WASHINGTON — NCUA Chairman Debbie Matz may have some explaining to do at her next listening session with credit union executives.
Testifying Thursday before the House Financial Services Committee's Subcommittee on Financial Institutions and Consumer Credit, Matz told lawmakers that credit unions that have raised questions about the size of the NCUA's budget are not representing the best interests of their members.
Matz' comment came in response to a query from Rep. David Scott, D-Ga., who asked why NCUA does not hold public hearings before approving its budget. Scott said he believed hearings would help the agency improve its relationship with the credit unions, but Matz disagreed.
"I don't believe that the credit unions necessarily represent their members, and if they did, they wouldn't be asking us to cut our budget," she said in response to Scott
Later in the two-hour hearing, Rep. John M. "Mick" Mulvaney, R-S.C., offered Matz a chance to walk back her statement, but she reiterated her position. "When they ask us to cut our exam budget, credit unions aren't representing the best interests of their members," Matz said.
Mulvaney said a number of credit union executives have complained to him about the NCUA's practice of approving its budget without holding public hearings. Matz, however, said she has met with credit union leaders on dozens of occasions, and they have rarely mentioned hearings one way or the other. She claimed the hearing issue has been manufactured by credit union trade groups.
"Now that the trades have cooked this up as an issue, you might be hearing about it, but I never had any questions asked," she said.
Matz' exchanges with Scott and Mulvaney earned her a sharp rebuke from CUNA President/CEO Jim Nussle.
"I certainly hope that NCUA Chair Debbie Matz misspoke at the hearing today," Nussle said in a prepared statement immediately following the hearing. "If she didn't, it's outrageous that Chair Matz would tell Congress she does not believe credit unions represent their members under the respectful questioning of Representatives Scott and Mulvaney. I can't believe I need to remind her that the nation's credit unions are member-owned."
Matz released her own statement after the hearing, refusing to back down much from her earlier comments.
"If credit unions are asking NCUA to cut the budget, cut staff, and cut exam hours, they are not representing the best interests of their members--because the credit union and its members will ultimately have to pay for the losses of failed credit unions," she said.
NCUA approved a $279.5 million operating budget for 2015 in November. That total represents a 4.2% increase over 2014. The agency's budget has increased every year since 2007. The upward trend has led to some discontent within the industry, where consolidation has led to a significant reduction in the number of credit unions in recent years.
Spot Bonuses Blasted
Questions about spending were not the only challenges Matz faced Thursday. Rep. John Roger Williams, R-Texas, blasted her for allowing an "on-the-spot" bonus program that paid NCUA employees $1.2 million in 2014. In response to Williams' questioning, Matz admitted she approved at least two bonuses last year, one of $2,500 to her chief of staff and a second totaling $1,000 or $1,500 to her administrative assistant.
Williams noted that NCUA's budget is funded by the credit unions it regulates, rather than by congressional appropriations. "I bet some credit unions would rather be loaning that money to their members, rather than having some bureaucrat in Washington give it out in bonuses," he said.
Past NCUA Board Member Dennis Dollar, who is now a consultant, noted that the number of credit unions has fallen nearly 50% in the last 15 years to around 6,000 institutions today.
"I would think the members of the remaining 6,000 would have legitimate reason to wonder why the agency they support through their member-owned credit unions needs a staff with 35% more employees and a budget over 100% larger than it was when there were twice as many credit unions," Dollar told Credit Union Journal following Thursday's hearing. "Those credit union members are stakeholders with a desire for governmental efficiency in how the dollars of the credit unions they own are spent by an agency with unlimited fee authority and a share insurance fund to tap into for over 72% of the agency's budget."
Matz told lawmakers that NCUA is more transparent than any of the other financial regulatory agencies, but she was forced to admit that it posted a redacted version of a 2011 report from consultant Price Waterhouse Cooper on the effectiveness of its overhead transfer rate it charges CUs to fund the share insurance fund. Among the sections it cut was one advising the agency to be more open with credit unions about the mechanism it uses to determine the overhead transfer payments.
That revelation prompted a question from Mulvaney who asked Matz whether she "recognized the irony of redacting a section that says you should be more transparent."
Matz said she did, adding that the agency plans to post the entire report on its website soon.