Credit Union Exam Solutions Presents With Flying Colors

Hey everyone, this is Mark TriCal with
another episode of With Flying Colors.

This is my part three of NCA's reorg,
or not reorg, but their downsizing plan.

They did on May 22nd, and in this
episode, I am going to predict what

I think NCUA will do may do, might
do relative to its future structure.

As previously discussed.

NCUA is losing about 25% of
their staff from buyouts.

Those will be staff who were
either eligible to retire or

eligible for early retirement.

Meeting over 50 with 25 years
of service is would be eligible.

And then over the mini minimum age of
retirement, which today, if someone

was going to retire today, I believe
they'd have to be 57, at least with

30 years to do full retirement.

The backdrop is the Trump
administration wanted credit union

or wanted agencies to get smaller.

The Trump administration wanted
agencies to come up with a plan,

and CUA came up with a plan.

And that plan led to 25%
of staff leaving, which I.

Is going to have a huge impact on NCUA.

Now.

They even said so at their board briefing
that some things were going to be coming

and so I'm taking what they said, I'm
taking what I know and predicting where

I think they might go problems they might
have with that, et cetera, et cetera.

So I threw together a quick
PowerPoint to keep me focused here.

You should see it on your screen
if you're watching on YouTube.

And again, this podcast is
about predicting NCOs future

structure based on their most.

Recent board briefing on downsizing.

But before we start, I, whenever I
talk about reorganizations or planning

something new, I think of two quotes.

And this goes back to when I was
involved in the first restructuring

that I was involved in back in the
Dennis dollar era, 2000 2001, 2002 NCA.

Went from six regions to five regions.

And these two quotes became.

Part of my quote list at the time
because of how challenging reorgs can be.

The first one is by Pius who said
we trained hard, but it seemed every

time we were beginning to form up
into teams, we would be reorganized.

I was to learn later in life that we tend
to meet any new situation by reorganizing

and a wonderful method, it can be for
creating the illusion of progress.

While producing confusion,
inefficiency, and demoralization.

So reorgs are painful, they're
demoralizing, they're confusing,

they're inefficient, but
sometimes they're necessary.

I'll let you decide at the end of
this podcast, if you think some of the

things I predict NSU A will do are good
things, bad things, or immaterial things

as it relates to you a credit union.

The next quote would be a Machiavelli
quote on creating a new system,

which in bracket here I have
org creating a new organization.

Machiavelli once said, it must be
remembered that there is nothing more

difficult to plan, more doubtful of
success, nor more dangerous to manage

than the creation of a new system.

For the initiator has the enmity
of all who would profit by the

preservation of the old institutions
and merely lukewarm defenders.

In those who would gain by the new ones.

I'll repeat that last sentence
and I'll pause for the initiator

has the enmity, which is hatred.

Had to look that back up in the day, has
the enmity of all who would profit by

the preservation of the old institutions
and merely lukewarm defenders in

those who would gain by the new ones.

Someone who might pick up something
and get a little bit more powerful

in the structure of an organization
will be a lukewarm defender.

'cause, status quo people tend
to like, and those who would

lose you will have hatred from.

So that's what happens in an organization.

Excuse me.

In a reorganization.

And so I wanted to kind of preface
that with on the front end of this

discussion, this podcast, this
YouTube video on what NCA may do.

So these are some points from the
NCA briefing that I took away.

Some of the things that I am.

Taking their comments and then intuiting.

So Halman mentioned that there were
23 department heads at the time, and

now that comment at the time that they
sought out advice on what could be

done relative to buying people out.

That could imply that there
are less department heads.

Now that could imply that some future
state will have less department heads.

You could easily interpret that comment
to mean either of those things, or

perhaps he meant someone something else.

I don't know what his intent was,
but I'm taking it to mean one of

those two things on NCA slide 13
of their consolidation meeting.

They talked about
consolidating business use.

Consolidating business units, increasing
supervisor to employee ratios.

So right there in their
presentation, they're talking

about consolidating business units.

That mean there will be, that
means they'll be contemplating

having less offices and I'll.

Talk about what I think
that could mean there.

There are references to shifting
HQ functions to the regions.

Now sometimes you centralize,
sometimes you decentralize.

It's my understanding the
Trump administration is more

of a decentralization that is
centralization type organization.

I do contemplate one way in
which they could centralize

here on a later slide, but.

Keeping that in mind they
specifically NCOA, talked about

shifting HQ functions to the regions.

I have a couple thoughts on what
that might mean, and then hiring

aligned to a desired future state.

That means that to me, when NCUA
loses four bodies, that doesn't

mean four bodies will come back.

As a matter of fact, under the Trump
initiatives, if you lose four, you need

to lose four before you can replace one.

And oh, by the way, that's not until
they take the hiring freeze off, and

there currently is a hiring freeze.

They will hire aligning
to a desired future state.

We know a future state.

State is coming.

They've made reference to it.

They've made reference to
shifting functions to regions.

They've made references to
consolidating business units.

I.

Then they talked about
mission prioritization, high

value, high impact work only.

What does that mean?

That means exams.

That doesn't mean feel good
positions in the central office.

That doesn't mean DEI because the
Trump admin administration has come

out against DEI both guns blazing.

That doesn't mean affinity groups
having all sorts of time to.

Get together and talk
about their feelings.

And again, I'm not saying this is
my position, I'm saying this is

the agency's position, but high
value, high impact means it has to

contribute to an exam getting done
because oh yes, that's our mission.

I.

All right, so here is N NCAA's
organizational chart from their

website, we have the board up top.

We have Kyle Halman and the
two VA vacant board members,

and they make up the NCA board.

And then there's dotted line over to
the positions that report directly to

the board, which would be the ombudsman.

The Office of the Inspector General,
the Office of External Affairs and

Communications, the Office of Minority
and Women Inclusion, and the office of

the secretary of the board, the office
of the secretary of the board when

I was there was one person, and it's
always reported directly to the board

and was supervised by the board chair.

I think we'll be able to take
that and put it somewhere else.

Office of Minority and Women Inclusion.

NCUA has a couple of legal opinions out
there, or did, they might not actually

be in their records, but there was one
that said the Office of Minority and

Women Inclusion could be, could report
to the office of the executive director.

Then a board chair came in that was
a Democrat and decided that should

report directly to the board and
that was more in line with the true

intent of the creation of am I Office
of Minority and Women Inclusion?

And you could argue that's true.

But you could argue that the first
legal opinion is one that they

might wanna rely on, particularly
in a Trump administration.

So I'm gonna predict
that will move somewhere.

Office of External Affairs
and Communications, those are

led by political appointees.

And oh, by the way, political
appointees can only be supervised

by other political appointees.

Schedule C or, I can't remember what
the schedule is for the board members.

But Schedule Cs can report to
board members because they're

politically appointed or they
can report to other Schedule Cs.

So the Office of External Affairs and
Communications, unless they decide to

spin some of that off needs to report.

To the board and should continue that way.

The ombudsman there's references in the
creation of the ombudsman and basically

that's the complaint department.

There are references in creation
of the ombudsman that talk about

it, reporting to the board.

There was an old legal opinion when
I arrived as executive directors,

so sometime 2012 or before that
said the ombudsman can report.

By issuing a report.

So there was an annual report,
there was a semi-annual report.

There was a quarterly report.

So previously, NCUA concluded
that reporting qualified and met

the terms of the requirement.

It's quite possible that you'll see the
ombudsman disappear into another office.

The office of the inspector General?

No way.

No.

How will that ever report to
anybody other than the board?

For obvious reasons.

Then you get down old when I was
there, the office of the executive

director and OGC were a little
higher on this pecking chart.

There weren't so many of these offices
reporting directly to the board.

So it's ironic that when I was there,
the office of the executive director

supervised everyone other than.

The general counsel, the ig and the
board secretary, everybody else came

to the office of the executive director
and then they moved the ombudsman.

They moved ethics, which I'll get to.

They moved owi, et cetera, et cetera.

Then you get to the office of the
executive director, which will still

report to the board in future structures.

They might pick up a few things, a few
areas, the office of General Counsel.

That's always reported to the board.

I believe the ACT requires
it to be done that way.

But in any event, I think the General
counsel typically is separate from

the rest of staff office of ethics.

If you go back a few years, there was
an ethics situation within the office

of the general counsel and the general
counsel served as the ethics officer.

So the solution was decided to
make a big office of the office.

Of the Ethics Council, they promoted
that person to a high level executive.

They added staff.

You could argue that they need to do that.

You could argue that they didn't
need to do that, but I will argue

that they will move that back into
the Office of the General Counsel.

I guess I'm tipping my hand on that one.

The Central liquidity facility has a
president and a vice president, and I

think you could argue that you could
move that, but it does have to have

some reporting directly to the board.

I believe that they may
consider moving that.

Now on this org chart, they
show a deputy director.

When I was at NCOA, there
was myself and John Kuchi.

Wa who's still at NCOA,
was my deputy director.

They added, two deputy director
positions to the NCA budget last year,

so they were going to have three.

John and I ran it ourselves, but they
decided they needed to have two more

deputy directors and then as soon as
they added it, Trump put the freeze in.

I've heard rumblings that they'll
probably want to keep that, which I

don't think will play well with staff
with all these other consolidations,

but I don't think they're worried
about it playing with staff.

But I think potentially they
may still end up having three

deputy directors because of the.

Large weight that they're creating
of reporting and other things in,

in, in the building since I left.

But some of those board members
requiring that large level of

reporting have disappeared.

So who knows?

Maybe they'll go back down to one deputy
director, NCA, if you're listening,

I think that's what you should do.

The rumors are that they may keep
some of those added Deputy Director

positions while eliminating others.

Not sure that's logical, but rumor has it.

They may do that.

You also have the Office of examination
of insurance, and you can see that reports

to the office of the executive director,
and you have the field program offices,

which will be the regions, the Office of
National Exams and Supervisions, which

I will refer to as ones and amac the.

Asset management and acquisition
and assistance center, which is

where liquidations happen with.

Think about the NGN program when
the corporate situation happened.

Think about the medallions.

Think about conservatorship.

Think about liquidations.

That's what happens at emac.

And I believe AMAC may
be may be consolidated.

And I think you could make an argument
for keeping ones, and I think you could

make an argument for getting rid of ones.

If your goal is to make it look
like you made a lot of changes, I

think they might get rid of ones.

All right, so under the deputy.

Executive director, you have the
Office of the Chief Economist.

I think that will move.

You have the office of the
Chief Financial officer.

I don't think that will move.

You have the Office of the
Chief Information Officer.

Don't think that'll move.

Unless of course they move to
different deputy directors.

If they decide to have three,
they're gonna have to have

reports to all of these people.

The Office of Consumer Financial
Protection, I don't think that'll move,

but I think they'll pick some things up.

The Office of Human Resources,
I don't think that will move.

My understanding is.

Nearly every or all of NCAA's,
office of Human Resources supervisors

took the buyout, which is going to
be challenging as how do they get

all the retirement paperwork done?

How do they get, when the freeze
comes off, how do they get

their new job announcements out?

Where do they get the
people who need to do this?

They'll be able to promote from
within, and I'm sure there are

very talented people there.

If you're listening in hr.

I know you've got a lot of good skills
there, but you're going to need some

leadership and finding that leadership
is gonna be challenging in any position.

But the impact on hr, from what
I'm hearing at NCA, was the hardest

hit of all the offices of credit
union resources and expansion.

I think that.

Office will go away.

And I think those things will be split up.

And I think the previous slide where
they're talking about consolidating

business units and shifting functions
to the regions you could see that here

as it relates to the Office of Credit
Union and Resources and Expansion, office

of Continuity and Security Management.

That's a skiff, that's security.

That I think you could make an
argument that goes away in what

I've put here in my PowerPoint.

I don't have it going away, but it's quite
possible you could see that move into

the chief Financial Officer position,
potentially being supervised by that.

The Office of Business Innovation
they helped work on converting the

exam program to merit from Aries.

There.

Working on crypto type things,
initiatives, blockchain they work on,

most likely, although I don't know
this for sure AI type initiatives or

evaluations, that office could easily
be moved into another office and we

will walk into that here shortly.

Alright, so then you
have the field programs.

I mentioned them, AMAC
ones and the regions.

And I think a few things
will happen relative to that.

Consolidation office.

This is the low hanging fruit.

I think you can make an argument
to get rid of ombudsman.

I think you can not get rid of.

Move ombudsman.

Move owi.

Move the board secretary, move
the office of ethics Council.

Move the CLF and move amac.

Consolidations, which are a heavier lift
would be ones the Office of National Exams

and Supervision and the Office of Cure
Credit Union Resources and Expansion.

But I think NCA will contemplate
doing both of those and will

definitely most likely do the cure.

Things that I'm about to show.

So the Office of National Exams
and Supervision would require a

regulation change and basically.

There is a regulation out there that
establishes each office and it establish

what each office is responsible for.

So in my opinion, they would
need at least two board members.

To make a regulation change
that gets rid of an office.

Why?

Because I don't believe that, and I don't
believe Helpmann believes, but I don't

believe that the General counsel believes.

I don't believe that they will be
willing to make drastic changes

to regulations because I believe.

They're worried about getting sued.

I believe they won't do these things
until they have two board members and

until Trump can at least two board members
and Trump can put a Republican in so

that they have a full Republican quorum.

So what else happens in the Office
of National Exams and Supervisions?

They do the big stress testing.

They require stress testing
for 10 billion plus.

As a reminder, the 10 billion plus to 15
billion currently report to the regions,

the 15 billion plus report to the Office
of National Exam and Supervisions.

When they set that up, they said they
were going to train the regions on that.

I don't know how well that's going but.

Theoretically, some of those skill
sets are moving to the regions

already from the 10 billion plus
to the 15 billion plus category.

Back in the day the corporates, when
there was a corporate failure, there

was past GA reports that didn't like the
fact that those reported to the regions.

So should they go back to the regions?

I don't know that.

That to me is a potential challenge,
bigger challenge about the Office

of National Exam and Supervision.

And there's what, less than 10, six to
eight corporate credit unions these days.

But could those go back to the regions?

And could the $15 billion plus
credit unions go back to the regions

back when ones was established?

It was during.

Shortly after, during, or shortly
after the Great Recession when too

big to fail became an issue for banks.

NCA decided it needed to have a too big
to fail, and the too big to fail was

the line drawn in the sand was at the
10 billion and it created the Office

of National Exam and Supervision.

And it also helped create
something for the Office of

Corporate Credit Unions to do.

At the time there were.

Factions.

Going back to those quotes those
who gained were lukewarm and those

who lost weren't excited about it.

The regions did not wanna
lose the big credit unions.

They liked having those big
credit unions in the regions.

They liked doing super exams.

They would take all star teams
of the regions and put them

in the big credit unions.

And I think the regions still
probably believe they lost

more than they gained by that.

And I think the people in.

Ones would say we gained
more than we lost.

And I think both can make compelling
arguments, but if they're trying to reduce

their footprint and or because they're
losing so many bodies, they're just doing

triage saying, Hey, we can't, we don't
have enough executives, we don't have

enough leadership after this to have three
regions and ones, you can make an argument

that unwinding ones would make sense.

Then you get into the credit
union resource and expansion.

So what do they do?

Expansion equals field of membership.

That was in the regions that was
centralized that was centralized,

ironically based on a project by the
current executive director, Larry fao.

So he could potentially
unwind that project here.

But when they talk about
functions, and I'll go back here.

When they talk about functions
going, shifting HQ functions to

the regions, the most logical one.

That would shift is field of membership.

It was there once before.

The regional directors can
supervise the field of membership

issues in their regions.

Some would argue that would be a little
bit better control for the regions

and the people that report to cure
could just report to the regions.

So I'm anticipating that might
something that they would it's a

definite maybe, but it's a definite, I
would say more definite than a maybe.

And then the resources.

The small credit union functions and
things like that that could easily move

to consumer and financial protection.

Here we have we have corporates
going back to the regions.

We have 15 billion plus going back to
the regions, what they would do at the

stress testing function, that would
probably be something that might you could

argue they, they put some of those folks
in e and i thinking out loud it might.

It might be that they split that
up, but I don't think there's

enough of those employees to
split them up across the regions.

How they do that is a work in progress.

All right.

We went through this asset
management and assistance center.

Now this is based in Austin, Texas.

This had previously been moved
to the southern region FYI, that

was moved to the southern region.

At my recommendation.

It was an odd recommendation
at the time but it was a wise

recommendation in my opinion, and
here was the fact pattern behind that.

There was a board member who left and then
a new board member who came on who said,

we need to move the asset management and
assistance center to the central office.

I thought that was a horrific idea
because none of the people would've moved.

We had big challenges going
on at the time, the medallion

situation and a couple others.

And I just didn't think it made sense.

Makes sense because if you ordered
people to move, and this was

before, everybody worked from home.

If you ordered everybody to move,
I thought they would've lost

a lot of corporate knowledge.

I ironically si similar to what they're
going through now, but I said, how about

if we merge it into the southern region?

And we have cost savings in
this way, that way, in another

way, they were open to that.

I put the plan together.

And because the Southern regional
director was multi-talented,

that would be Keith Morton.

Keith, if you're listening hat tip to you.

Sorry I did that to you
back then, but guess what?

I think it might be happening again.

So asset management and assistant
center was moved into the southern

region supervised by the Southern
regional director and then it was

spun out and I'm anticipating with.

The loss, the magnitude of the loss of the
executives that they might just consider

putting it back into the southern region.

Pendulum swing.

All right.

So what I mentioned other things
that might move somewhere.

What could come to the Office
of examination of insurance?

That's what e and I stands for.

I think they will add the Office of
Business and Innovation, and again, that's

the builders of the merit, the people
who keep merit moving the exam program.

So there's a natural link to
e and I think they will move

the Office of the Economist.

To the to the office of ENI.

When that was established at a, at as an
office, it was because the board member

at the time, Debbie Mats, wanted to
raise the bar on the thinking at NCUA.

I think in general it did a lot of that.

But if you're looking to consolidate,
have less chiefs and last.

SSP threes, which is the highest
ranking position at the agency.

Staff wise.

You can put this I think, pretty easily
into ENI and you could also add the

CLF, although there may be some sort
of reporting that technically makes

it have to report to to the board.

I think you could, you, you could
and would house these people at

least part-time in ENI, which
I think they're already doing.

So what would be happening?

To the new OED, would they
have two more deputies?

I don't think they should, but they might.

I think that they could easily
move the ombudsman back.

That's where it was when I was
at NCUA early in my e ed reign.

And the same with oi.

I think both of those could be moved in.

Should be moved to the office
of the executive director.

What will go to the new general counsel?

That I would believe that what they'll
do is the office of ethics will go

to the general counsel, and I believe
the board secretary who has typically

been required to have a law degree,
will move to the general counsel

that's been talked about doing that.

Ethics was there, the board secretary has
been talked about for years and years.

So I believe those things will happen
draconian, what could happen long term.

How about eliminating the regions?

How about requiring all credit unions
to be in one region that's housed out

of the central office on Duke Street?

Could it happen?

Yes.

Is it draconian?

Potentially, yes.

I.

And it looks like I misspelled NCUA here.

I've got NCA once had nuc.

NCA had nine offices, but
they nuked them I guess.

So there once were nine regional office.

Then there were six, then there was
five when California was closed.

California and Chicago were closed.

And I.

Tempe, Arizona, Phoenix was established.

And then then there were three
they closed Albany in Atlanta.

I was involved in that restructure and
actually flew out to Albany in Atlanta

to break the news to those staff.

One of the challenges of keeping
all the regions while the pay

structures broken, the, they.

As I understand it, office
analysts were given a grade

increase, so they're now fourteens.

The specialists are fourteens, the
supervisors are fifteens, the supervisors,

locality pay oftentimes bumps them up,
so they're making as much as executives.

Long story short getting people
to move in this world is harder.

Getting people to move when they're
not gonna get much of a pay increase,

I think, is gonna be a non-starter.

So at some juncture.

Five 10, not, probably not this
iteration, but at some juncture I.

Envision there won't be three
regions, there won't be two regions.

There'll be one field program, and
that field program will be based in

Washington, dc Alexandria, or who
knows, they could sell that building

and move it to the middle of St.

Louis because there were people at NCUA
who are still there in high positions.

That thought moving the agency
to the Midwest would be wise.

It certainly, theoretically
would be cheaper, but.

Will that happen short term?

No.

Will it happen at some juncture?

Potentially, yes.

Back to the issue of there
being one board member.

If offices exist in the regulation,
they cannot be dissolved, in my opinion.

When does Har, when does
Trump replace Harper and Ska?

Will that be soon?

Will Trump, will Harper and Ska
give you, get put back on the board?

I think based on other recent.

Supreme Court decisions,
that's not likely.

And then when might this happen?

So assuming that at least one
R comes on before the end of

the year, you could see some.

All of this happening at the
December board meeting when they

would roll out their new budget.

Now, if they've only got one board member,
I don't think they can do a budget.

I think they will go off the old
budget, and I will think he will

control this purse strings as if
he's operating under a new budget.

Lastly.

This is my contact information
from my PowerPoint.

There's my web address.

We have the With Flying Colored podcast,
which I'm speaking to you on now.

We have another podcast
called Credit Union Regulatory

Guidance Podcast, which is ai.

Reading of guidance, I'll
think of books on audio books.

It's gonna say books on
tapes that was dating me.

There's my LinkedIn address,
there's my email address and

I'm going to stop sharing here
and get back to the full screen.

And that's it guys, ladies, gentlemen.

I think NCUA is going to
have some challenges ahead.

I think people will rise to the occasion.

I think that the reorg, I think, I
wouldn't say I'm spot on, but it's

pretty, some of that's pretty easy to
take a look at if you're talking about

consolidating, if you're talking about
pushing things to the regions, it's pretty

easy to figure out what that might be.

But, i'll do a postmortem on this once
NCUA does their budget and actually does

some reconfiguring, I will compare what I
recommended here to what happened and what

I missed, and I'm gonna leave it at that.

As always, I appreciate you listening.

This is Mark TriCal signing
off with flying colors.