NCUA: A Quorum of one?

The NCUA: A Quorum of one?

The Supeme Court decided that Trump did have the authority to fire two presidential appointees. One was a member of the Labor Relations Board while the other was on the Merit Systems Protection Board. But the Fed was explicitly excluded from the order. The court said “The Federal Reserve is a uniquely structured, quasi-private entity that follows in the distinct historical tradition of the First and Second Banks of the United States.” The president then said “The press runs away with things. No, I have no intention of firing him.” I guess he forgot all the threats he was making. But remember “Powell’s termination cannot come quick enough”? Then why doesn’t Trump just fire Powell and see what happens next?

There is another suit now being heard that may have implications for the Fed. It was brought by the two democrat board members of my old agency the National Credit Union Administration, Todd Harper and Tanya Otsuka. Trump fired them although Harper was appointed by Trump during his first term. The NCUA board is appointed by the president and confirmed by the senate to fill expiring terms or to a new six-year term. The board was created by the Financial Institutions Act of 1978. The Act replaced the agency’s sole administrator who served at the pleasure of the president and created a three person bipartisan board. It was intended that two board members be of the same party as the president. One person is designated by the president as chairman. The board then names one other board member as vice chair. When the board was created, Jimmy Carter appointed me as the minority (no pun intended) member along with two democrats.

It is noteworthy that when the president fired the two democrat members he did not name their replacements. Since NCUA regulations require a quorum to act, the question is whether one constitutes a quorum. Harper and Otsuka do not think so but NCUAs lawyers opine differently. Mind you, the remaining board member is a republican and likely told the lawyers to issue an opinion stating that he can constitute a quorum of one. Not surprisingly, they have done so. They cited the act creating the board which said “A majority of the Board shall constitute a quorum.” Thus, with only one board member, the chairman contends that he constitutes a majority. He is operating on that assumption and is conducting the agency’s business as a quorum of one. His lawyers also said “The departure of two of our three NCUA Board Members has led to speculation within the credit union industry and trade press about the NCUA Board’s ability to exercise authority with the presence of only a single Board Member. Please be assured that the NCUA has precedent and standing delegations of authority in place to continue performing all operational and statutory requirements under the authority of a single Board Member.” Mind you if Harper and Otsuka were still on the board, the opinion would have been different.

It is apparent that the old board was not particularly one of comity. When I and other former board members were invited to attend the celebration of the 90^th anniversary of the signing of the Federal Credit Union Act, the republican member Kyle Hauptman was not in attendance. As such he is not in the above photo taken commemorating the occasion – I am on the far right. Hauptman clearly did not agree with some of the initiatives taken when Harper was chairman particularly with respect to DEI. Although those were removed to conform to Trump’s dictates, it is clear that Hauptman would have removed them anyway. He has also ordered a review of certain regulations that he opposed and now being a quorum of one, is likely to succeed in having them changed.

Harper and Otsuka are arguing in court that the intent of the congress was explicitly to remove the administration of NCUA from serving at the pleasure of the president by creating its three person board. Moreover they contend that the 1958 case Wiener v. United States demonstrates that agencies like NCUA with a nonpartisan, multi-member expert board enjoy removal protections. This makes NCUA special in their eyes and similar to the Fed Board (and the FDIC). “Congress structured all three agencies to operate independently for good reason: a stable financial system depends on independent regulators who act free from political interference, guided by expert judgment in line with statutory mandate,” Whether the Supreme Court agrees would give NCUA the protections that some are now giving the Fed. If the court orders Harper and Otsuka reinstated then that will settle the issue regarding firing Powell – unless the administration appeals to the Supreme Copurt. Then the Supreme Court would settle the matter once and for all.