Mulvaney repeatedly asked Matz who the credit unions do represent, to which she finally answered, "I can't answer that. You'll have to ask them."

In an exclusive interview with CU Times following the hearing, Mulvaney said it was one of the most outrageous things he has heard since being elected to Congress nearly five years ago.

"I've heard some real stunners and not being able to answer the obvious questions – who do credit unions represent? ­­­– it's almost as if she has this vendetta over the credit unions she oversees," Mulvaney said.

The comment about credit unions not representing their members came up in the first half of the hearing, but in a follow-up round with Mulvaney after more than an hour of testimony, Matz said it again. That time, she expanded the statement by saying that credit unions who want to take part in the budget process, and tell the NCUA to cut items from the budget, are not doing so in the best interest of the members they serve.

Following the hearing Matz further clarified her statement.  

"If credit unions are asking NCUA to cut the budget, cut staff and cut exam hours, they are not representing the best interests of their members – because their credit union and its members will ultimately have to pay for the losses of failed credit unions," she said.

Jim Nussle, president/ CEO of CUNA, released a statement which said, in part, "I certainly hope that NCUA Chair Debbie Matz misspoke at the hearing today. If she didn't, it's outrageous that Chair Matz would tell Congress she does not believe credit unions represent their members under the respectful questioning of Representatives Scott and Mulvaney. I can't believe I need to remind her that the nation's credit unions are member owned."

NAFCU President/CEO Dan Berger sent the following statement to CU Times: "We strongly believe credit unions do a fantastic job of looking out for their member-owners, especially in an ever-increasingly difficult regulatory environment." 

In her first Congressional hearing since 2011, credit unions being part of the NCUA budget process became a large area of tension. Many members of Congress wanted the NCUA to give the public the budget two weeks prior to the board voting on it. Committee members also wanted to know why the NCUA budget had increased at an average of more than 8% in the last five years when the amount of credit unions funding the overhead transfer rate has decreased due to credit unions merging and going out of business.

Prior to the hearing, Matz released a statement to further explain the budget increase over the last five years.

"The experiences of the recent financial crisis have also informed the NCUA's current budgeting decisions," she said. "Budgets cannot be aimed at consistent staff cuts, as was the case for seven consecutive years leading up to the Great Recession when the agency held budget hearings. Instead, the NCUA's resources and staffing need to keep pace with the risks and complexity of the credit union system. The NCUA board has now achieved that appropriate balance, while preventing any unnecessary budget and staffing growth. The committee is also expected to blame the NCUA for regulating credit unions out of conformity rather than necessity.

"The financial crisis also demonstrates why the NCUA must maintain needed resources in positive economic cycles to prepare for downturns," she continued. "As the crisis hit, the NCUA quickly needed to augment our pool of examiners to address significant increases in the number of credit unions experiencing balance sheet and operational problems. However, developing fully seasoned examiners requires several years of training and experience, and there were limited talent pools from which to draw these experts. Moreover, other banking agencies were competing for this same talent as the crisis took hold."

At the hearing, Matz pointed out that while the budget had increased in the last five years, it had dropped significantly since 2000.

During the first half of the hearing, Matz said the reason credit unions were not part of the budget process was because they weren't asking to be and that the only complaints she heard where from the trade associations. However, toward the end of the hearing, Matz said that she thinks it would be wrong to have credit unions be part of the process and stated they are not representing the best interest of their members.

Matz also asserted in the hearing that credit unions "don't really care" about the NCUA budget.

NCUA Board Member Mark McWatters disagreed with that statement, telling CU Times after the hearing Matz' position was contrary to his experience.

"I am apoplectic that the Chair would have the temerity to even suggest that credit unions and their members are not interested in NCUA's budget and the budgetary process. I have conducted a series of de facto budget hearings as part of the town hall meetings I have held throughout the country. Credit union officers, their boards and members are fantastically interested in these topics and we have engaged in countless debates and discussions on ways to improve the transparency, effectiveness, efficiency and accountability of the NCUA budget and budgetary process," he said.

However, Matz also testified that to obtain more frequent public input on the OTR going forward, NCUA will solicit comments on the rate's methodology "every three years in conjunction with the public review of the agency's strategic plan."

NASCUS President/CEO Lucy Ito said she disagreed with that plan.

"That approach is inadequate," she said. "As the legal analysis we released late last month detailed, the OTR is a rulemaking for the purposes of the Administrative Procedure Act. That means, the OTR must be subject to notice – in the Federal Register – and public comment whenever the rate is changed, immediately, just like any rule. State-chartered credit unions deserve to know what the elements of the OTR are when it is developed by NCUA, and have the opportunity to comment on it when the rate changes. 

"During the hearing, it also became apparent that an unredacted audit report by PriceWaterhouse Coopers on the OTR noted concerns about the lack of formal transparency around such a major component of the budget process. Following today's hearing, it would appear that the audit was in concert with our analysis. The agency should consider these two views carefully, and take action accordingly. Ultimately, we believe that leads to formal 'notice and comment' of the OTR."

Berger also weighed in on the news the NCUA would seek input on the OTR, saying in a statement, "We appreciate the agency's indication that it will solicit comment on its strategic plan including the OTR, but we believe NCUA should go further by submitting the OTR methodology through a formal comment period subject to the Administrative Procedures Act."

It was a long day of testimony for Matz, who was hammered by members of the committee mostly on what they believe to be a lack of transparency on the agency's part. The few Democratic members of Congress at the hearing mostly stated support for the NCUA and the current amount of transparency from the board.

At one point, Matz was admonished for telling members of Congress how to do their job, to which she said she was merely giving them suggestions that would make her job easier. The hearing then turned into a history lesson on the powers of the executive branch and whether those in the current administration can tell members of Congress what to do.

Matz was questioned by Rep. Ed Royce (R-Calif.) on her support of H.R. 1422, the Credit Union Residential Loan Parity Act, as well as action by Congress on clarifying field of membership rules.

"On another front, as you indicated in your testimony, improving the field of membership rule is a priority for the NCUA; you have even set up a separate working group to address regulatory relief needs on this front," Royce said. "I know the NCUA has a proposed rule addressing proposed streamlined field-of-membership procedures, and is working to address issues related to community charters, and occupation charters. My question was, while much of this work can be left to the NCUA alone, is there anything Congress should be doing to address field of membership issues in the statute?" "Thank you for asking that. Yes, there are several things that can be done, but probably the most impact would be if community charters would be allowed to take on underserved areas," Matz said. "That would help keep the federal charter competitive and would provide relief to a number of community charters which would really like to take on underserved but can't do it. It really makes no sense, I can't figure out any reason for it. We hate to say no but we have no choice."

Matz then testified there was no evidence that overregulation or the Dodd-Frank Act was the cause for losing 17% of the industry since 2010. She said the vast majority of small credit union mergers are voluntary, and sometimes the CEO retires and there is no contingency plan for a replacement.

"I think there is a major disconnect between her and the folks she oversees," Mulvaney said after the hearing. "What I hear (from credit union executives) is the exact opposite."

Matz then defended on-the-spot cash incentive and other bonuses to NCUA employees and reminded members of Congress that staff had not received a raise in five years. Rep. Roger Williams (R-Texas) interrupted and said the private sector hadn't seen pay increases either.

Matz also defended the more than $1 million Sensitive Compartmented Information Facility room that was recently built.

Mulvaney said following the meeting, members of Congress on both sides were shocked by the answers they received from Matz and were strongly considering the possibility of having her come back soon for additional questioning. He said, in the end, Matz inadvertently helped promote the bill H.R. 2287, the National Credit Union Administration Budget Transparency Act. He added he believes it now has a better chance of passing due to her testimony.

"The bill I co-sponsored got a boost today," he said. "The NCUA is in bad need of reform."