Publicdifferences between NCUA Board members are needed for therulemaking process, according to the results of a CU Times poll and the opinions of several credit unionexecutives.

NCUA board members in recent months have taken adversarialpositions during board meetings and released statements refutingthose made by other board members.

In particular, the risk-based capital proposal has fueled debatebetween Chairman Debbie Matz and Board Member Mark McWatters.

In response to a Feb. 17 online poll regarding recent boarddisagreements, the vast majority of respondents (72%) said healthydebate within the board leads to positive change. Of the 157 totalresponses, 19% said the disagreements make the board lookunprofessional and 5% said the infighting was a waste of resources.Custom responses were written by 4% of the survey'srespondents.

One reader said the disagreements revealed a “governing bodythat blatantly exhibits its self-serving interests,” while otherslabeled the debates “partisan politics” and “politicalposturing.”

Another reader said board members can disagree but should notuse the media to air the disagreements.

“Everybody doesn't have to be a yes person to the chairman,”wrote another respondent.

Johnstown, Pa.-based consultant Orlando Hanselman commented on aLinkedIn post of the poll, writing, “A board that always agrees isdysfunctional. Board issues are complex particularly in theseuncertain and volatile times. Robust, fact-based debate is criticalto successful decisions.”

He continued, “If there is always board consensus, then somemembers are either disengaged or fail to understand the gravity ofthe issues. Choices and alternatives abound. It is a board chair'sresponsibility to hear members' thoughts on issues and to stimulatedebate and vigorous discourse. Recording and making such debatepublic increases credibility and demonstrates an active, thoughtfulboard. If all members always agree, several members are no longerneeded. I applaud learned, fact-based debate and disclosure.”

Jim Hayes, president/CEO of the $1 billion Andrews FederalCredit Union in Suitland, Md., and former NCUA examiner, saidsimple disagreements make the rulemaking process stronger.

“I think that disagreements can be a healthy part of the rulemaking process as long as both sides maintain a posture ofcompromise,” he noted.

“Disagreements that cause key parties to choose absolute sides(us against them) tend to move into an unhealthy unproductiveprocess where nothing gets done. But simple disagreements andhealthy tensions can make the process stronger and promote a betterend result.”

Addressing the differences between Matz and McWatters on budget hearings, Hayes said, “I would notobject to budget hearings; however, overall my expectation is thatNCUA leadership is doing all they can to control costs withoutpublic scrutiny.”

James Norris, president/CEO of the $105 million MontgomeryCounty Employees Federal Credit Union in Germantown, Md., said hewas aware of the recent debates among board members but had notformed an opinion. He added he was waiting to see how the situationdeveloped over time.

Jim Blaine, president/CEO of the $29 billion State Employees'Credit Union in Raleigh, N.C., said he did not view differences ofopinion between NCUA board members as disputes.

“I believe the current transparency at the NCUA board level isnot only healthy, but long overdue,” he offered. “[The] NCUA wasdeveloping a reputation, perhaps unfairly, that it would not eventolerate discussion, let alone dissent. That growing perceptionneeded to be changed.”

During the agency's November 2014 boardmeeting, Matz disagreed with McWatters when he said the agencyshould hold budget hearings.

McWatters said the agency should adopt more transparency andallow stakeholders to publicly comment on the budget before it isvoted on by the full board.

Vice Chairman Rick Metsger called the hearings a dog and ponyshow, while Matz said such hearings could lead to regulatorycapture.

“I believe that providing that information to the trades reallywould result in regulatory capture which is what existedpreviously,” Matz said. “We had hearings on the budget. We reducedFTEs by a total of 71 in a five year period. When I came on in2009, the industry was on the verge of collapse and we didn't havethe resources that we needed in order to protect the industry so wewere playing catch up.”

McWatters responded that public hearings would not lead toregulatory capture.

“We are using other people's money. It seems fair. It seemsreasonable for people to look at the budget and come and presenttheir thoughts on the budget to us in an open meeting. Tradeassociations meet with members of the board all of the time,” hesaid.

Following the January 2015 board meeting, Matz claimed McWattersviolated law firm Paul Hastings LLP's confidentiality policy by quoting thefirm's legal opinion on the risk-based capital proposal at themeeting.

“My statement during the open meeting on Jan. 15, 2015, clearlyand deliberately referred to the oral opinion,” Matz said.“Regretfully, Board Member McWatters quoted directly from thefirm's written opinion during the open meeting and, in so doing,violated the firm's policy regarding the confidentiality of thatopinion.”

In response, McWatters said Matz violated the confidentialityagreement before he delivered remarks at the meeting.

“By the time I spoke at the bard meeting the cat was out of thebag, as the key legal conclusion of both the oral legal opinion andthe written legal opinion of Paul Hastings was already in thepublic domain. I merely commented on what had been disclosed by theChair,” McWatters said.

McWatters, who voted against the revised risk-based capitalproposal, said Matz' actions were distracting from the amount ofmoney the agency spent on the legal opinion.

“The chair's accusatory statement directed at me is nothing morethan an attempt to obscure the true issue at hand – she directedNCUA to waste $150,000 of credit union funded resources to obtainan opinion that offers modest support for a two-tier RBNW system,”he said.

McWatters directed further criticism at Matz and questionedpriorities.

“With so many critical issues facing the credit union communitytoday, the ongoing attempt by the chair to discredit my efforts toprovide meaningful transparency and inform credit unions of what istaking place within NCUA demonstrates a sad state of affairs at theagency,” McWatters added.