Sherrod Brown accuses NCUA of capitalizing on coronavirus crisis
Rodney Hood, chairman of the National Credit Union Administration, faced criticism Tuesday of using the coronavirus crisis to undo safeguards Congress put in place after the last recession.
During remote testimony before the Senate Banking Committee, Hood and other financial regulators gave updates on what their agencies were doing to help institutions navigate the pandemic. Senators focused most of their criticism on the others that testified — Comptroller of the Currency Joseph Otting, Federal Reserve Vice Chair of Supervision Randal Quarles and FDIC Chairman Jelena McWilliams — over issues such as reforms to the Community Reinvestment Act.
Still, Sen. Sherrod Brown, D-Ohio, went after Hood.
“The NCUA is also rolling back some of the very protections we put in place in response to our last financial crisis — reducing and delaying rules that protect real estate borrowers, and lowering capital and loan reserve standards that ensure that credit unions can lend in their communities during a downturn,” Brown said during the hearing Tuesday.
Brown didn’t provide additional details on which changes he thought were problematic.
However, Brown has been critical of NCUA’s delays to its risk-based capital rule before. RBC, which has been highly controversial, has been in the works for the better part of a decade, and last summer the board delayed it once again in order to tie it in with a wider reworking of capital standards.
However, those issues predate the current crisis.
The agency has implemented a number of policies in response to the coronavirus, such as approving an interim rule that allows credit unions to delay appraisals up to four months after a mortgage closes. Hood also discussed a final rule that increases the threshold needed for real estate appraisals from $250,000 to $400,000.
"While this rulemaking began before the pandemic, the relief it provides, combined with the temporary appraisal relief approved during the board’s April 2020 open meeting, will benefit credit unions and borrowers during this crisis period,” Hood said in prepared remarks.
Bankers have accused credit union advocates and NCUA in recent weeks of taking advantage of the coronavirus crisis to implement new policies. Credit union lobbyists are pushing for legislation that would temporarily eliminate the cap on member business lending. The American Bankers Association called that move “an attempt by the credit union industry to quietly ease longstanding commercial lending limits using the current crisis as a cover.”
Last week NCUA said it would change how it calculates whether an institution is designated as a low-income credit union by including members who serve in the military and use Army/Air Post Office and Fleet Post Office addresses. That prompted the Independent Community Bankers of America to accuse the regulator of “expanding the powers of credit unions well beyond the limits established by Congress to justify their tax exemption.”
During Tuesday's hearing, Brown reminded the financial regulators that they have two basic jobs — to ensure the financial system is safe and strong and that money reaches those who "grow the real economy."
"You’re failing at both of those jobs," Brown said.
"Your responses to the pandemic seem to be more of the same, relying on the same old trickle-down economics that we have seen over and over again doesn’t work,” he added, referring to the regulators in general.
Hood received some praise from Sen. Doug Jones, D-Ala., for credit union efforts in accessing the Small Business Administration’s Paycheck Protection Program. Hood mentioned that it was particularly helpful when the SBA blocked lenders with over $1 billion in assets from accessing its loan portal for a period last month.
"One of the successes that we've seen with the PPP is when SBA opened that window for eight hours for those smaller community institutions,” Hood said. “That is how many of our Main Street lenders were able to get loans in the hands of small businesses.”
Hood's written testimony teased an initiative that NCUA is preparing to improve financial services in rural communities that tend to be underserved. Providing better service to these areas has been a longtime priority for Hood.
The credit union regulator also shared a slew of legislative requests. The majority of what Hood outlined has already been requested of Congress, such as making temporary changes to the Central Liquidity Facility permanent and raising the member business lending cap.
Still, Hood added to the list a request for a temporary reduction in minimum capital standards for federally insured credit unions. Currently to be considered well capitalized an institution needs a net worth ratio of 7%. He asked that be lowered to 6%.
To be considered adequately capitalized, a credit union needs a net worth ratio of 6%. Hood requested that be changed to 5%.
“The NCUA continues to monitor the situation on the ground to ensure we are protecting our nation’s system of cooperative credit,” Hood concluded in his remarks.