Nature Abhors a Vacuum & So Does the Rumor Mill
Download MP3Treichel: Hey everyone, this
is Mark Treichel with another
episode of With Flying Colors.
This is being recorded.
The morning of April 14th for
publication on April 15th, there
is an NCA Board meeting on.
Thursday, April 17th, which
I'll get to here in a second.
But first I want to start with a quote
that is attributed to C North Coat
Parkinson, which is that nature abhors
a vacuum and so does the rumor mill.
Now, the idea behind this is that
absence clear information, people
tend to fill the gap with speculation.
Gossip or rumors.
Now, I'm not here to talk about rumors.
I'm not here to talk about gossip.
I may have a little bit of
speculation though, but it's educated,
speculation, or educated guests also
filled in by some triangulation of
conversations I've had in the industry.
Conversations I've had with some of
my teammates, conversations I've had.
With some other folks who used to
work at NCUA and or may still work
at NCUA relative to the anxiety if
you will, that might be there because
of NNC a's reorganization and the
buyout offers that they have been
making the last NCA board meeting.
Most of their discussion was
a morale based conversation.
And so seeing that NCUA has an item to
fill a vacuum of information or eliminate
a vacuum of information on their agenda
this week, I think is a good thing.
They're doing a briefing on that.
But first, before we get into
that, I did a poll in that
regard on NNC Wade's agenda.
And by the way.
I did a podcast recently, kinda walking
through what I thought NCUA would do
this year and wouldn't do this year.
They won't be approving a lot
of rules in my opinion, or based
on my speculation educated guess
they will be doing more briefings.
And what happens is when there's
nothing for the board to vote on, they
go, Hey, what can I brief the world
on to show that we are still engaged?
And so they picked two good topics.
Although one of them based on my poll,
is not something that a lot of people
are very interested in, but I think
it's a good thing that they're doing.
So at the board meeting coming up, they
are doing a briefing on the inter-agency
rule relative to regulatory relief
on the California wildfire appraisal
rules that NCUA put out along with
all the other agencies in January.
So they're doing a briefing on
that and they're doing a briefing
on NCA staff buyout program.
I did a poll on this and the
the results were as biased as
any or were as polar as any.
Poll result that I have done here on
LinkedIn, but 90% of the people that
voted were more interested in NCA
staff buyout program, and 10% of the
folks that voted were interested in the
California wildfire appraisal relief.
Now, in that regard I did a follow up.
Poll and bear with me as I try and
get it to come up here on LinkedIn.
Sometimes LinkedIn can be a little wonky.
And so the, to, to the poll
that I did relative to NC.
Staffing downsizing Red as this
NCA is downsizing with 12% of
staff already accepting buyouts.
What percentage of total FTEs do you think
will Ultimate NCA will ultimately choose?
What's, what percentage of
total FTEs do you think will
ultimately choose to leave NCUA?
How low will they go?
The options were 14 to 16%
reduction, which 15% of the folks I.
Voted for.
And by the way, this is probably
my most popular poll ever.
Next up, 16 to 18% reduction was 16%.
18 to 20% reduction was 31%.
Throw a lot of numbers at you.
Some of you like that.
Some of you'll go, ah,
stop with the numbers.
20% or more, 38%.
So the bigger numbers, the bigger options.
18 to 20 and the 20 and over
were 31 plus 38, almost 70%, 69%.
Of the, those who voted thought
that it would be at least 18%, 38%
thought that it would be at least 20%.
So in regards to those numbers I've
heard that again, probably along the
lines of trying to fill the vacuum for
staff and the anxiety that staff has.
They are providing a frequent
update to NCA staff of how many
people have accepted the buyouts.
And the last number I heard from last
week and I heard it from several sources,
was that 145 people had committed and
once they commit, they can't un uncommit.
And that's probably some things,
some details they'll talk about.
On Thursday, 145 people had committed
to take the early departure.
Now that's 12%.
I also heard that the powers that
be wanted roughly a number in the.
Somewhere in the range
of two 15 to two 20.
And if you look at what
that would be, two, two.
So let's just pick two 17 for example.
Number right in the middle of that range,
two 17 divided by 1247 would be 17.4%.
NCU a's budget had 1,247 approved FTEs.
If someone is hoping for a top
end goal of 217, that would leave
you 30 bodies over a thousand.
And people, people advertise that they'll.
Sell a shirt for $9 and 99 cents not $10.
One of the theories I've heard
is that NCUA would like to get
below a thousand employees.
So if we assume that one of
the rumors I heard was right,
that 217 is a goal at the.
Board level or very high up level,
shall we say, 217 departures that
would leave you at 1030 FTEs.
How could that number make
sense if someone was trying
to get below a thousand?
It could make sense if there were already
30 vacancies when they started the
process and they're under a hiring freeze.
So let's assume 1,247.
Is the total of FTEs in the budget?
Let's assume that there are 30 vacancies
and who knows, maybe it's higher.
And let's assume that n NCAA's
top management is trying
to achieve 217 departures.
That would get you below a
thousand, which is a good soundbite.
Good soundbite for, Hey, you
should leave us independent.
Hey, we went along, so don't tax us.
Hey, we're listening to the
Trump mandate, that's all.
Again, specula speculative me filling
in some blanks on how I know NCR works,
coupled with some triangulation of some
numbers I've heard in the industry and as
I said, from from elsewhere within NCUA.
So it'll be interesting how the
NCUA board approaches this briefing.
I.
Some of, I think one thing it will
reveal will be, was this a unanimous vote
to approve this, these buyout offers.
If one of the Democrats is comes out,
one of the Democrats come, may come out
and say, and if I voted against it, I
would say, Hey, I didn't vote for this.
Here's why.
If it passed, at least one of
the board members voted for it.
I would wanna have a
narrative that explained.
Why I voted for it.
And if I was the chair, I would be wanting
to show the Trump administration that I'm
taking what they want me to do seriously.
And my comments would be in that vein.
Now, how do you balance all of
those three things while also
holding morale high at NCA?
It's going to be tough.
And who's gonna be at the table for NCA?
Most likely Larry fao.
Who?
Is really good on his feet.
It'll be interesting to see how and
how Larry, if presuming it is Larry
possibly to Tawanda Tawanda Brooks,
who is in the acting or permanent
deputy executive director position.
And who knows, perhaps a few others
will be at the table from general
counsel, et cetera, et cetera.
Alright, it's going to be a delicate
balance because one of the things I will
say this being a consultant as opposed
to being at NCUA, I love the fact that I
can say what my opinion is and not having
to triangulate on what I think three
board members' opinion is what I think
the general counsel's opinion is, what I
think my staff is, how I keep morale up.
And it becomes very difficult to
negotiate all those things in your
brain when you're figuring out what
to say at a public event like this.
I'm.
I'm going to be listening
closely for hints of what
this chosen words might mean.
And, I've talked in the past about
how NCA board meetings are scripted.
Oftentimes NCA staff, most often under
most board members NCA staff is alerted
I'm going to be asked this question.
Sometimes the board members will
say, if I ask this question, I
wanna know what your answer will be.
Kyle Halman doesn't seem to operate
that way based on what I've heard
and based on what I've seen.
Questions can come outta left field
and have come outta left field.
Where he puts people on the spot
in some very unique situations.
Some of those have been revealing.
Some of those have just been awkward.
I'm looking forward to see how this
plays out and I will be doing a podcast
postmortem of whatever they do, say.
If it's urgent, I may do it
Thursday after the meeting.
Otherwise that one will follow next week.
Alright, one other thing I wanted to talk
about was a listener po tipped me off to
an article that I want to walk through.
The title is from writers written by
David Lauder and Pete Schroeder Bessant
says US Treasury to take stronger role
in bank regulation easing undue burdens.
US Treasury Secretary Scott Bessant.
Said on Wednesday his department
will play a greater role in banking
regulations to better balance costs
and benefits and ensure the lenders
can finance growth in the US economy.
In prepared remarks to an American
Bankers Association conference.
Bessant called for common sense
principles and banking regulations
to ease burdens, especially for
community banks that have had to
deal with rules tailored for larger.
Organizations.
Bessant said, Tre's, stronger involvement
in crafting bank regulations would be
achieved through the financial system.
Stabi Financial Stability Oversight
Council, FS OC, which meets regularly
includes the heads of the Federal Reserve
and other banking regulators, FYI.
That includes NCUA.
He also said he would use the president's
working group on capital markets.
A smaller committee that studies
financial trends and has sometimes
met during financial crises.
Treasury engagement with individual
regulators such as the OCC.
FDIC is another tool for this.
In the past, bank regulators have
exercised vast powers on almost
every aspect of daily life, but
without meaningful accountability
to the American people.
Be essence said, most glaringly regulation
through supervision has too often
taken place behind a veil of secrecy
that precludes scrutiny by the public.
And their elected officials, Bestin
remarks were short on specific proposed
changes to banking regulations or capital
requirements, but he said that the
Trump administration would look at the
capital buffer framework for large banks
to ensure that it's consistent with law
and acts as an appropriate backstop.
He said that his princip principles
for regulation should derive
from clear statutory mandate.
Including safety and soundness,
mitigating risk and consumer protection.
Second, regulation should be efficient.
That means regulation should
strike an appropriate balance
between cost and benefit.
Adding that regulators themselves
needed efficiency in their budget and
staffing just talked about how NCA
is trying to theoretically achieve
that more tailored regulation.
Cent said the regulation should be fair
and applied evenly across entities.
The Treasury Department intends to drive
a change in the culture of supervision
through improvements to examination
procedures, enhanced monitoring of
examiner's compliance with those
procedures, and more realistic processes
for appealing supervisory findings.
Perhaps the most consequential step
would be to define unsafe and unsound
by rule using more objective measures,
root rooted in financial risk.
He said he would be particularly focused
on a more tailored regulation of community
banks that have struggled with undue
compliance burdens that require heavy
investment in technology For the last four
decades, wall Street has grown wealthier
than ever before, and it can continue to.
Grow and do well, peasant said, but
for the next four years, its main
street's turn to drive investment.
Whatever that means.
Besson also criticized the Basel
Committee's endgame standards,
saying that in his opinion, this
was not the right starting point
For US regulatory modernization, we
need to take a different approach.
We should not outsource decisions
making for the United States
to international bodies.
Adding that the US should conduct an
analysis tailored to its interest,
and the US can borrow selectively
from the Basel end game standards.
All right couple things.
NCA does have a table at FS o.
What happens is the NCH chair is a
member of fs o and a as a reminder
in oh 8, 0 9 as a result of, the
Great Recession Fsoc was created.
One of the things that happened then under
the Democratic leadership was that some
institutions were named cfi, significantly
important financial institutions.
Some insurance companies were named that.
Then when Republicans got in,
they, they took some of those
labels off the insurance companies.
And that's also when NCOA decided
to create ones and say that this was
significant to the insurance fund.
While we don't have
anything significant to the.
The economy of the us, if it failed,
it would impact the insurance fund.
And that's where one's was born.
When NCA goes, this is
how it used to work.
Not sure if this is how it still works.
When NCA would go to the FS OC, the
would be the one per one board member,
the chair, and someone typically from
the Economi office would go with them.
And, would prepare notes for them, should
they be involved in any discussions.
But it was very bank focused and it
was, I'll say this as nicely as I can.
NCA was invited to the table because
they needed to be, but they really
were much of an afterthought based
on my conversations with staff.
So they will be at those
meetings besson when he refers
to other banking regulators.
NCOA will be there and will be expected
to comply with whatever is done here.
The second major point is, I talk
a lot about safety and soundness.
NCUA uses the hammer of safety and
soundness and swings it around pretty
aggressively and inconsistently
depending on, on, on region, depending
on supervisory examiner, depending
on examiner, depending on specialist.
It's really the wild west.
So the be the biggest takeaway from
this is that perhaps they could define.
Safety and soundness.
I think it's a noble goal.
Will it happen?
Besson has a lot going on right now
since he's in charge of tariffs, so
I'm not expecting anything here soon.
But I like the concept of looking
at safety and soundness, making it
more defined, less regulation by by.
Guidance, less regulation on best
practice et cetera, et cetera.
So I like what the administration
is doing in that regard.
It'll be interesting to see what, if
anything, will actually come of it.
All right.
That's it.
I appreciate as always, I
appreciate you listening.
I appreciate the listener who, pointed
out be Essence's article here, and if
there's something that you see in the
press that you'd like me to talk about
here on the podcast, shoot me a note
and I will take it into consideration.
I always like hearing from my
listeners, and as always, I
hope you'll listen again soon.
I thank you for listening today.
This is Mark Treichel signing
off with flying colors.
