard something that might be helpful to those efforts, I might share that with them. Because you want this relationship to be give and take, not just asking for stuff and waiting to get it. They approached me into the Biden administration, the first year into the Biden administration, about taking over as Director of Office of External Affairs and Communications. That is The only director position at the NCUA, that's a political appointment, meaning it's not a career job. You're appointed by the administration and whoever's chairman, only report to the chairman, not the rest of the board. And you could be dismissed at any time for any reason. It's a Schedule C position. You have to go through a whole process to get the job. And you're not a career employee. When the president changes or the chair changes, usually you're out as well. So I was very interested in the position. I always thought, you know, if there's any job at the NCUA I would love to have, it was that one. That was the one position I thought was different for me, but would really... helped me grow as an individual and in my career, but I figured no one would ever consider me for it. Well, when they reached out, I thought, oh my gosh, I can't believe it. Yes, I'm interested. Well, the Biden administration, was not interested in me. And this was because I was a lobbyist and they didn't want lobbyists who lobby an agency then going and working for the agency that they were just lobbying. They didn't like this kind of revolving door and they actually had an executive order against those types of hires. So when we approached the Biden administration to ask for an exception, to ask for a waiver, they said no. they were granting a couple waivers at that time, but very, very few. And they were only in like for labor, labor employees, folks in the labor union world, not for anybody else. So they said no. So like any lobbyist rule, number one of being a lobbyist is don't take no for an answer. Right. So we said, okay, we wait. You know, I thought, you know, if you're willing to wait, why don't you ask again in like another month or two? And that's what, the chairman's office did. Eventually, after a few months, the administration said, okay, we will grant a waiver for me to take this position. I think I was like number 16. They only granted maybe a couple dozen waivers of all Schedule C employees. And so credit unions got one, and that was myself. So that's why I started at the NCUA in in year two of the Biden administration. I served three years there, not the full four. And then once the president changes over, which happened, then I'm out. I stayed for the transition for a few weeks as Chairman Hauptman transitioned into the position and then left and went to Atlas Advocacy after that. And I always knew that was, you know, this is how it works. This is the job. You don't take the job unless you really understand this. But that gets to my point. I knew that this was how it works. I took the job knowing there's a very high likelihood I'm only going to be here for three years. In fact, there's probably like a 99% chance I'm only going to be here for this amount of time. There's going to be an end. I need to do everything that I want to get done and the impact that I want made in that amount of time. I had that situation and the deputy who worked with me at OEAC had that situation. Nobody else at NCUA was in that position. It was just the two of us. And of course, now neither one of us are there. Everybody else who works at NCUA, if you're not with the board office, you're a civil servant. You're not a Schedule C. You're a civil servant employee. So it's kind of interesting as folks, the day after the election, many people were coming by my office. They felt very bad. They know that I'm going to be having to leave. And And I'm thinking to myself, it might not just be me. Because I know if the administration comes in and makes some changes, it could be other people leaving too. There could be a shift in how things are done. I don't think folks at the agency thought that. So to have to now face the rifts... And the early retirements and the buyouts and all of what's happening now, I could imagine is incredibly stressful for the individuals that are there. So you have two groups, you have those that leave and they leave and they go off to do whatever, get another job or just retire, take early retirement. But then you have the folks that stay and the ones that stay then have to take on the workload that the others left behind and they have to take on the anxiety of of how long do I have here? And should I be thinking about leaving and all these things? And that type of anxiety doesn't work with people that take jobs at the NCUA. I mean, you take a job at an agency like the NCUA because you don't want that kind of anxiety because you want a job that'll pay you well, it's stable. You're going to have it for a long time. You're going to do your job every day. You're going to go home. Eventually, you serve enough time. You get a nice pension, retirement, health care. You move on. You like that level of stability. If you're someone that wants to work in a crazy environment that's like a startup, you're not going to go work at the NCUA. So now you have an environment that's like that for people who aren't really accustomed to that kind of energy. So I could imagine... it is really difficult for a lot of folks there. And when there's difficulty emotionally, you don't do your job as well. And so that's a concern that I have personally.
SPEAKER_03:The anxiety had to ratchet up when two of the board members were dismissed.
SPEAKER_01:Exactly. And
SPEAKER_03:questionable legality of dismissal, but the reality is, for now, they've been dismissed. And that... didn't seem to be something that was going to happen and yet it did
SPEAKER_01:absolutely that that is another thing so you now see the folks at the top you can't imagine anything like this happening to them and that's happened to them that is going to absolutely just add on to the this is the already existing tsunami of anxiety that you're experiencing. Like, like I said, it's all about expectation. I expected this was going to happen to me, or it was a high possibility. So when it did, I was like, okay, this, I knew this was, that
SPEAKER_03:was built, built into your job. If you're appointed secretary of defense and your president loses, you're out, man. It's one in a thousand appointments or a hundred. Do I know of cases where the executive branch says, no, no, come on, you can stay with us. Right.
SPEAKER_01:Yeah. So you know that going in, when you don't, it's almost like the expectation, if you expect that the reality isn't so bad. It's when you don't expect it and you have the same reality. And that's the
SPEAKER_03:reality of Washington, D.C. employment today, I think.
SPEAKER_01:Absolutely. Everywhere.
SPEAKER_03:Everything that you thought was certain. And you were pretty much right. Not you, but this nameless individual federal employee. Now you have to look and say, you know, the floor is shifting under my feet. You know, it's it's used to be concrete. Now it seems to be like quicksand or something is weird.
SPEAKER_01:That goes to a good point, too, because I like I said, I live here. All my neighbors are federal employees. A lot of them are federal employees and they're they're dealing with some of these issues. So we talk about it all the time. Another concern I have about it is, you know, the younger generations watch their parents. They watch and they watch. adults and see what happens to them. They live like that. And the government job has always been one of the highlights of it. One of the things that makes it marketable is that level of stability. Well, that piece is not there anymore. And anyone watching and experiencing today's world will never feel that way about the federal government again.
SPEAKER_03:Exactly. The attraction. Again, I worked in the private sector in DC. I never really had much interest in working for the federal government. But the people who did, We're attracted by the stability and good benefits. And in most cases, the workload wasn't that intense. For some employees, they wanted their kids working for EPA, wanted intense in that period of time. But for the most part, I'm not saying people are lazy. Please don't misunderstand. But you're not saying, oh, man, I live to work 18-hour days. I love it. Can I have an extra project, please? That's not the person we're attracted to working in Washington, D.C. for the federal government.
SPEAKER_01:Right. And one thing, too, that's worth noting, because we're talking about what it's like at the NCUA now, another distinction, I would say, and I worked for the Federal Reserve as well, so I could kind of compare and contrast a little bit. One thing that I thought was a little unique about the NCUA is it was already very thinly staffed.
SPEAKER_02:Oh, really? Yeah.
SPEAKER_01:Very much so. And that's something that a lot of individuals in the industry, I don't think, understand. FFIEC, which is a group of all the prudential regulators to make sure that our examination procedures are consistent and they work together on CRA. Of course, NCUA doesn't participate in those working groups, but HMDA, those types of things. And I did a lot of interagency work when I was at the Federal Reserve. So that's how I knew who the NCUA was. I was pretty familiar with the agency. There's a ton of different working groups. It's the government. So there's a working group for everything. There's probably a working group for what the holiday party is going to be that year. There's a working group for everything. And you always had, like I was on a working group, I was on a couple different ones. There were a dozen staff members at the Fed that were on these various working groups. The NCUA, same staff member on every working group. Same person they said every single time. And I thought to myself, what is your portfolio like over there? And that was kind of a joke. You know, the NCUA was very thinly staffed, and it looked like that to the other agencies, and it really impacted their credibility as a player at the table. And I always remember that, and everyone felt like that. And then when I went to the agency and experienced it from the inside, it was worse than I even thought. Like everyone's portfolios were gigantic. You would have people working on so many issues that, you know, maybe 10 issues at the Fed, it would be one or two that you have now 10 at someone at the NCUA working on. I never felt overworked at the Federal Reserve. Never. I mean, there were times we had deadlines. There were times during the financial crisis, they were probably all extremely overworked, but those are anomalies. Those are environmental situations that don't happen every day. But yeah, during that time, everyone was working crazy hours. I guarantee it. At the NCUA, people worked a lot. They worked a lot of hours because they were so thinly staffed and so thinly resourced. And You just had to. So I felt like the workload was far greater for individuals at NCUA than it was when I was at the Federal Reserve.
SPEAKER_03:Now, has Hauptmann, has anybody given an indication of further staff reductions at NCUA?
SPEAKER_01:Yes. So I know they're cutting significantly, a lot of buyouts happening. And then there's rifts happening. I know people... Personally, I know people that have been told you're no longer going to be here anymore. So they are significantly cutting. I mean, it'll be under, I'm guessing under a thousand employees. I think it was around 12, over 1200 when I was there. My office, Office of External Affairs and Communications, we had about 14 individuals there. I can't imagine. It'll probably be half that. And we had a huge portfolio. Like every single person in my office was overworked. And
SPEAKER_03:I'll give you- impact the workload? I mean, the question is when the first tech DCU merger goes through regulators for approval, do they have the staff to adequately look at this paperwork?
SPEAKER_01:It's everything's going to be slowed down because not only do you have fewer people, right? You have to take those who's going to do their work. Elves aren't going to do the work. Somebody has to come in and take over what that workload was. Everybody had a workload at NCUA. There was no one floating. Everyone had a workload. So someone has to take that over. Plus, you have the emotional turmoil of what you're facing. That's going to slow you down whether you like it or whether anybody likes it or not. Being in a situation that's stressful slows you down. It makes you unproductive. That's just the way it is.
SPEAKER_03:When you're afraid to go out to lunch because you think you might be fired while you're at lunch, this is not good for your mental health or your work productivity.
SPEAKER_01:Right. So you already, and I think even, I've heard folks at the top say this at NCUA, we're already thinly staffed. We were already, I mean, I know board member Otsuka said this, we were already thinly staffed to begin with. And she knows that she used to work at FDIC. So she understands that too. If you worked at these other agencies and then you come to work at NCUA, you're thinking, oh my God, how do these folks do this? This is just too much of a portfolio for one person to be effective. And it exposes you to potential error, potential mistakes, and just not doing complete work. I mean- Work takes FTEs. That's how the equation works. So yeah, that is absolutely a concern of mine. Also, you'll hear people in the industry, and this also cracks me up, stuff like, well, you guys aren't doing any regulation, so there shouldn't be a big workload. at the agency. That is one very small piece of what the agency does. Examinations, running the CIF, running the CLF, just keeping operations open. My office in particular, do you know how many requests from Congress we would get on questions on things that we would have to be super precise and get those questions back to them in a very orderly fashion? So
SPEAKER_03:your office, is there someone... And your position in that office at this point.
SPEAKER_01:Yes, there's someone in the so Chairman Hauptman has an individual in the position right now who I think is great. Yes. And I'm just
SPEAKER_03:thinking if I'm a member of Congress or a senior staff right now, it's taking four times longer to get my questions answered by NCUA. I'm irritated.
SPEAKER_01:Yeah.
SPEAKER_03:Yeah. I would make sure that Chairman Hauptman understood my level of irritations.
SPEAKER_01:That's correct. Now, I'm not saying that's happening. I'm not saying that's happening.
SPEAKER_03:If the staffing's down by at least half, by your estimation, in that one work group, it seems to me logical to conclude that it's going to take longer to respond, even to a member or staff person's request.
SPEAKER_01:I would make that assumption. Now, this is a very hyper-political environment, too. So if I'm working at the OIAC office right now, whose questions do you think I'm going to get answered first? Right?
SPEAKER_03:Exactly.
SPEAKER_01:So there's certain members you're going to stay up late.
SPEAKER_03:If Ruben Gallego sends you a question, you're going to say, Ruben, isn't that a sandwich? Yeah.
SPEAKER_01:Oh, we'll get back to that later. It's
SPEAKER_03:a great sandwich, by the way. And he's my senator. I'm fine with Ruben Gallego. There's
SPEAKER_01:a little bit of that in any environment, but yeah, you're especially going to see it now. Also, the amount of annual reports the NCUA has to put out, that also went through my office. It's insane. I did not expect that when I got there. We were constantly putting together an annual report because when lobbyists go and they want different things... Thank you. Thank you. Elves aren't writing the annual report. Somebody has to write it. Somebody has to get the information. Somebody has to have all the people in the office make sure they weigh in. Then you got to make sure the annual report looks professional and not like a sixth grader wrote it, right? Make sure it's formatted and beautiful and professional at the level of an agency. There's dozens of these that the NCUA has to do. Now, let's say somebody said, well, just be late on the annual reports. So what? Don't let perfect be the enemy of good. You know, this is the type of thing I hear often. Well, guess what? If something isn't done properly, the next time the chairman goes up to testify on the Hill, which is twice a year usually, who's going to get called out on that? That individual. And that testimony is streamed and anyone in the world could watch it. So these are all issues that you have to think about when you're running an agency. It looks easy from the outside. I mean, any task is easy when you're not the one doing the task, but it's not easy. There's a lot that goes into running these agencies and it takes really competent individuals and many of them to do it effectively. And when you do not have that, the agency cannot run effectively. That's just a reality.
SPEAKER_03:Todd Harper said, this was some weeks ago, outcome of NCUA staff reductions would be almost certainly an increase in the number of credit union failures. We can argue if there's a linear connection there, but I do think if the examinations are more casual, the probability of failures goes up. I'm not going to quantify it. I couldn't. His point is a good point. Is it 100% valid? I wouldn't go that far, but.
SPEAKER_01:I'll give you some perspective on that too, because when I was at CUNA, one of the things we lobbied for, and I personally, this was when I really pushed a lot with the board. And this was when one of the times we were really active in lobbying this. I know the Cooperative Credit Union was also active in this, was during when McWaters was chair and we wanted the 18 month examination cycle because the bank regulators had something similar And we wanted that for credit unions under certain asset size. Eventually, they were able to give us that. And it was eventually expanded at the end of last year a little further. But at the time, the chairman was not in favor of that at all. And this is McWatters. This is a Republican, very well respected in the industry. And he had said, look, it's about... He says maybe for certain asset sizes, this is okay, but it's about protecting the share insurance fund. And if we go too long between examinations, that is bad. exposing the share insurance fund. And we just can't take that level of risk to expose it like that. And I'm thinking, really, it's going to make that big of a difference if you extend the examination cycle for a couple months. Are you serious? It's going to make that big of a difference? We're talking two, three months here. We're not talking three years. And he was very... He says, look, we've looked at this situation. We've run numbers. We've analyzed it. And I... I trust he has because McWatters was pretty thorough in how he analyzed situations and issues. And he said, I just don't believe that is responsible and it's too big of a risk to the Share Insurance Fund. So that was the position he had then. Now, fast forward, there has been a little bit of expansion to that period with some caveats. Certain credit union Campbell ratings don't get the every 18 months or there's a range. It's usually like 14 to 20. So there is some flexibility in how that is interpreted per credit union, and it can be tailored to a specific credit union. But to get to your point, one of the main things you are going to see with the reduction in staff is that if you have a range, like a 14 to 20 month per exam cycle, this is what you have for most credit unions, everyone's going to be on the 20 and probably going to go 20, 22, 23, because you just don't have the FTEs to go in and do these examinations. Or you could get the alternative. You could maybe have the exam within that range, you know, maybe at 20 months. But it might not be as thorough an exam. It might be kind of an in and out.
SPEAKER_03:That's what concerns me is that the exams will become more slipshod. I'm not blaming the examiner. If I have to do 10 exams today... I'm going to be moving around pretty fast.
SPEAKER_01:Yeah.
SPEAKER_03:And I don't have a heck of a lot of time to write these things up. So I'm going to write them while I'm sitting there.
SPEAKER_01:And again, this was something that was thought about years ago with the Republican board, with the Republican chairman having these same conversations there. So it's, I mean, it's not a partisan issue. It's an issue of how do we protect this insurance fund? You're
SPEAKER_03:insurers. None of this, in my mind, none of this is really partisan. I mean, things have become partisan in Washington, D.C., because everything is partisan in Washington, D.C. Where you drink coffee is probably partisan for all I know.
SPEAKER_01:I'm a Wawa coffee person. I'm convinced they have the best coffee.
SPEAKER_03:Yeah, I've lived half my life in New Jersey, and Wawa is kind of like, it's almost an institution on the order of the Roman Catholic Church.
SPEAKER_01:Yeah.
SPEAKER_03:But in better favor. I've never been to a Wawa, but what can I say?
SPEAKER_01:Try their coffee.
SPEAKER_03:Now, NCUA was going to roll out a few other things. There has been rolling out like a tech audit and also going to start requiring succession planning.
SPEAKER_01:Yes.
SPEAKER_03:What's the future of those things? And I think both of them are good ideas.
SPEAKER_01:Yes. So I know they're asking for commentary on some of these some of their rules. What and I know this is sort of across the board with all. agencies and regulators and government offices, where they're asking the industry, is there anything that we should cut? Is there anything that is a regulatory hurdle for you that we should reconsider? The succession planning rule was passed 3-0 late last year. So all board members voted for it. I have heard concern with some in the industry about the regulatory burden of the rule. And I urge people to read the rule because I'm ultra sensitive to regulatory burden. impediments that make it difficult for smaller institutions to really operate and do their job because that's what I lived and breathed for 14 years as a lobbyist for both community banks and credit unions. I did not feel that this was the case with this rule. I felt like this is something you get your board together, you put pen to paper, write a few things down. There's even a model form in there for smaller credit unions. If you're a build from there. I think ChatGBT could even help you with this project, right? Get it done, put it in the file, ask the examiner, hey, examiner, did I get it right? Because if I didn't, tell me how to get it right next time. They're not going to cite you for this. I mean, it's not that environment right now. This is a no-brainer. So I think for those that are really concerned about this rule, I'm telling you right now, it's not one that's going to keep me up at night at all. It's literally an exercise to get you thinking about the succession of your institution to help your members. And the reason for it, I know at the time, Chairman Harper was concerned because he was seeing credit unions merge with others because they lost their CEO. And he said, look, I don't care if a credit union goes under or merges. I mean, these are business decisions. But it is unfortunate to see one do it. And they have to make that business decision, not out of choice, but because they have no other choice. Particularly
SPEAKER_03:when your CEO is 65.
SPEAKER_01:Right.
SPEAKER_03:And it's not like the person was 45 and had a horrible heart attack. No, no, no, no. You had five years to plan for this succession and you didn't.
SPEAKER_01:Yes. And that also is indicative of like, if you can't do that, what other things are we, are we letting slide? Because this is, you know, I have three kids. I got a will. I'm not going to think, this is just sort of a gimme you have. So this is not one of those heavy lift, like the QM rulemaking, like the TILA RESPA forms rulemaking, like interchange. This is nothing like that. To
SPEAKER_03:me, succession planning is good business practice in any publicly held corporation. Yeah. If I'm the chairman of the board, I will say to the CEO, what's the succession plan that you've been working on? In other words, who is going to succeed you? What candidates are you training? What candidates are you developing? And if the CEO says, I ain't training nobody, I'd say, man, you got to get started today because otherwise you're going to be really mad.
SPEAKER_01:Right, right. This is just something you do as normal business practice, and your members deserve to have that. It's not great for a member of a credit union to love their credit union and then be told, no, your credit union is merging with this other one because they don't have anybody to take over when they could have easily had that person in place to do that.
SPEAKER_03:So I agree with Harper. I've also said, and I've gone on record, if I were a board chairman at a small credit union... I'd write for my succession plan for CEO, going to merge out of existence. And
SPEAKER_02:people say,
SPEAKER_03:what would the examiner say? I don't care what he says or what she says. I'm going to write it. And then we can scream at each other. I'm good at that.
SPEAKER_01:Right. Well, here's what the examiners do. I mean, I can't imagine this environment is going to be one where the examiners are looking to just annihilate a credit union in the exam process. I think it's going to probably go the other way. And let's say it was that environment. You know, I've been in the world of exams as well, working for a bank. You go in with like the attitude of, look, if we didn't get it right, you let us know. We will get it right next time. We'll do whatever you want to make this perfect. This is an audit. You're not going to argue with them. You're going to say, what can we do to work with you to all get on the same page so that we're all BFF here? You know, that's the philosophy and approach you take. And if you have that, you're going to be fine in a lot of issues with the examiner. Not everything, but a lot of them. And of course, it depends on the examiner. But typically, that's the approach. that is more successful than not. There are horror stories out there. I've experienced that on the bank side. I see it way more on the bank side, which gets to another point I'll make in a little while. But I have seen it. But you can't act like that's going to be every single time. It does happen. I think
SPEAKER_03:that's the novel. Sometimes it's just a personality clash or something.
SPEAKER_01:Right.
SPEAKER_03:It's unfortunate, but it's not. To me, I've heard lots of people's so-called horror stories about credit union examiners. I think sometimes they were just asking a few questions that the credit union wasn't prepared to answer. It didn't rise to me as a personal vendetta against you. It didn't.
SPEAKER_01:And I think too, I noticed this a little more with the credit unions than with the banks. A little bit with the banks, but more with the credit unions. They really take pride in how they run their credit unions. So when somebody comes in and says, hey, have you looked at how you're doing this? Maybe this could be done a little bit differently. Sometimes they might be a little more defensive. It's
SPEAKER_03:embarrassing to all credit unions. And this kind of ties in in a crooked way to McWater's point. It's embarrassing to all credit unions when a credit union fails because a senior executive has been stealing from it for 20 years. I don't care if their credit union is$20 million an asset. It looks bad for every single credit
SPEAKER_01:union. Absolutely.
SPEAKER_03:And that should be caught in an exam.
SPEAKER_01:Yeah.
SPEAKER_03:Sometimes the thieves are fairly clever about covering that up.
SPEAKER_01:Well, and that's an excellent point that you're making about the exams. And one that I... I've had many conversations when I do some speaking about the distinction between banks and credit unions. And this was a very, very big distinction I noticed coming from ICBA to CUNA, was that at ICBA, it's Independent Community Bankers of America. Every bank cares about themselves. If their bank is doing well, they don't care how every other bank is doing. Their bank is doing well, they're happy. Credit union... It's not like it's branded, like they're all branded together, which you don't see on the bank side. So it's not like I'm a member of a credit union, you say. You don't say I'm a member of such and such credit union. It's you're a member of a credit union. Credit unions are all branded together. Well,
SPEAKER_03:every big credit union CEO has a story where the agency calls him up and says, will you merge with this little crappy credit union? He already knows why he's being asked or she knows. Because that credit union is about to fail and NCUA does not want the failure. So could you take it out? It's mercy killing. Just do it sweetly and kindly. It's a merger. You don't see that sort of thing much in the banking world.
SPEAKER_01:No.
SPEAKER_03:And Jamie Dimon took Silicon Valley Bank because he saw things in that deal for Chase and Chase's shareholders. He was not doing the regulator a favor. He happened to be doing the regulator a favor, but the reason he agreed to do the deal was there was something in it for Chase's shareholders.
SPEAKER_01:Yeah, you definitely have this feeling of a credit union movement that we're all part of the same religion or movement or what's good for my credit union is good for all credit unions. You do not see that on the bank side. You
SPEAKER_03:don't see anything like the CUSO system on the bank side. And I've been saying this from the moment I began to understand what CUSOs were, and it took me quite a few years to realize. QZOs are, I think, credit union's secret weapon. I think they're vastly more important than the tax exemption. Now, what do you think about the agency consolidation? Do you think that's on the table? That's a possibility for NCUA?
SPEAKER_01:Yeah, I mean, I think everything is on the table right now. And one thing, one mistake I think some folks make is You know, do I think it's on the absolutely? Absolutely. I think it's definitely an issue that could could happen.
SPEAKER_03:Now, I'm told ICBA is opposed to sharing a regulator. You
SPEAKER_01:know, and I have contacts over there still because of my my employment there. And that's that is sort of the position I've been hearing, too. But when I was there, that was not the case. Yeah,
SPEAKER_03:this is just I'm just passing out. Yeah.
SPEAKER_01:When I was there, they wanted the two things you there, the three things that you advocated for. in terms of credit unions when you were at ICBA. Now, again, this wasn't heavy when I was there because remember we wanted to be BFF with them because we were in the middle of Dodd-Frank and you wanted the credit union next to you when you were lobbying. So it wasn't as heavy then, but the three major issues was credit unions should tax exempt status, obviously. Credit unions should be subject to CRA and credit unions should not have their own regulators. So that was an issue definitely on the table because bankers think that the NCUA is a nice, happy, fuzzy teddy bear of a regulator for credit unions when they don't necessarily have that experience dealing with their regulators. Do I have that? I don't know how to answer that. I definitely see a distinction. When I was working for the community bankers and dealing with the FDIC and the OCC and Fed and some of those regulators, there was a huge difference in dealing with those regulators at ICBA versus going to NCUA working for CUNA. Like night and day to the point where I was like, I remember I was in a meeting with an NCUA board member. And I thought, is this really happening? Because the board member was listening, was asking questions, was candid, was giving intel. You would never in a million years have that experience ever. at ICBA going into talking to FDIC or any of these banking regulators. They were not, they would say nothing in the meetings. You would talk, they would say, okay, thank you. And then the meeting would be done. I mean, that was pretty much it. It was very cold that way. That was how those regulators operated. NCUA has a much lighter touch as a regulator, I'm just going to say. Working at the Fed versus working at the NCUA, huge distinction. Lobbying both agencies, huge distinction. So do I think it would be hugely problematic if credit unions lost their regulator? I absolutely think it would. I think it would be very, very problematic. And I think they would get swallowed up. The issues would get swallowed up. The entities would get swallowed up. The lobbies would get swallowed up by this regulator that's only going to look out for some of your largest banks. I mean, when I worked at the Fed, we wrote all the consumer financial protection regulations. So that impacted credit unions too. And I tell you, nobody knew who CUNA was at the Fed. They thought CUNA and CUNA Mutual were the same organization.
SPEAKER_03:I thought that for a number of years.
SPEAKER_01:I mean, what's CUNA? And they called it CUNA. OK, so like that tells you the impact of that association at the Federal Reserve. Now, at NCUA, totally different because it's a niche regulator. It only regulates credit unions. So the level of understanding of the industry, the level of understanding of the external stakeholders and players and everybody, it's like one. little family. We all know each other. Everybody knows each other. I mean, Todd Harper shows up at events and everybody knows who he is and he knows who they all are. You know, that's the distinction. So you don't see that. And that absolutely will go away if you have one regulator overseeing it. overseeing everybody or one regulator like FDIC taking on community banks and credit unions. It also concerns me if the share insurance fund and the DIF are like combined. I feel like that should be decentralized. I think it's better for the system. So do I think it's going to happen? I think anything is on the table. I tend to think it'll be talked about, but maybe not essentially happen? Because I don't know if there's time for that to happen. You'd have to have a statutory change. I don't know. They might try to do it through like putting the NCUA under treasury. Maybe they might sneak something through. Who knows? So there's always something that could go on. I know folks in treasury, you know, at the top have said we are not in favor of this. But again, cabinet affairs, the White House is deciding these issues, not not the cabinet level officials. It's all being done in the White House. So I don't care what the secretary of, that's great that the secretary of treasury said that, you know, my, my sixth grade daughter thinks the same thing, but it's really not their, their place to decide that it's really going to be decided in, you know, in the White House and what the White
SPEAKER_03:House. That makes lobbying more difficult though. A lot of the people on the Hill, still have nice titles, chairman of this, blah, blah, blah. What influence do they actually have today? The answer in many cases is they don't seem to have a hell of a lot of influence, unfortunately. That's how I feel. Is this a permanent position? I seriously doubt it. I think this is a blip in history.
SPEAKER_01:Yeah, and I mean, let's look at history. Would this kill the industry? Well, I mean, okay, the NCUA is 55 years old. The 55-year birthday is this year. Share insurance funds, 55 years old. Funds weren't insured until the 70s. Before that, I think the NCUA was... It started out as like the farm... It was in the farm credit thing, administration. Then it was a part of the FDIC at one point. Then it was like another agency that was part of HHS. So it's gone through an evolution before... 1970 when it then became the NCUA. And credit unions were there. They were growing. They were existing. They were growing when they didn't have their own independent regulator at that time. They
SPEAKER_03:also had extremely simple business models.
SPEAKER_01:They did, yes.
SPEAKER_03:Basically, they took in savings account money. They made loans. Almost all the loans were secured by something, a house, a car, whatever. And it was what they call a spread business. Right. And there was no share insurance. You were okay. You were really fine.
SPEAKER_01:And you didn't have the fund. So now you have a share insurance fund. You know, 1970, you have the fund, you have the agency. It is really, the way this is structured now, they really, it would be very, very problematic, in my opinion, if the credit unions did not have their own independent regulator, not regular reports to treasury. No, independent regulator, not like the OCC. No, independent. You're your own thing. And with the share insurance fund, just like the FDIC with deposit insurance fund, that is really the way to continue running things. And even when you have consolidation, you still have large credit unions. The asset size of credit unions is getting larger. The assets of credit unions in this country is getting larger. There are more credit union members now than ever before. So there's other numbers that really indicate that a separate regulator is extremely necessary, even if credit unions decline another 50% in the next 20 years or so. It's still very
SPEAKER_03:necessary. The sheer number of credit unions. I I don't see as a meaningful metric because the size of the credit union industry continues to grow and community banks are shrinking to a number. These are just realities. Now, tax exemption, people were celebrating, credit union people were celebrating, oh, it's off the table. my attitude
SPEAKER_01:well for now it is
SPEAKER_03:yeah my attitude is how can break loose in reconciliation dude at 3 a.m that can be written into the law
SPEAKER_01:you live today you got to live day by day you know that's that's the key here you got to live your life day by day right now today you today you're okay what's tomorrow gonna look like
SPEAKER_03:yeah uh yeah that's totally my position i'm not saying i think tax exemption will be taken away. I don't have a position on that. All I'm saying to people is, no, just because it's not in the writing right now, this fight's not over.
SPEAKER_01:Absolutely. Absolutely. I could not agree more with that. And I mean, even, you know, I was talking to some ICBA folks, you know, they're now starting to push for the tax exemption and to be taken away for credit unions that are over$1 billion in assets. And that's a sign. They're looking, look, we're getting closer on this argument. Let's kind of give it a little nuance here. Maybe that will help our position. And the concern is more about the mergers or the buyouts, the credit unions buying banks. And they could kind of tie into that.
SPEAKER_03:Oh, come on. That's a handful of things. Spare me. Well,
SPEAKER_01:that's what they're saying. That's what their membership is. That's how they're selling it to their membership.
SPEAKER_03:What I've always said is, hey, no one put a gun to the board members of this community bank that sold out. Oh, right. They sold out. They sold out because the credit union offered more money than any of you
SPEAKER_01:both. That's right. That's the whole of the argument. It's a
SPEAKER_03:simple financial transaction here. So shut up. Go away. I ain't going to fight with you no more about it. You're just crazy.
UNKNOWN:Yeah.
SPEAKER_01:Don't even talk about it. Because again, that's the big hole in the argument that nobody, your member made the deal.
SPEAKER_03:Yeah, exactly. That's your
SPEAKER_01:member. If you have a problem, talk to your membership.
SPEAKER_03:And there's no vote by the depositors in the community bank. No, most of these are privately held companies. It's four people have a vote. And they all voted, yeah, we want the money. We want to move on.
SPEAKER_01:I'm trying to think how this issue got started. Because when I was at ICBA, this was never talked about. I mean, this happened. It was fine. When it happened, it was understood it was a business decision. It was not something that the lobby. I think somebody
SPEAKER_03:just decided. Some lobbyist
SPEAKER_01:decided. I think so. I think there was someone on the
SPEAKER_03:board. This was a whistle they could blow.
SPEAKER_01:And
SPEAKER_03:everybody would say, oh, that's evil. This is evil.
SPEAKER_01:Right. Because this hasn't, this didn't just happen. This has been happening for years. This isn't like a new thing. And
SPEAKER_03:the people doing it. You know, it's some guy whose grandfather started the bank in blah, blah, blah, Texas. And he wants to cash out. He's 65 years old. His kids don't want to run the little community bank. Exactly. They want to work for Chase. So, and he said, great. This credit union is willing to give me a few million bucks. Wow. It sounds great. Let's do it.
SPEAKER_01:Yeah, and they're able to do it. No
SPEAKER_03:one's being harmed in this thing.
SPEAKER_01:Right. And you're going to see that more with community banks because, like you said, the business model was very much a family business kind of model. And now grandpa's leaving and the grandchildren don't want to take on this business. It's not a fun
SPEAKER_03:business. Community banks were... We're run out of the country clubs. That's where you met the people you're going to make loans to. That's right. The big deposits. And as a guy said to me, you know, for young people, the country club is Starbucks.
SPEAKER_01:Right. Or Wawa for me.
SPEAKER_03:So his point was this young generation doesn't want to hang out at the country club. So, yeah, it's your community banks have to change their whole model.
SPEAKER_01:Yeah, there's a lot of truth to that. Because too, when you were head of a community bank, you were like the mayor of the city.
SPEAKER_03:Exactly. It was a
SPEAKER_01:big
SPEAKER_03:deal. Down the country club, many people wanted to be your buddy. They wanted to play golf with you. They wanted to borrow a little money from you. I mean, that was extremely important. And now it's like, So you run a check cashing places.
SPEAKER_01:Right. Yeah. The panache or whatever, the intrigue of it is going away. And now I could just get my banking on my app and I don't really need the, you know. So it's definitely that kind of model has it. There is a dated quality to it.
SPEAKER_03:Before we go, think hard. Can't all be mega banks, can it? It's my hope it won't all be medical banks. It'll always be a place for credit unions. That's what we're discussing here. So figure out how you can help. Get in touch with me. This is rjmcgarvey at gmail.com. Robert McGarvey again. That's rjmcgarvey at gmail.com. Get in touch. We'll figure out a way that you can help. We need your support. We want your support. We thank you for your support. The CU 2.0 Podcast.