As President-elect Donald Trump prepares for his new administration by selecting and nominating candidates for various high-level government jobs, one post has received little public attention, despite impacting the financial lives of more than one-third of all Americans: the chairmanship of the National Credit Union Administration
The current NCUA Chairman, Rick Metsger, is a Democrat, and when his term expires in August, Trump is expected to nominate another Republican in his place, giving the GOP a 2-1 advantage on the panel. Board Member J. Mark McWatters is also a Republican, but the board is required to have no more than two members from the same political party. Trump will also have to fill in a vacancy on the agency's three-member board, made possible by the resignation last April of former chairman, Debbie Matz, another Democrat.
Interestingly, under terms of the Federal Credit Union Act, NCUA board members are subject to approval by Senate confirmation, but the president can unilaterally appoint the agency's chairman. So how will the incoming president proceed?
Dick Ensweiler, the outgoing president and CEO of Cornerstone Credit Union League, said that while he does not believe filling the vacant seat on the NCUA board is Trump's "highest priority," he does believe that the new president will be addressing the NCUA board positions "fairly soon."
And the "logical choice" for the NCUA chairmanship, Ensweiler asserted, is McWatters, given that he could be appointed to the position and serve there for the remaining two years of his term.
Geoff Bacino, a former NCUA board member who now leads Bacino & Associates of Washington DC, echoed those sentiments, noting in a recent commentary that not only is McWatters of the same party as Trump, but he is very well politically connected to powerbrokers on the Trump team, including Paul Atkins, the man designated by Trump to lead the transition team for government financial agencies. (Atkins and McWatters served on a board that oversaw the Troubled Asset Relief Program).
According to Dennis Dollar, a former NCUA chairman and now a credit union consultant based in Alabama, when a different political party takes the presidency, the incoming administration almost always immediately designates someone from their own party to take the gavel at regulatory agencies shortly after inauguration.
"If this precedent is followed – and I see no reason why it would not be – that certainly puts Board Member McWatters in the catbird's seat to become NCUA chairman in the early days of the Trump presidency," he said.
Marvin Umholtz, president & CEO of Umholtz Strategic Planning & Consulting Services in Olympia, Wash., also believes that McWatters is the most likely person to become NCUA chairman.
"McWatters is eminently qualified for the role, and … would provide immediate leadership continuity directing the agency's important responsibilities," he explained. "Along with…Metsger, the revised two-person NCUA board could continue with its business without missing a beat."
Back to the Future?
There is one other possibility, however. Former NCUA Chairman Michael Fryzel has also been rumored as a candidate, having previously been appointed by George W. Bush and currently serving as a liaison to the Trump team.
"His name also becomes an interesting option for a board seat," said Cornerstone's Ensweiler.
Ryan Donovan, chief advocacy officer at the Credit Union National Association, said another Fryzel chairmanship was "within the realm of possibility," but noted that he believes McWatters is the front-runner for the top job.
Fryzel is an occasional contributor to Credit Union Journal.
Of course, the NCUA is just one of many financial-related government agencies that Trump will seek to carve in his own image, but choices at other agencies could impact what happens at NCUA.
While Trump will surely pick a member of GOP for the NCUA chairmanship, Donovan said CUNA hopes he will choose someone who understands the history, mission and structure of credit unions, and how the credit union difference sets them apart from other financial institutions.
Umholtz noted that since the NCUA board chairman serves as a voting member of the Financial Stability Oversight Council, President Trump will have a "strong incentive" to convert the FSOC's current membership – all of whom are Democrats – into pro-free enterprise Republican-held positions.
"President Trump's selection as Secretary of the Treasury – former Goldman Sachs partner and hedge fund investor Steven Mnuchin – will be serving as the Chairman of FSOC," Umholtz elaborated. "The heads of the federal banking agencies, the securities and commodities regulators, and other federal finance and market regulators, also serve on FSOC."
Umholtz added that the FSOC was designated as the financial system's "macro-regulator" by the partisan and still-controversial Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 that Republicans have vowed to repeal or significantly reform.
"Filling-up the voting seats on FSOC as soon as possible would be an effective way to quickly gain systemic control of financial markets," he added. "To a large extent, the FSOC has a major influence upon the policy directions taken by all of its member agencies, including the NCUA."
Umholtz further said that he has heard speculation "from individuals in a position to know" that all of the federal banking supervisors could "turn over" within twelve to eighteen months. "The incumbent Securities and Exchange Commission Chairman and the incumbent Commodity Futures Trading Commission Chairman have already declared their intent to leave their posts in January 2017," he said.
"There will be a new Comptroller of the Currency and a new Chairman of the Federal Deposit Insurance Corporation (FDIC) Board in 2017."
It is also likely that Trump will nominate two new Federal Reserve System Board Governors early on, though those posts will also require Senate confirmation. And the structure of the Consumer Financial Protection Bureau could also see significant changes, given a recent court ruling and pressure on Director Richard Cordray to step aside.
"Cordray's departure and replacement – whether by a single Republican or by a multi-partisan commission – would be a huge benefit for the financial services industry and for the businesses and customers that they serve," Umholtz commented.
On the whole, Umholtz offered, there will be an "entire sea change" at the federal regulatory agency leadership level for financial institutions and markets over the next two years. "That [change] will be welcomed with opened arms," he concluded.