NCUA’s Harper Faces Few Questions at Senate Regulator Hearing

Agency chairman reinforces safety of shared insurance deposits at federally insured credit unions.

If financial regulators with jurisdiction over Silicon Valley Bank were well-broiled by Senate Banking Committee members Thursday, NCUA Chairman Todd Harper came out “rare” during the session.

Harper and acting comptroller of the currency Michael Hsu, whose agencies had no role in the recent bank failures, faced virtually no questions during the two-hour hearing.

In fact, Sen. Jon Tester, D-Mont., noted that while other witnesses may have dreaded Thursday’s hearing, Harper and Hsu had little to worry about.

“My guess is that last night probably the only two people who slept well were Harper and Hsu,” he said.

The hearing also featured FDIC Chairman Martin Gruenberg and Michael Barr, vice chairman for supervision at the Federal Reserve; both agencies had supervisory authority over the banks that recently failed.

Criticism of Banking Regulators

Banking Committee Chairman Sen. Sherrod Brown, D-Ohio, said that bank executives who testified earlier this week maintained they were not to blame for the failures.

“They just couldn’t have known that growing so fast to grow their bonuses would put their bank at risk…despite repeated warnings,” Brown said. “It was basically ‘the dog ate my homework’ for three hours.”

And he blamed regulators as well, saying they “didn’t just miss the plane—they allowed a couple of crashes,” before criticizing the Trump Administration for loosening regulations that allowed the banks to quickly grow.

Pushback from Republican Committee Member

However, Banking Committee ranking Republican Tim Scott of South Carolina said the loosening of regulations and Trump-era legislation did not cause the failures.

“Nothing could be further from the truth,” he stated, telling the regulators, “You just didn’t use the tools you had in your toolbox.”

NCUA Chairman’s Testimony

Harper and the other regulators agreed to issue rules governing incentive-based compensation—regulations that the senators said were long overdue.

For his own part, Harper basically repeated testimony he gave on Tuesday when he and the other regulators appeared before the House Financial Services Committee.

He noted that unlike the banks that failed, 91% of the accounts in federally insured credit unions are less than the $250,000 maximum level for federal insurance. By comparison, one of the banks that failed—Signature Bank—had 80% of its accounts uninsured.

“Consumers, therefore, should remain confident that their insured share deposits at federally insured credit unions are safe,” Harper testified.

The NCUA Chairman also urged senators to support legislation that would reinstitute pandemic-related regulations that allowed corporate credit unions, on behalf of a subset of their clients, to serve as agents at the agency’s Central Liquidity Facility.

Sens. Alex Padilla, D-Calif., and Kevin Cramer, R-N.D., introduced S. 544 in February, legislation that Harper explained would allow corporate credit unions to contribute capital to provide coverage for their smaller members with less than $250 million in assets.

“Liquidity risks within the credit union system are rising, and timely consideration of this bill would better protect the credit union system from a future liquidity event,” he said.

Harper additionally repeated his request that Congress enact legislation to give the NCUA power over credit union third-party lenders. Further, he said that if Congress increases the $250,000 insured account threshold for banks, it should do the same for credit unions.