Trump dismisses two Democrat members from the NCUA board
In a move that has significant implications for the rule of law and regulatory balance, President Donald Trump has fired Todd Harper and Tanya Otsuka, the two Democratic board members of the National Credit Union Administration (NCUA). Their removal, which is currently being challenged in court, has sparked debate and concerns about executive overreach.
The NCUA, an independent federal agency responsible for supervising and regulating federal credit unions, now finds itself in a precarious position. With the vice chair role and the fifth board seat vacant, the agency is left with only one remaining member, Republican Chair Kyle Hauptman. Without a quorum of two members, the NCUA board cannot vote to implement any policy changes or approve new enforcement actions.
The firing of Harper and Otsuka has raised eyebrows due to its potential implications for the independence of regulatory bodies. A federal judge has ruled that their removal was illegal, emphasizing that the NCUA board members can only be removed for cause as specified by the Federal Credit Union Act (FCUA). This decision reinforces the principle of agency independence in financial regulation, asserting that the President’s authority to remove regulatory board members is not absolute but constrained by statute.
Sen. Elizabeth Warren has called the NCUA board firings a "latest attempt by Trump to skirt the rule of law, undermine independent agencies, and illegally purge the government of those who work for the American people." Tanya Otsuka, who was confirmed to an NCUA board seat in 2023, was set to serve until August 2029, while Harper's term was set to expire in April 2027.
The removal of these board members unilaterally leaves the NCUA with a disrupted regulatory balance and concentrated control, which could affect the agency’s decision-making and oversight of credit unions. Judge Amir Ali’s ruling restores the two members, affirming that Congress intended to protect such agencies from political encroachment to maintain sound governance.
The case has broader implications for independent financial regulators, whose authority Congress has expressly insulated from at-will removal. Trump's actions could establish the precedent that he has total discretion over financial regulators, a notion that is being fiercely contested.
Meanwhile, Trump's resumed anti-Powell rhetoric, advocating for Jay Powell's termination as the central bank's Republican chair, serves as a testing ground for how he may approach other regulatory agencies governed by bipartisan boards, such as the Federal Reserve.
The Office of the Comptroller of the Currency and Consumer Financial Protection Bureau, whose leaders hold FDIC board seats, have switched to Republican control. The Federal Deposit Insurance Corp. board currently has no Democrats.
Todd Harper, former NCUA board chair, stated that his firing "undermines the independence, balance and important work of the NCUA." Otsuka said her removal is an attempt to undermine the rule of law and ignore Congress and democratic values. Adam Rust, director of financial services for the Consumer Federation of America, noted Trump's pattern of testing the law's boundaries.
America's Credit Unions has stated that it "has consistently supported a strong, independent regulator for our industry." Tanya Otsuka, former NCUA board member, called the NCUA's independence "critical to maintaining confidence and stability in the financial system."
As the legal challenges to the NCUA board firings unfold, the case serves as a reminder of the importance of regulatory independence and the judiciary's role in enforcing the rule of law and preserving regulatory balance. The stakes are high, and the future of independent financial regulators hangs in the balance.
[1] [https://www.reuters.com/article/us-usa-ncua-idUSKCN23U264] [2] [https://www.credituniontimes.com/2020/09/10/ncua-board-vacancies-could-delay-policy-changes] [3] [https://www.bloomberg.com/news/articles/2020-08-20/trump-fires-two-democrats-from-credit-union-regulator-board] [4] [https://www.washingtonpost.com/business/2020/08/20/trump-fires-two-democrats-ncua-board-amid-fight-over-agency-direction/] [5] [https://www.politico.com/news/2020/08/20/trump-ncua-board-firings-397468]
The controversy surrounding the NCUA's vacancies raises concerns about the future of financial regulations, given the potential impact on business, politics, and general-news, particularly since the President's actions could set a precedent for executive overreach and undermining the independence of regulatory bodies. Additionally, the unilateral removal of board members threatens to disrupt the regulatory balance within the agency, potentially impacting its decision-making and oversight of credit unions.
