OMB Makes Huge Power Play

The NCUA’s regulatory process may soon slow to a crawl.

And it won’t be the agency’s fault.

On April 11, the Office of Management and Budget announced that beginning May 11, all guidance and rules issued by independent agencies, such as the NCUA, CFPB and other financial regulators, must be submitted for review by the budget office. If the rules or guidance is deemed to be “major,” they also will be required to submit them to Congress under the Congressional Review Act.

Congress then would have to decide whether to accept the rule. If Congress votes against it and the president signs the resolution, the agency is prohibited from issuing a similar rule.

NCUA officials, with the exception of Todd Harper, the new Democratic board member, have been reluctant to comment on the memo.

But former agency board members said the documents signify a major power play on the part of the Trump Administration.

“Undoubtedly it will undermine the independence of the regulatory agencies and could diminish their ability to respond expeditiously to situations requiring immediate attention,” former board Chairwoman Debbie Matz said in an email to CU Times.

Harper took the occasion of his first board meeting to draw a line in the sand.

“The Congress deliberately established the NCUA as a bipartisan, independent agency, and gave the board members six-year terms in order to insulate the agency’s decision-making process from transitory political winds,” the Democrat said in his first remarks as a board member. “That decision by Congress has served our nation, and the credit union community, well in both good economic times and bad, and will continue to do so in the future.”

But Mitra Wilson, CUNA’s senior director of advocacy and counsel, said the new policy will force agencies to better evaluate the cost of rules and guidance.

“It’s a good thing for the industry and it’s a good thing for consumers,” she said.

And conservatives applauded the administration’s effort.

“The Constitution states that only Congress can make laws, but that doesn’t always stop overzealous bureaucrats from making up regulations that effectively have the force of law, but without oversight from the legislative branch,” Sen. Tom Cotton (R-Ark.) said.

But former NCUA board members said the new OMB policy could have a profound impact on the agency’s ability to respond to problems.

“Personally, I think the independent financial regulatory agencies should be just that – independent – and not be subject to being politicized by either Congress or an executive administration,” former NCUA Board Chairman Dennis Dollar told CU Times.

The rule could have a draconian impact on agencies that are supposed to be independent, former NCUA Chairman Michael Fryzel added.

“If implemented, it will delay the regulatory process for months if not years,” he said to CU Times. “In addition, with a no vote by Congress, an approved agency regulation could disappear forever. The memo appears to reduce the authority of independent agencies to implement rules they may feel are necessary to regulate entities under their jurisdiction.”

It all boils down to control, former NCUA board member Geoff Bacino told CU Times.

“If you’re an administration, it makes sense,” he said. “You want to control everything.”

By comparison, he said, when the NCUA needed capital, the industry obtained it itself and did not rely on the federal government.

Previous administrations have steered clear of taking on the independent agencies.

The Congressional Research Service in a 2017 report made it clear that previous presidents have avoided exerting control over independent agencies.

“Notably, however, the requirement for [OMB] review does not apply to the independent regulatory agencies – presidents have chosen to respect the independence of those agencies while imposing requirements on the executive agencies,” the CRS said. “This independence from presidential review of rulemaking is considered to be one of the hallmarks of agency independence.”

Some federal agency is likely to fight the new policy.

“Somebody’s going to push back on it,” Bacino said, adding that the battle would end up in court.

“I can’t even begin to guess how much resistance this OMB memo will engender within the Executive Branch,” John McKechnie, senior partner at Total Spectrum, said. “There’s a saying that ‘personnel is policy’ and my guess is that individual officials within government will accept or reject it based on their political views.”

NCUA officials will have to assess the impact of the new policy, Henry Meier, SVP and general counsel of the New York Credit Union Association, recently wrote in his blog.

“The NCUA board and its attorneys must determine if this order is effectively giving the White House power it does not have to delay or even refuse to submit proposed regulations to Congress,” he wrote, cautioning that the evaluation was his own and does not represent the views of the association. “Even if the NCUA and other independent agencies question the legality of the guidance, they must still decide whether the issue is one worth getting into a fight with the Trump Administration.”

And one policy analyst questioned whether the Trump Administration has the power to do what is called for in the memo.

“This would be a foot in the door for OMB review of independent agencies,” Sean Moulton, senior policy analyst at the Project for Government Oversight, which monitors regulatory issues, said. “Congress created these independent agencies to be independent.”

He added, “This is a very long limb that OMB is climbing out on and I’m not sure they have the [legal authority] to do it.”