WEBVTT 00:00:00.000 --> 00:00:02.640 Welcome back to the Deep Dive. Our mission here 00:00:02.640 --> 00:00:05.120 is to take stacks of complex source material, 00:00:05.299 --> 00:00:08.839 historical documents, regulatory filings, financial 00:00:08.839 --> 00:00:12.080 data, and really turn them into the deep insights 00:00:12.080 --> 00:00:15.300 you need to be truly well informed. And when 00:00:15.300 --> 00:00:17.500 we talk about, you know, financial stability 00:00:17.500 --> 00:00:19.440 and making sure your money is safe in the United 00:00:19.440 --> 00:00:23.350 States, one name always comes up. The FDIC. The 00:00:23.350 --> 00:00:25.309 Federal Deposit Insurance Corporation. They're 00:00:25.309 --> 00:00:27.670 the ones everyone knows. They back the big commercial 00:00:27.670 --> 00:00:30.969 banks. Exactly. And that familiarity, it's well 00:00:30.969 --> 00:00:33.770 -earned, but it kind of obscures a huge part 00:00:33.770 --> 00:00:36.429 of the picture. The U .S. financial system has 00:00:36.429 --> 00:00:39.500 this crucial parallel structure. The credit union 00:00:39.500 --> 00:00:42.200 movement. Right. And if you, the listener, are 00:00:42.200 --> 00:00:45.079 one of the, what is it, 124 million people in 00:00:45.079 --> 00:00:46.820 this country with an account at a credit union. 00:00:47.000 --> 00:00:49.359 That's a number. Then you are insured and regulated 00:00:49.359 --> 00:00:52.340 by a completely separate, equally vital, and 00:00:52.340 --> 00:00:54.859 frankly, a much less understood federal agency. 00:00:55.200 --> 00:00:57.579 And that's our entire focus today. We're zeroing 00:00:57.579 --> 00:01:00.060 in on this powerful regulator, the National Credit 00:01:00.060 --> 00:01:02.280 Union Administration, or as we'll call it, the 00:01:02.280 --> 00:01:05.599 NCUA. It's the sister agency to the FDIC, but 00:01:05.599 --> 00:01:08.579 it is built exclusively for a credit union. and 00:01:08.579 --> 00:01:11.879 their unique cooperative nonprofit structure. 00:01:12.200 --> 00:01:13.879 So let's define it right out of the gate. What 00:01:13.879 --> 00:01:17.180 is the NCUA fundamentally? Okay, so at its core, 00:01:17.299 --> 00:01:21.159 it's an independent U .S. federal agency. Congress 00:01:21.159 --> 00:01:24.019 created it, and it has this really expansive 00:01:24.019 --> 00:01:28.099 mandate. to regulate, to charter, to supervise. 00:01:28.420 --> 00:01:30.640 And this is the most critical part for most people. 00:01:30.760 --> 00:01:33.239 Yeah. To ensure the nation's credit unions. And 00:01:33.239 --> 00:01:35.420 that structure, it seems to suggest that credit 00:01:35.420 --> 00:01:37.959 unions are just different. They need their own 00:01:37.959 --> 00:01:40.040 special kind of oversight. They absolutely do. 00:01:40.219 --> 00:01:41.819 Yeah. The whole idea is that because they're 00:01:41.819 --> 00:01:43.920 cooperatively owned by their members and they're 00:01:43.920 --> 00:01:46.819 mission focused, not profit focused, they just 00:01:46.819 --> 00:01:49.140 don't fit the commercial banking regulatory model. 00:01:49.299 --> 00:01:51.519 And we are not talking about a small niche player 00:01:51.519 --> 00:01:53.719 here. The scale is. I mean, the sources we have 00:01:53.719 --> 00:01:56.060 paint this map. picture of financial responsibility. 00:01:56.319 --> 00:01:58.719 It's staggering, really. As of December 2020, 00:01:58.959 --> 00:02:01.519 you had the NCUA insuring the deposits of over 00:02:01.519 --> 00:02:05.140 124 million people. 124 million? Across nearly 00:02:05.140 --> 00:02:09.610 5 ,100 federally insured credit unions. And the 00:02:09.610 --> 00:02:12.110 total assets under their watch. It was over $1 00:02:12.110 --> 00:02:16.409 .84 trillion. A trillion with a T. Yeah, that 00:02:16.409 --> 00:02:19.050 puts the NCUA firmly in the big leagues of financial 00:02:19.050 --> 00:02:22.090 regulators. They are managing a huge pillar of 00:02:22.090 --> 00:02:24.729 American finance. Right. So our deep dives today, 00:02:24.770 --> 00:02:26.789 our mission is to give you a really comprehensive 00:02:26.789 --> 00:02:29.210 understanding of this agency. We're going to 00:02:29.210 --> 00:02:31.689 unpack its unique governance, trace its history 00:02:31.689 --> 00:02:34.069 all the way back to the New Deal. And look at 00:02:34.069 --> 00:02:35.909 how it handled some of your financial crises. 00:02:36.050 --> 00:02:38.669 All while, and this is key, maintaining a core... 00:02:38.669 --> 00:02:41.750 cooperative, non -taxpayer funded insurance system. 00:02:41.830 --> 00:02:44.729 Exactly. The goal is for you to walk away truly 00:02:44.729 --> 00:02:47.689 informed about the other major financial insurer 00:02:47.689 --> 00:02:50.030 in the U .S. Okay, let's unpack this, starting 00:02:50.030 --> 00:02:51.990 with the architecture, you know, the very structure 00:02:51.990 --> 00:02:55.439 that makes this agency pick. So the first thing 00:02:55.439 --> 00:02:57.240 that really jumps out at you about the NCUA is 00:02:57.240 --> 00:02:59.759 its governance. It's not led by a single person 00:02:59.759 --> 00:03:02.039 like a secretary or an administrator. Right. 00:03:02.180 --> 00:03:04.500 It's run by a three -member board. Why do they 00:03:04.500 --> 00:03:06.800 do it that way? It seems very deliberately designed 00:03:06.800 --> 00:03:09.539 for, I don't know, stability. That is the absolute 00:03:09.539 --> 00:03:12.800 key insight. The board model is all about checks 00:03:12.800 --> 00:03:15.620 and balances. It's about continuity. These three 00:03:15.620 --> 00:03:17.819 members, they're not just picked out of a hat. 00:03:18.240 --> 00:03:20.780 They're high -level federal appointees. Appointed 00:03:20.780 --> 00:03:22.860 by the president, confirmed by the Senate. Yes, 00:03:22.919 --> 00:03:25.039 which just underscores how serious their positions 00:03:25.039 --> 00:03:27.819 are. I mean, they're trustees of a nearly $2 00:03:27.819 --> 00:03:31.099 trillion financial system. The president then 00:03:31.099 --> 00:03:33.060 picks one of the three to be the chairman to, 00:03:33.139 --> 00:03:35.580 you know, set the agenda. And what's really fascinating 00:03:35.580 --> 00:03:37.879 to me is the political constraint that's baked 00:03:37.879 --> 00:03:40.520 right into the law. The bipartisan rule. Exactly. 00:03:40.740 --> 00:03:43.500 The law says no more than two of those three 00:03:43.500 --> 00:03:45.659 members can belong to the same political party. 00:03:46.250 --> 00:03:49.009 That's not an accident, is it? Not at all. It's 00:03:49.009 --> 00:03:51.870 a structural requirement designed to force bipartisanship. 00:03:52.110 --> 00:03:55.250 It's like an internal break on ideology. A huge 00:03:55.250 --> 00:03:58.710 policy change or response to a crisis can't just 00:03:58.710 --> 00:04:00.750 be pushed through on a narrow party line vote. 00:04:00.969 --> 00:04:03.729 So it forces them to talk to each other. It forces 00:04:03.729 --> 00:04:07.919 deliberation, negotiation, consensus. You know, 00:04:07.939 --> 00:04:10.319 if you compare that to an agency run by one person 00:04:10.319 --> 00:04:12.219 who can be swapped out the day a new president 00:04:12.219 --> 00:04:15.860 takes office, the NCUA's structure is built to 00:04:15.860 --> 00:04:18.699 prevent that kind of regulatory whiplash. And 00:04:18.699 --> 00:04:20.819 the terms they serve, that reinforces the goal, 00:04:20.899 --> 00:04:24.459 too. Six years. A long time. It's designed to 00:04:24.459 --> 00:04:27.300 span across presidential election cycles to provide 00:04:27.300 --> 00:04:29.019 that stability. And they can't just keep getting 00:04:29.019 --> 00:04:31.079 reappointed either. Right. The rules are pretty 00:04:31.079 --> 00:04:33.459 specific. You can't be reappointed to succeed 00:04:33.459 --> 00:04:36.759 yourself immediately unless, say, you were just 00:04:36.759 --> 00:04:39.300 filling out the last bit of someone else's term. 00:04:39.740 --> 00:04:42.519 It's meant to encourage a slow, steady rotation 00:04:42.519 --> 00:04:46.199 of fresh perspectives without gutting the institution 00:04:46.199 --> 00:04:48.019 of its experience. And there's this one little 00:04:48.019 --> 00:04:50.160 logistical detail, the holdover provision, that 00:04:50.160 --> 00:04:52.139 seems incredibly important for keeping things 00:04:52.139 --> 00:04:54.920 running. Oh, it's essential, especially in today's 00:04:54.920 --> 00:04:57.740 political world. It means that if a member's 00:04:57.740 --> 00:05:00.120 six -year term is up, they don't just pack their 00:05:00.120 --> 00:05:03.129 bags and leave. They stay on. They stay on. They 00:05:03.129 --> 00:05:05.730 continue to serve until their replacement is 00:05:05.730 --> 00:05:08.250 not just nominated, but actually confirmed by 00:05:08.250 --> 00:05:10.910 the Senate and sworn in. This prevents a power 00:05:10.910 --> 00:05:13.170 vacuum. It means a political fight can't just 00:05:13.170 --> 00:05:15.769 paralyze the agency. And we can see this in action. 00:05:15.889 --> 00:05:17.910 The source material gives us a snapshot, right? 00:05:18.129 --> 00:05:22.569 As of July 26, 2025. We can. In that example, 00:05:22.629 --> 00:05:24.689 the chairman is Kyle S. Hauptman, a Republican. 00:05:25.449 --> 00:05:28.069 But the other two seats, the vice chair and the 00:05:28.069 --> 00:05:30.860 member slot. are vacant, which happens a lot 00:05:30.860 --> 00:05:33.279 in government all the time. Yeah. But because 00:05:33.279 --> 00:05:36.160 of that holdover rule, the agency doesn't grind 00:05:36.160 --> 00:05:39.240 to a halt. It can still function. It does, however, 00:05:39.300 --> 00:05:41.399 show you the vulnerability. I mean, a board that's 00:05:41.399 --> 00:05:43.879 supposed to be three strong and bipartisan isn't 00:05:43.879 --> 00:05:45.680 at its best when it's operating with just one 00:05:45.680 --> 00:05:48.060 member for a long time. Right. Makes sense. OK, 00:05:48.120 --> 00:05:49.699 so from the leadership at the top, let's go to 00:05:49.699 --> 00:05:51.899 the boots on the ground. This is a national organization 00:05:51.899 --> 00:05:55.339 covering all 50 states, territories. How do they 00:05:55.339 --> 00:05:58.420 manage such a huge supervisory load? They break 00:05:58.420 --> 00:06:00.579 it down. The agency operates through three big 00:06:00.579 --> 00:06:03.740 regional offices. And that physical separation 00:06:03.740 --> 00:06:06.399 is crucial for effective regulation. Why is that? 00:06:06.620 --> 00:06:09.079 Well, think about it. You need examiners to be 00:06:09.079 --> 00:06:11.399 physically near the institutions they're regulating. 00:06:12.090 --> 00:06:14.589 especially with that mandatory 12 -month examination 00:06:14.589 --> 00:06:16.829 cycle we're going to talk about. It's all about 00:06:16.829 --> 00:06:19.790 having that close supervisory relationship. Okay, 00:06:19.829 --> 00:06:21.810 so let's lay out these three pillars for the 00:06:21.810 --> 00:06:24.009 listener. First up is the eastern region. It's 00:06:24.009 --> 00:06:26.649 headquartered in Alexandria, Virginia. And as 00:06:26.649 --> 00:06:29.430 you'd guess, it handles the really dense established 00:06:29.430 --> 00:06:32.670 credit union areas in the northeast and mid -Atlantic. 00:06:33.079 --> 00:06:36.279 So you're talking New York, Pennsylvania, Virginia, 00:06:36.660 --> 00:06:39.860 D .C. The older, more urban institutions. Exactly. 00:06:40.120 --> 00:06:42.160 Then you travel south and you get the southern 00:06:42.160 --> 00:06:44.800 region, based out of Austin, Texas. This one 00:06:44.800 --> 00:06:47.480 covers a huge swath of the country. Florida, 00:06:47.660 --> 00:06:50.920 Texas, Georgia. And its reach goes into the Caribbean, 00:06:51.000 --> 00:06:53.019 too, which is an important detail. They oversee 00:06:53.019 --> 00:06:55.319 credit unions in Puerto Rico and the U .S. Virgin 00:06:55.319 --> 00:06:58.360 Islands. And finally, the west. The vast western 00:06:58.360 --> 00:07:00.259 region, which has run out of Tempe, Arizona. 00:07:01.600 --> 00:07:03.660 Geographically, this one is just enormous. It 00:07:03.660 --> 00:07:06.600 covers everything from the Midwest, like Illinois, 00:07:06.800 --> 00:07:09.160 all the way west. So you've got huge financial 00:07:09.160 --> 00:07:11.480 centers like California and Washington, but also 00:07:11.480 --> 00:07:14.480 Alaska, Hawaii, and even the Pacific Territory 00:07:14.480 --> 00:07:17.360 of Guam. That division of labor seems so important. 00:07:17.459 --> 00:07:19.740 It lets them tailor their supervision to what's 00:07:19.740 --> 00:07:21.560 actually happening in the local economy, right? 00:07:21.759 --> 00:07:24.300 It's vital. The health of a credit union is often 00:07:24.300 --> 00:07:27.199 tied directly to local industries. Is it auto 00:07:27.199 --> 00:07:29.660 manufacturing in Michigan? Is it tech in California? 00:07:30.300 --> 00:07:32.839 Tourism in Florida? The regional offices make 00:07:32.839 --> 00:07:34.959 sure their examiners understand those specific 00:07:34.959 --> 00:07:37.339 economic headwinds when they walk in the door. 00:07:37.560 --> 00:07:39.740 Okay, so let's pivot to what powers all of this. 00:07:39.839 --> 00:07:42.740 The money. The sources make it really clear that 00:07:42.740 --> 00:07:45.420 the NCUA isn't just one big pot of insurance 00:07:45.420 --> 00:07:48.540 money. It's actually four separate funds. Yep. 00:07:48.579 --> 00:07:50.759 And this complexity is key. Most people only 00:07:50.759 --> 00:07:53.420 know about the first one. The insurer. The National 00:07:53.420 --> 00:07:56.860 Credit Union Share Insurance Fund, or NCUSAF. 00:07:57.079 --> 00:08:00.199 That's the one. It's the main guarantee. Insures 00:08:00.199 --> 00:08:03.860 your deposits up to $250 ,000. And it is explicitly 00:08:03.860 --> 00:08:06.980 backed by the full faith and credit of the U 00:08:06.980 --> 00:08:09.569 .S. government. It is the absolute bedrock of 00:08:09.569 --> 00:08:12.610 consumer confidence. Okay. Number two. The NCUA 00:08:12.610 --> 00:08:15.269 Operating Fund. This is what pays the agency's 00:08:15.269 --> 00:08:18.069 bills. It works with the NCUCIF to cover the 00:08:18.069 --> 00:08:20.870 day -to -day stuff salaries for all those examiners, 00:08:20.970 --> 00:08:24.089 IT, rent for the regional offices. It keeps the 00:08:24.089 --> 00:08:26.329 lights on and the regulatory machine running. 00:08:26.490 --> 00:08:29.459 The third one. Seems strategically crucial, especially 00:08:29.459 --> 00:08:32.159 in a crisis. The Central Liquidity Facility, 00:08:32.220 --> 00:08:34.840 or CLF. The CLF is fascinating. It's what really 00:08:34.840 --> 00:08:36.600 anchors the cooperative in attendance of the 00:08:36.600 --> 00:08:39.000 whole system. It's the lender of last resort, 00:08:39.100 --> 00:08:41.460 but just for credit unions. So if a credit union 00:08:41.460 --> 00:08:45.090 has a sudden cash crunch. a big unexpected wave 00:08:45.090 --> 00:08:47.149 of withdrawals maybe or the money markets freeze 00:08:47.149 --> 00:08:49.350 up, the CLF could step in and provide short term 00:08:49.350 --> 00:08:51.490 loans to tide them over. How is that different 00:08:51.490 --> 00:08:54.169 from, say, the Federal Reserve's discount window 00:08:54.169 --> 00:08:57.370 that banks use? It's the structure. The CLF is 00:08:57.370 --> 00:09:00.179 member owned. Credit unions actually buy stock 00:09:00.179 --> 00:09:02.559 in it to become members. So when one of them 00:09:02.559 --> 00:09:05.019 needs liquidity, the CLF is essentially tapping 00:09:05.019 --> 00:09:07.740 into this shared capital pool to stabilize that 00:09:07.740 --> 00:09:10.059 institution. It's a critical line of defense. 00:09:10.240 --> 00:09:12.659 It lets this system solve its own short -term 00:09:12.659 --> 00:09:15.110 problems internally. And that brings us to the 00:09:15.110 --> 00:09:17.649 fourth and final fund, the Community Development 00:09:17.649 --> 00:09:20.870 Revolving Loan Fund. This one really seems to 00:09:20.870 --> 00:09:23.429 speak to the mission of credit unions. It absolutely 00:09:23.429 --> 00:09:26.990 does. The CDRLLF, as it's called, exists purely 00:09:26.990 --> 00:09:29.450 for community investment. It provides loans and 00:09:29.450 --> 00:09:31.629 grants to credit unions that are specifically 00:09:31.629 --> 00:09:33.909 serving low income and underserved communities. 00:09:34.149 --> 00:09:37.830 So the NCUA is using its power to actively foster 00:09:37.830 --> 00:09:40.629 economic growth, tying regulation directly back 00:09:40.629 --> 00:09:42.549 to the whole reason credit unions were created 00:09:42.549 --> 00:09:44.980 in the first place. To really get the NCUA today, 00:09:45.139 --> 00:09:48.399 you have to go back, way back. Like so many of 00:09:48.399 --> 00:09:51.179 our big financial institutions, its story starts 00:09:51.179 --> 00:09:53.700 in the Great Depression. That's right. The year 00:09:53.700 --> 00:09:56.419 is 1934. President Franklin D. Roosevelt signs 00:09:56.419 --> 00:09:59.259 the Federal Credit Union Act into law. And you 00:09:59.259 --> 00:10:01.320 have to remember the context. Trust in banks 00:10:01.320 --> 00:10:03.340 was completely shattered. Millions were out of 00:10:03.340 --> 00:10:07.700 work. And the goal of the act was what exactly? 00:10:08.039 --> 00:10:10.639 It was profoundly progressive for its time. It 00:10:10.639 --> 00:10:13.279 was designed to promote. thrift, you know, saving 00:10:13.279 --> 00:10:16.500 and to create a stable national system of financial 00:10:16.500 --> 00:10:19.759 institutions that were based on this cooperative 00:10:19.759 --> 00:10:23.419 nonprofit model. This idea that the owners are 00:10:23.419 --> 00:10:25.919 the members. Exactly. Any profits go back to 00:10:25.919 --> 00:10:28.600 the members through lower loan rates or higher 00:10:28.600 --> 00:10:31.120 savings rates. It was a direct contrast to the 00:10:31.120 --> 00:10:34.370 shareholder owned. profit driven banks that had 00:10:34.370 --> 00:10:37.190 just failed so spectacularly. So in the beginning, 00:10:37.250 --> 00:10:39.909 this new regulatory body was pretty small. Tiny. 00:10:39.990 --> 00:10:41.570 It started out as the Bureau of Federal Credit 00:10:41.570 --> 00:10:44.549 Unions, the BFCU. And for the first few decades, 00:10:44.750 --> 00:10:47.070 it just it sort of wandered through the government 00:10:47.070 --> 00:10:49.610 bureaucracy. The sources show this crazy migration. 00:10:49.950 --> 00:10:51.509 It's a real shuffle. It started at the Farm Credit 00:10:51.509 --> 00:10:53.830 Administration. Then kind of ironically, it got 00:10:53.830 --> 00:10:56.450 moved to the FDIC for a while. The very agency 00:10:56.450 --> 00:10:58.490 it would later parallel. Right. Then it went 00:10:58.490 --> 00:11:00.490 to the Federal Security Agency. And finally, 00:11:00.490 --> 00:11:02.460 it landed for a time inside. the Department of 00:11:02.460 --> 00:11:05.580 Health, Education, and Welfare, HEW. So you can 00:11:05.580 --> 00:11:08.240 really think of this period as the agency just 00:11:08.240 --> 00:11:09.899 trying to find its footing, right? It's always 00:11:09.899 --> 00:11:12.399 part of something bigger. Completely. But while 00:11:12.399 --> 00:11:14.679 the regulator was getting shuffled around, the 00:11:14.679 --> 00:11:16.820 credit union movement itself was just exploding. 00:11:17.100 --> 00:11:20.360 By 1960, the scale was becoming undeniable. You 00:11:20.360 --> 00:11:23.399 had over 6 million members in more than 10 ,000 00:11:23.399 --> 00:11:26.480 federal credit unions. The Bureau was just outgrowing 00:11:26.480 --> 00:11:28.690 its small corner in the government. And that 00:11:28.690 --> 00:11:31.269 growth, that demanded a change. It demanded independence. 00:11:31.470 --> 00:11:34.730 It demanded focus. And that really sets the stage 00:11:34.730 --> 00:11:37.149 for the big turning point in the 1970s. This 00:11:37.149 --> 00:11:39.570 is when the BFCU gets a complete overhaul and 00:11:39.570 --> 00:11:42.450 becomes the modern independent NCUA we know today. 00:11:42.649 --> 00:11:45.590 1970 is the year. And just as importantly, 1970 00:11:45.590 --> 00:11:47.669 is when the National Credit Union Share Insurance 00:11:47.669 --> 00:11:50.870 Fund, the NCUCIF, was formally created. Having 00:11:50.870 --> 00:11:53.090 federal deposit insurance specifically for credit 00:11:53.090 --> 00:11:56.419 unions was a huge step. OK, and let's focus on 00:11:56.419 --> 00:11:59.399 the aha moment here, because this one detail 00:11:59.399 --> 00:12:01.940 seems to define the entire philosophy of the 00:12:01.940 --> 00:12:04.279 agency, the funding. This is the fundamental 00:12:04.279 --> 00:12:07.240 distinction. The NCU site was capitalized solely 00:12:07.240 --> 00:12:10.200 by credit unions. No tax dollars. Not a single 00:12:10.200 --> 00:12:12.460 cent of taxpayer money was used to start it. 00:12:12.600 --> 00:12:15.220 And that self -funded model isn't just a fun 00:12:15.220 --> 00:12:18.200 fact. It creates this perfect alignment of interests. 00:12:19.129 --> 00:12:22.169 The entire credit union system has a direct financial 00:12:22.169 --> 00:12:25.470 stake in making sure the insurance fund is stable 00:12:25.470 --> 00:12:27.870 and well -regulated because they are the ones 00:12:27.870 --> 00:12:30.799 who paid for it. So in the 70s went on, the credit 00:12:30.799 --> 00:12:32.519 unions themselves were getting more sophisticated. 00:12:32.919 --> 00:12:36.379 Much more. By 1977, they weren't just simple 00:12:36.379 --> 00:12:38.399 savings and loan operations anymore. They were 00:12:38.399 --> 00:12:40.600 offering things like share certificates, doing 00:12:40.600 --> 00:12:42.840 mortgage lending. They were becoming the full 00:12:42.840 --> 00:12:45.740 service institutions we see today. And that complexity 00:12:45.740 --> 00:12:48.960 demanded a more robust leadership. It did. And 00:12:48.960 --> 00:12:51.919 the response came in 1979 when that three -member 00:12:51.919 --> 00:12:54.720 board structure we talked about officially replaced 00:12:54.720 --> 00:12:56.500 the single administrator. It was about building 00:12:56.500 --> 00:12:59.659 in that stability at the top. And 1979 was also 00:12:59.659 --> 00:13:01.639 the year they formalized the Central Liquidity 00:13:01.639 --> 00:13:05.809 Facility, the CLF. Yes. Adding the CLF, that 00:13:05.809 --> 00:13:08.730 lender of last resort, was Congress recognizing 00:13:08.730 --> 00:13:11.929 that as these institutions grew, they needed 00:13:11.929 --> 00:13:14.389 their own dedicated source of liquidity to manage 00:13:14.389 --> 00:13:17.149 risk. So by the end of the 70s, the picture is 00:13:17.149 --> 00:13:19.129 complete. You have separate dedicated bodies 00:13:19.129 --> 00:13:22.110 for regulation, insurance and liquidity. And 00:13:22.110 --> 00:13:24.710 the growth during that decade was just off the 00:13:24.710 --> 00:13:27.169 charts. Unbelievable. Membership doubled and 00:13:27.169 --> 00:13:31.370 assets tripled to over $65 billion. The 1970s 00:13:31.370 --> 00:13:33.529 was really the decade the NCUA came into its 00:13:33.529 --> 00:13:36.110 own. So the NCUA gets its modern independent 00:13:36.110 --> 00:13:39.769 form just in time to face, what, a massive economic 00:13:39.769 --> 00:13:42.669 test in the 1980s? An immediate test. The early 00:13:42.669 --> 00:13:44.889 80s were brutal. You had sky -high interest rates, 00:13:44.990 --> 00:13:47.809 a deep recession, soaring unemployment, and all 00:13:47.809 --> 00:13:49.750 of that economic stress flowed directly to the 00:13:49.750 --> 00:13:51.789 credit union system. And it started causing losses. 00:13:52.230 --> 00:13:55.009 Significant insurance losses. The NCUCEF, that 00:13:55.009 --> 00:13:56.970 fund that was so proudly built by the credit 00:13:56.970 --> 00:13:59.470 unions, started to feel the strain from all the 00:13:59.470 --> 00:14:01.230 failures and the payouts. And they had to fix 00:14:01.230 --> 00:14:03.110 it, but without going to the taxpayers first. 00:14:03.149 --> 00:14:06.990 bailout. Right. The solution came in 1985, and 00:14:06.990 --> 00:14:10.250 it was a crucial recapitalization. The federally 00:14:10.250 --> 00:14:13.289 insured credit unions all deposited 1 % of their 00:14:13.289 --> 00:14:16.970 total shares directly into the NCUSEF. So it 00:14:16.970 --> 00:14:18.730 wasn't a fee, it was more like an equity injection. 00:14:19.110 --> 00:14:21.610 Exactly. It was an equity deposit that instantly 00:14:21.610 --> 00:14:24.169 shored up the fund and gave it the cushion it 00:14:24.169 --> 00:14:26.610 needed to absorb more losses. And this action, 00:14:26.649 --> 00:14:28.970 it basically created the fail -safe mechanism 00:14:28.970 --> 00:14:32.320 that protects the fund to this day. It did. It's 00:14:32.320 --> 00:14:34.879 a highly sophisticated system designed to trigger 00:14:34.879 --> 00:14:37.720 automatically if the fund's capital level drops 00:14:37.720 --> 00:14:40.539 too low. What's the magic number? Well, the goal 00:14:40.539 --> 00:14:43.059 is to keep the fund's equity ratio at or above 00:14:43.059 --> 00:14:45.960 1 .3 % of all insured shares. The trigger point, 00:14:46.120 --> 00:14:48.980 the line in the sand, was set at 1 .23%. So if 00:14:48.980 --> 00:14:52.440 it dips below 1 .23%, alarms go off. Pretty much. 00:14:52.559 --> 00:14:55.000 The board is then required by law to immediately 00:14:55.000 --> 00:14:57.460 charge all the credit unions a premium to bring 00:14:57.460 --> 00:14:59.580 that level back up. And we saw it happen. In 00:14:59.580 --> 00:15:01.879 1991, the ratio dipped and boom, the board charged 00:15:01.879 --> 00:15:04.200 the premium. It forces the industry to bear the 00:15:04.200 --> 00:15:07.080 cost of its own risks in real time. At the same 00:15:07.080 --> 00:15:10.200 time, all this is happening. The agency is dealing 00:15:10.200 --> 00:15:13.200 with big changes inside the credit union world 00:15:13.200 --> 00:15:16.639 itself, especially around this idea of the field 00:15:16.639 --> 00:15:19.799 of membership. Oh, yeah. For decades, the rule 00:15:19.799 --> 00:15:22.279 was incredibly strict. You could only join a 00:15:22.279 --> 00:15:25.120 credit union if you had a very specific common 00:15:25.120 --> 00:15:27.539 bond, like you all worked for the same company 00:15:27.539 --> 00:15:30.139 or lived in the same small town. That started 00:15:30.139 --> 00:15:32.940 to loosen up in the 80s. It did. But the real 00:15:32.940 --> 00:15:36.279 earthquake came in 1998 with a law called the 00:15:36.279 --> 00:15:39.820 Credit Union Membership Access Act. H .R. 1151. 00:15:40.100 --> 00:15:42.559 And that law. Yeah. It just changed everything. 00:15:42.799 --> 00:15:45.179 It blew the doors open. Instead of being restricted 00:15:45.179 --> 00:15:48.000 to those tiny, narrow groups, credit unions could 00:15:48.000 --> 00:15:50.700 now serve much larger community -based or geographic 00:15:50.700 --> 00:15:53.159 areas. It was a massive expansion of their potential 00:15:53.159 --> 00:15:55.019 market. Which they needed to compete with the 00:15:55.019 --> 00:15:57.679 big banks. Absolutely. It was critical for letting 00:15:57.679 --> 00:15:59.659 them grow and achieve the scale they needed to 00:15:59.659 --> 00:16:01.519 survive. It was the moment the movement really 00:16:01.519 --> 00:16:04.059 became a nationwide competitor. So that expansion 00:16:04.059 --> 00:16:06.720 helps them through the 90s and early 2000s. But 00:16:06.720 --> 00:16:09.039 then comes the big one. The global financial 00:16:09.039 --> 00:16:12.320 crisis of 2008. Right. And it strained the entire 00:16:12.320 --> 00:16:15.200 system. The NCUCIF had to charge premiums again 00:16:15.200 --> 00:16:18.759 in 2009 and 2010. But the unique problem for 00:16:18.759 --> 00:16:21.750 credit unions, the real weak spot. wasn't the 00:16:21.750 --> 00:16:25.029 small consumer -facing CUs. It was the ones that 00:16:25.029 --> 00:16:27.669 served them, the corporate credit unions. Exactly. 00:16:27.669 --> 00:16:30.629 These were the giant wholesale institutions that 00:16:30.629 --> 00:16:33.669 provided banking services for the thousands of 00:16:33.669 --> 00:16:36.490 smaller credit unions. And five of the biggest 00:16:36.490 --> 00:16:38.570 ones in the country basically failed. Here's 00:16:38.570 --> 00:16:40.309 where it gets really interesting for the listener. 00:16:40.830 --> 00:16:43.649 Why did they fail? The same reason as so many 00:16:43.649 --> 00:16:46.649 big banks. They invested billions and billions 00:16:46.649 --> 00:16:49.269 of dollars in those toxic, high risk mortgage 00:16:49.269 --> 00:16:52.210 backed securities that became worthless when 00:16:52.210 --> 00:16:54.350 the housing market collapsed. So the failure 00:16:54.350 --> 00:16:56.909 of these huge central institutions threatened 00:16:56.909 --> 00:16:58.789 to take the whole system down with them. It was 00:16:58.789 --> 00:17:01.779 an existential threat. And the NCUA had to act 00:17:01.779 --> 00:17:04.500 immediately to wall off the consumer system from 00:17:04.500 --> 00:17:07.299 these massive corporate losses, all while sticking 00:17:07.299 --> 00:17:10.019 to that core principle of no taxpayer bailouts. 00:17:10.140 --> 00:17:12.019 And their response was, I mean, it was multi 00:17:12.019 --> 00:17:14.079 -primed. It was complex. It was a master class 00:17:14.079 --> 00:17:16.059 in crisis management. The first thing they did 00:17:16.059 --> 00:17:18.519 was work with the Treasury and Congress to create 00:17:18.519 --> 00:17:21.119 the Temporary Corporate Credit Union Stabilization 00:17:21.119 --> 00:17:23.799 Fund. OK, a stabilization fund. What was that 00:17:23.799 --> 00:17:26.539 for? Is that taxpayer money? No. And that is 00:17:26.539 --> 00:17:29.130 the crucial point. It was designed to absorb 00:17:29.130 --> 00:17:32.410 the billions in losses from the failed corporates 00:17:32.410 --> 00:17:37.329 to protect the main NCUCF insurance fund. But 00:17:37.329 --> 00:17:39.589 it was structured so that the credit unions themselves, 00:17:39.930 --> 00:17:43.349 not you, the taxpayer, would pay the costs back 00:17:43.349 --> 00:17:46.230 over time through special assessments. So they 00:17:46.230 --> 00:17:49.390 contain the fire within their own house. Precisely. 00:17:49.609 --> 00:17:51.829 Second, they got their hands dirty and dealt 00:17:51.829 --> 00:17:55.099 with the toxic assets themselves. Ow! They seized 00:17:55.099 --> 00:17:56.819 the failed corporates, and then they took all 00:17:56.819 --> 00:17:58.420 those worthless mortgage -backed securities, 00:17:58.720 --> 00:18:01.079 repackaged them, and sold them off with a new 00:18:01.079 --> 00:18:03.700 government -backed guarantee. That move alone 00:18:03.700 --> 00:18:06.400 raised almost $30 billion and helped stabilize 00:18:06.400 --> 00:18:08.259 the market. And they had to keep the system running 00:18:08.259 --> 00:18:11.099 day to day. Yes. So they set up these temporary 00:18:11.099 --> 00:18:13.819 bridge corporate credit unions. These were placeholder 00:18:13.819 --> 00:18:16.940 institutions run by the NCUA to make sure that 00:18:16.940 --> 00:18:19.880 consumer CUs could still clear payments and get 00:18:19.880 --> 00:18:22.279 liquidity while the old corporates were being 00:18:22.279 --> 00:18:25.509 dismantled. It prevented any disruption for those 00:18:25.509 --> 00:18:28.970 124 million members. And beyond the corporate 00:18:28.970 --> 00:18:31.809 mess, they also had to deal with regular consumer 00:18:31.809 --> 00:18:34.710 -owned credit unions failing because of foreclosures 00:18:34.710 --> 00:18:36.750 and unemployment. Right. And their response there 00:18:36.750 --> 00:18:39.190 was to get much tougher on supervision. They 00:18:39.190 --> 00:18:41.289 implemented a mandatory 12 -month examination 00:18:41.289 --> 00:18:44.269 cycle for every single federally insured credit 00:18:44.269 --> 00:18:46.509 union. To catch problems faster. Much faster. 00:18:46.670 --> 00:18:49.150 Before they could fester and lead to insolvency. 00:18:49.269 --> 00:18:52.609 And you know what? It worked. The data is incredible. 00:18:52.750 --> 00:18:55.049 By the end of 2009, in the middle of the worst 00:18:55.049 --> 00:18:57.710 financial crisis since the Depression, over 96 00:18:57.710 --> 00:18:59.750 % of all credit unions were still considered 00:18:59.750 --> 00:19:02.549 well -capitalized. It was a remarkable success 00:19:02.549 --> 00:19:05.309 story of self -funded crisis containment. So 00:19:05.309 --> 00:19:07.470 coming out of the 2008 crisis, the next decade 00:19:07.470 --> 00:19:09.650 seems to be about making things permanent, really 00:19:09.650 --> 00:19:12.119 cementing the lessons they learned. Absolutely. 00:19:12.279 --> 00:19:14.759 The first big step was the Dodd -Frank Act in 00:19:14.759 --> 00:19:17.539 2010. That's the huge legislative response to 00:19:17.539 --> 00:19:21.119 the crisis. And it made the NCUA's $250 ,000 00:19:21.119 --> 00:19:24.150 insurance limit permanent. That had been a temporary 00:19:24.150 --> 00:19:26.490 increase during the crisis, right? It had. Making 00:19:26.490 --> 00:19:29.049 it permanent was a huge deal for consumer confidence 00:19:29.049 --> 00:19:31.450 and stability. That's the guarantee you see on 00:19:31.450 --> 00:19:33.630 the little NCUA sign at every credit union. And 00:19:33.630 --> 00:19:35.990 that legal battle we mentioned earlier over who 00:19:35.990 --> 00:19:38.029 credit unions could serve their field of membership, 00:19:38.329 --> 00:19:41.349 that fight continued to rage through this period. 00:19:41.589 --> 00:19:44.450 It was a decade -long war, really. The NCUA issued 00:19:44.450 --> 00:19:48.190 new, broader rules in 2016 to modernize the system, 00:19:48.309 --> 00:19:50.529 and they were immediately sued by banking trade 00:19:50.529 --> 00:19:52.480 groups who said they were straying too far. from 00:19:52.480 --> 00:19:55.480 the original mission. But in the end, the NCUA 00:19:55.480 --> 00:19:59.559 won. A huge regulatory victory. In 2019, the 00:19:59.559 --> 00:20:01.980 D .C. Circuit Court upheld most of their new 00:20:01.980 --> 00:20:04.940 rules. And then in 2020, the Supreme Court refused 00:20:04.940 --> 00:20:07.240 to hear an appeal from the banks. That was the 00:20:07.240 --> 00:20:09.240 final word. It cemented the broader membership 00:20:09.240 --> 00:20:12.019 criteria and really secured the future competitiveness 00:20:12.019 --> 00:20:14.119 of the credit union system. And it's kind of 00:20:14.119 --> 00:20:16.460 amazing, just as they finally get that long -sought 00:20:16.460 --> 00:20:19.059 permanence, they get hit with a totally different 00:20:19.059 --> 00:20:22.369 kind of global crisis. COVID -19. It's almost 00:20:22.369 --> 00:20:25.609 ironic. The agency celebrated its 50th anniversary 00:20:25.609 --> 00:20:29.230 as an independent regulator on March 10th, 2020. 00:20:30.190 --> 00:20:33.049 And then days later, the world just shut down. 00:20:33.170 --> 00:20:35.170 And the response had to be immediate. It was. 00:20:35.250 --> 00:20:37.750 They shifted gears instantly to focus on giving 00:20:37.750 --> 00:20:40.329 credit unions maximum flexibility to deal with 00:20:40.329 --> 00:20:42.250 the lockdowns, the loan distress, everything. 00:20:42.450 --> 00:20:44.490 And that central liquidity facility, the CLF, 00:20:44.509 --> 00:20:46.750 became a key tool again. Oh, it was the focal 00:20:46.750 --> 00:20:49.470 point. They took the lessons from 2008 and supercharged 00:20:49.470 --> 00:20:52.420 it. The CARES Act and the NCUA board made changes 00:20:52.420 --> 00:20:54.759 that dramatically increased the CLF's borrowing 00:20:54.759 --> 00:20:57.380 capacity and made it easier for more credit unions 00:20:57.380 --> 00:20:59.859 to join. They were preparing for a worst -case 00:20:59.859 --> 00:21:02.420 scenario, making sure a liquidity crunch wouldn't 00:21:02.420 --> 00:21:04.660 cause a system failure. And they also used their 00:21:04.660 --> 00:21:07.019 community development fund to target help where 00:21:07.019 --> 00:21:10.069 it was needed most. They did. They recognized 00:21:10.069 --> 00:21:12.150 that the pandemic was hitting low -income and 00:21:12.150 --> 00:21:14.470 underserved communities the hardest, so they 00:21:14.470 --> 00:21:16.730 dedicated the majority of the 2020 community 00:21:16.730 --> 00:21:19.910 development revolving loan fund to COVID -19 00:21:19.910 --> 00:21:22.890 assistance. It was a very mission -driven response. 00:21:23.309 --> 00:21:25.930 Which brings us to today and where the NCUA is 00:21:25.930 --> 00:21:28.509 headed. The sources show the agency expanding 00:21:28.509 --> 00:21:31.390 its vision way beyond just insuring deposits. 00:21:31.990 --> 00:21:34.660 It's a profound shift. They're looking at major 00:21:34.660 --> 00:21:37.740 macroeconomic and societal challenges and seeing 00:21:37.740 --> 00:21:40.299 how they connect to financial stability. A big 00:21:40.299 --> 00:21:42.299 one is advancing economic equity and justice. 00:21:42.660 --> 00:21:45.200 What does that mean in practice? It means using 00:21:45.200 --> 00:21:47.339 their regulatory power to help close the wealth 00:21:47.339 --> 00:21:50.049 gap. It means stricter compliance with fair lending 00:21:50.049 --> 00:21:53.029 laws and focusing examinations on whether institutions 00:21:53.029 --> 00:21:55.109 are actually serving their entire communities. 00:21:55.349 --> 00:21:57.910 And they're also specifically supporting minority 00:21:57.910 --> 00:22:01.009 depository institutions, MDIs. Right. They see 00:22:01.009 --> 00:22:03.289 that these MDIs are often the only gateway to 00:22:03.289 --> 00:22:05.670 financial services in some communities. So they're 00:22:05.670 --> 00:22:08.230 making their stability and growth strategic priority. 00:22:08.509 --> 00:22:11.200 It's all part of that broader equity goal. But 00:22:11.200 --> 00:22:14.140 the most surprising, I think, and maybe the most 00:22:14.140 --> 00:22:16.779 forward -looking expansion of their mandate is 00:22:16.779 --> 00:22:18.940 thinking about climate change. What's fascinating 00:22:18.940 --> 00:22:21.539 here is you have a regulator that was born in 00:22:21.539 --> 00:22:24.880 1934 to promote basic thrift, and now it's making 00:22:24.880 --> 00:22:27.799 strategic plans for rising sea levels and wildfires. 00:22:28.019 --> 00:22:31.460 That's a huge leap. It is. But the NCUA now recognizes 00:22:31.460 --> 00:22:33.980 that climate change is a direct threat to the 00:22:33.980 --> 00:22:36.480 solvency of regional credit unions. If you're 00:22:36.480 --> 00:22:39.019 a credit union in Florida or California, your 00:22:39.019 --> 00:22:41.319 entire loan portfolio could be exposed to hurricanes, 00:22:41.559 --> 00:22:43.980 floods, or fires. So they're saying climate risk 00:22:43.980 --> 00:22:47.380 is financial risk. Unquestionably. A major wildfire 00:22:47.380 --> 00:22:49.759 doesn't just destroy homes. It destabilizes the 00:22:49.759 --> 00:22:52.200 regional economy. It causes loan defaults. It 00:22:52.200 --> 00:22:54.779 devalues assets. All of that ultimately threatens 00:22:54.779 --> 00:22:56.579 the insurance fund they're sworn to protect. 00:22:56.839 --> 00:22:59.160 So they are moving into this next frontier of 00:22:59.160 --> 00:23:01.140 risk management, trying to figure out how to 00:23:01.140 --> 00:23:03.019 regulate for threats that are completely new. 00:23:03.640 --> 00:23:06.079 Hashtag Taktag Outright, Trey. So we've covered 00:23:06.079 --> 00:23:08.240 a lot of ground here, from a small New Deal bureau 00:23:08.240 --> 00:23:12.279 to a $2 trillion regulator. The NCOA really stands 00:23:12.279 --> 00:23:14.819 as this essential but often overlooked pillar 00:23:14.819 --> 00:23:17.579 of U .S. financial stability. I think the key 00:23:17.579 --> 00:23:20.500 takeaways are these. The NCOA protects the money 00:23:20.500 --> 00:23:23.440 of 124 million people. It's separate from the 00:23:23.440 --> 00:23:26.519 FDIC. Its leadership structure is built for bipartisan 00:23:26.519 --> 00:23:29.660 stability. And most importantly, its insurance 00:23:29.660 --> 00:23:31.880 fund is paid for by the credit unions themselves. 00:23:31.980 --> 00:23:34.359 Which allowed it to absorb the catastrophic losses 00:23:34.359 --> 00:23:37.579 of 2008 without a taxpayer bailout. A critical 00:23:37.579 --> 00:23:40.519 point. So what does this all mean? It means a 00:23:40.519 --> 00:23:42.599 huge part of our financial system is overseen 00:23:42.599 --> 00:23:45.380 by an agency that's not just an insurer. It's 00:23:45.380 --> 00:23:47.799 an agency that's deeply rooted in a cooperative, 00:23:48.039 --> 00:23:50.500 community -focused mission. And that mission 00:23:50.500 --> 00:23:53.660 is now expanding to include promoting economic 00:23:53.660 --> 00:23:56.319 equity. and even planning for the financial risks 00:23:56.319 --> 00:23:59.460 of climate change. It's a powerful, highly adaptive 00:23:59.460 --> 00:24:02.339 regulator. We saw how the 2008 crisis came from 00:24:02.339 --> 00:24:04.700 risks in complex financial products, mortgage 00:24:04.700 --> 00:24:06.960 -backed securities. It was a threat they learned 00:24:06.960 --> 00:24:09.680 to manage. So here is a final provocative thought 00:24:09.680 --> 00:24:12.819 for you to explore on your own. With the NCUA 00:24:12.819 --> 00:24:15.279 now officially considering the risks from rising 00:24:15.279 --> 00:24:17.900 temperatures and devastating wildfires, what 00:24:17.900 --> 00:24:20.539 new unprecedented threats will these physical 00:24:20.539 --> 00:24:23.339 environmental changes create? Think about the 00:24:23.339 --> 00:24:25.779 loan portfolios in coastal Florida or agricultural 00:24:25.779 --> 00:24:28.799 California. Will that kind of concentrated climate 00:24:28.799 --> 00:24:31.539 risk force the NCUA to evolve the fail -safe 00:24:31.539 --> 00:24:33.660 features of its insurance fund into something 00:24:33.660 --> 00:24:36.180 we've never seen before, something beyond what 00:24:36.180 --> 00:24:38.380 they needed for the crises of the 80s or 2008? 00:24:39.230 --> 00:24:41.589 How do you price the risk of a flood or a fire 00:24:41.589 --> 00:24:44.329 into the stability of a cooperative system? Thanks 00:24:44.329 --> 00:24:46.009 for joining us for the Deep Dive. We'll catch 00:24:46.009 --> 00:24:46.430 you next time.