Charges of 'Midnight Rulemaking' Made at NCUA as Hood Faces End of Chairmanship

Midnight rulemaking may have struck at the NCUA.

A loaded meeting agenda for the NCUA board’s December meeting, coupled with the unique scheduling of the board’s January meeting, is likely to help Chairman Rodney Hood gain at least initial approval for policies he wants addressed before he is expected to be removed as chairman once Joe Biden is sworn in as president.

The board has an unusually long agenda for its December meeting — so long that the agency has stretched it into a two-day meeting on Dec. 17 and Dec. 18.

House Financial Services Chairwoman Maxine Waters (D-Calif.) recently warned financial regulators, including Hood, not to engage in so-called “midnight rulemaking,” in which an administration pushes through policies just before leaving office.

Sources familiar with the agency said it would appear that is what Hood is attempting to accomplish.

“Clearly Hood is trying to cram through rules before his chairmanship is over and create a legacy for himself of reg relief given all that he has been able to accomplish to date are low-hanging-fruit rules,” said one source familiar with the agency. The source added that much of the agenda amounts to a credit union trade group wish list.

Agency officials did not respond to several requests for comment.

Here are five things to expect happening at the NCUA in the coming weeks: 

1. President-elect Joe Biden is likely to remove Hood, a Republican, as chairman, and replace him with Democrat Todd Harper after Biden is sworn in on Jan. 20. This will give Harper the power to set much of the agenda for board meetings.
2. That means that Hood has until Jan. 20 to push his agenda.
3. Kyle Hauptman, another Republican, was confirmed by the Senate last week and will likely be sworn in by the time the Dec. 17 meeting is held.
4. That will allow Hood to bring issues he wants addressed to the board during its two-day December meeting without having McWatters’ opposition.
5. Hood has scheduled the January board meeting for Jan. 14. That is the second Thursday of the month. Normally, the board meets on the third or fourth Thursday of the month. The third Thursday in January falls on Jan. 21 — a day after Biden is sworn in and Harper likely takes over the chairmanship.

If Hauptman agrees, all of this will allow Hood to push through the board policies — at least on a preliminary basis — before leaving as chairman.

Sources familiar with the agency said they have never seen an agenda that is so packed that it requires a two-day meeting.

“Other than the budget-related items, nothing on the agenda can be considered an emergency measure requiring action,” one source said.

The source added, “To put the board members through this hurry-up offense to accomplish as much as possible before the chairmanship is relinquished shows a lack of consideration and leadership. If the chairman is so concerned about his legacy, his choice of how he tops it off is a poor one.”

Another source said that while Hood may be trying to get as much done as possible before giving up the chairmanship, it also is true that Hauptman will be a new member of the board, in his first week on the job, facing an agenda containing several complex regulatory issues.

In releasing the agenda, the agency said, “To ensure a transparent and open discussion of several policy issues affecting federally insured credit unions, the National Credit Union Administration Board’s December meeting will occur over a two-day period.”

The Dec. 17 agenda includes a proposed rule on overdraft policy. The agenda does not elaborate on what that includes, but when Hood attempted to bring an overdraft proposal to the board earlier this year, it was tabled after Harper and then-NCUA board member J. Mark McWatters objected. The absence of McWatters on the board may ease passage of the rule.

The agenda for the Dec. 17 meeting also includes:

• A proposed rule on Field of Membership, Shared Facility Requirements. The agenda does not include details of this proposal, but the agency’s Fall regulatory agenda, released earlier this week, stated that the agency plans to consider a proposed rule that “would include any shared branch, shared ATM or shared electronic facility in the definition of service facility for FCUs participating in a shared branching network. These changes would apply to the definition of service facility both for additions of select groups to MCB FCUs and for expansions into underserved areas.”
• A temporary final rule on regulatory relief in response to the coronavirus crisis.
• A proposed rule on Mortgage Servicing Rights. The board did not provide details, but the Fall regulatory agenda stated that the board will consider a proposed rule to amend its investment regulation to permit federal credit unions to purchase mortgage servicing rights from other federally-insured credit unions under certain conditions.
• A final rule on subordinated debt.
• A board briefing on the agency’s Normal Operating Level.

On Dec. 18, the agenda includes:

• A vote on the agency’s 2021-2022 budget. McWatters and Harper had objected to parts of the budget, but without McWatters on the board, a vote could go smoothly.
• A final rule governing the annual operating fee assessment.
• A board briefing on the operating fee schedule and the Overhead Transfer Rate.