Credit Union Exam Solutions Presents With Flying Colors

MARK TREICHEL: Hey everyone, this
is Mark Treichel with another

episode of With Flying Colors.

This will likely also be the last episode
for 2023, which has been a good year.

I think we're approaching on, or just hit
30, 000 downloads and substantially more

listens since we started two years ago.

I appreciate you listening.

And today's episode is being recorded
exactly at noon, December 21st.

And it's exciting times over at NCUA.

Why?

Because they got a new
board member coming on.

The Senate confirmed.

Tanya Otsuka to join Todd Harper,
chairman and Kyle Hauptman, current

vice chairman, that'll be, that title
will be evaporating pretty soon.

If not at Tanya Otsuka's first
board meeting, perhaps the one

following that, but so now what
happens is she has to get sworn in.

Once she's sworn in, Hood Rodney
Hood is done and Miss, Ms.

Otsuka will become the
second Democrat on the board.

Now I got a an email from Ken McCarthy
over at American Banker asking me my

thoughts on how that might influence NCUA.

I don't know if he's come out with an
article on it or quoted me yet, but I

shot him some some notes relative to
that and the answer to the question.

First question he asked was,
what will this mean for the NCUA

board from a perspective of when
was the last time there were

two Democrats on the NCUA board?

And that was a board that concluded
its its reign of a triumvirate on May.

In May of 2016, and it was chairman Debbie
Matz, vice chairman Rick Metzger and

Mick Waters, who was the sole Republican.

Now it's, so it's been seven years,
roughly almost seven years, just short

of seven years, since there was a NCUA
board that was led by two Democrats.

Now, what will this mean for NCUA?

It means that.

The budget in 2025 will be
higher than the one in 2024.

It would be anyway, but there'll
be adding some staff in my opinion.

It also means I had heard
actually ran into somebody today

on my walk that confirmed it.

But I had heard from a couple of
different sources that Chairman

Harper was trying to get Ms.

Otsuka on before.

The board meeting last week,
which was when NCUA approved their

2024 2025 budget, because they
weren't able to get her in place.

They cut the budget back
to an increase of 7%.

There were some positions that fell out.

But even before that the two
Republicans in my mind probably kept.

The probably kept climate change from
being an initiative that would be

discussed in the budget documents or
any money spent on I I'd heard that you

know, that was something that, that may
have been a little bit prohibited from

chairman Harper's desires in the budget.

And he is adding some staff in the area
of specialists on consumer compliance.

My prediction is that in 2025,
that budget will go up even more.

My prediction is this will give
him even, make him more empowered

as chair, not that he wasn't as
chair, but having a second vote.

Potentially to back him up on
nearly everything he wants to do.

I'm expecting that they will be
lockstep with CFPB even more lockstep

with CFPB on most things that comes
out from CFPB, but in particular

share overdrafts and NSF fees.

So, the first time that you'll probably
see something where there's a bit of

a more of a full court press on these
Democratic, issues will be at the NCA

board meeting in January, but also
in January, one of the key documents

of the year comes out and I'll be
doing a podcast when it does come out.

But that document is the examination
priorities for 2024 that typically

comes out in the 3rd week of the year.

And while other board members can
influence that, that the federal

credit union act names the chairman
of NCUA as the spokesperson for NCUA.

So when letters to credit unions come
out, that can be 100 percent the words

of the chairman, they can seek input and
Todd is of the of the political variety

where he does seek input, but in the
end, he decides what goes in that letter.

So he's going to have a little bit.

I Think he's going to lean
into consumer compliance.

Consumer compliance is
always on the priorities.

Last year, it had the most verbiage.

If you looked at which of the six
priorities last year had the most

words associated with it, consumer
compliance was number one, even though

it was fourth or fifth on the list.

I'm predicting that'll
move up on the list.

I'm predicting they will do a full
court pressed on share overdrafts and

NSFs and probably a few other things.

Now, in that letter, they also
point out what their exam scope is

going to be on consumer compliance.

Perhaps we'll see them list more
of those of those as priorities

more different regulations that
they're going to be looking at.

Why?

Because they have a Democratic led
board and because they are putting

specialists in in this arena.

So, again, you can expect
more in that letter.

You can expect more in 2025.

Now it would have been nice if for,
for the Democrats and for Chairman

Harper, if she could have been on in
time to influence the budget more.

But that's going to have to wait to 2025.

Five with the caveat that there
are two tools that NCOA can use to

reorganize monies from the budget.

One of those is there is the mid
year budget, which happens in July.

So you get to July and you decide,
you know, we really want to add

a few more positions of this.

We don't need that.

And I will predict that chairman
Harper will make some changes.

Perhaps the most material changes
in a mid year budget in 2024, as

we've seen since since Debbie Matz
was in charge you know, in 2016.

So watch for that in July.

But the other thing they can do is they
have this power called an overhire.

So in the federal government, they have
full time equivalents that are FTEs

that are approved in a, in the budget.

Now, approval of that.

the bodies, the numbers, but
it also assigns the dollars.

Those dollars are not always spent.

And so as long as you stay
under the dollars spent, you can

do what's called an overhire.

So for example, I have in the budget
for a region, I have a hundred

examples, just picking a number.

And when I start the year,
I only have 90 of those.

Folks on board, I get to the middle of
the year and I, I still only have 90 on.

Well, I have not spent the half
that I could have spent that year.

That gives me some play in the
budget where I can take some

other positions over hire.

I could say, let's hire.

20 examiners and, and go up to 110 and
then burn the money at a little faster

rate in the second half of the year.

Or I could have folks come to the office
of the executive director saying, you

know what we had a cybersecurity incident
and we need more people in that area

and the executive director can fund
these overhires and then it all kind of

comes home to roost at the full budget.

That gets approved in November
of December for the next year.

So it's a good tool that the
executive director can can utilize.

Now, when I was at NCWay, the executive
director reported to the board,

but supervised by the the chairman.

The chairman has more pull still
with the executive director.

I think they've tweaked how the appraisal
process works for the executive director.

So the other board members have a little
bit more clout over just reporting

to them than they did when I left a
couple of years back, but in any event.

The chairman can walk down to Larry
Fazio, the executive director, and

say, you know what, I think we need
a few more consumer compliance folks.

When you have some over, over higher
capacity, I think we should do that.

Larry, what do you think?

And of course, you know.

When the chairman says that to you you
have a, you have to have a good reason

to disagree meaning that it's not legal.

So, I make fully expecting that Todd will
be able to flex flex his muscle a little

bit and do some things that he's probably
wanted to do since he became chairman,

but he didn't have that second vote.

Now, the other thing is
typically you see the.

The Democrats vote together and
the Republicans vote together.

Now I was at NCUA as the deputy executive
director back in the year of 2000.

And there were situations there
where it didn't quite work like that.

Then chairman Norm DeMoore was so excited
when Yolanda Wheat came in because he

had quote unquote, his second vote.

Well, guess what?

They very rarely voted together.

They didn't like each other.

They took each other on at board
meetings, after board meetings.

The things that I heard them say
to each other were were chaotic and

stressful for staff a little bit
less than the professional level

that we have now with this board.

So now what I'm saying is I fully expect
these two Democrats to work together.

But it doesn't mean Todd
will get everything.

Now, Tanya Otsuka is coming over from
Sherrod Brown, working with Sherrod Brown.

I know that I believe that Chairman
Harper is pleased to get her on board.

But the way.

Todd tends to be while he's on the
democratic side, he tends to, on

some issues to be more moderate.

I'm looking at and looking forward to
see where Tanya Otsuka lands on all this.

She, she's the first Asian
board member, and she's also

in her thirties lower thirties.

So she brings youth to the board.

All of these things are going to be
good, but they're going to mean something

as to what her agenda is based on
the journey she's taken in life and

what her priorities are going to be.

So it's going to be interesting to see
where that goes, but I fully suspect

that she will support Todd on many of
these initiatives because they are.

The ones I've mentioned are big
Biden administration, big Democratic

Democrats supportive type issues.

You're going to see these things in my
opinion, coming up in 2024 and beyond.

And Todd's got a long
run left on his term.

I'm sure he's very
excited to get into 2024.

Now again, as I mentioned on the
front end, this is likely going

to be my last podcast for 2023.

I did a podcast earlier this month where
I, two of them actually, where I tested

some AI functions and you're going to see
a little bit more of that on a related

podcast, likely as soon as early 2024, but
I'll announce that probably in January.

With that, I want to thank
you for listening this year.

I hope wish you happy holidays, merry
Christmas, happy Hanukkah, happy Kwanzaa,

and I look forward to recording at least
weekly podcasts and likely more into 2024.

All right.

Thank you so much for listening.

This is Mark Treichel signing
off for 2023 with Flying Colors.