In Senate hearing, NCUA nominee forced to defend credentials
Members of the Senate Banking Committee on Thursday had mixed reviews to Kyle Hauptman’s nomination to the National Credit Union Administration board, ranging from praise and encouragement to outright questioning the nominee’s qualifications to serve.
President Trump last month nominated Hauptman, a former Lehman Brothers employee, to replace Mark McWatters, whose term expired nearly a year ago. Like many board members, McWatters pledged to stay on until his replacement is confirmed. If confirmed, Hauptman could serve on the board until at least 2025, giving Republicans a majority vote on the panel until at least 2023, when Chairman Rodney Hood’s term expires.
Hauptman most recently worked as an economic policy advisor to Sen. Tom Cotton, R-Ark., and as a staff director on the Senate Banking Committee's Subcommittee on Economic Policy. During Tuesday’s hearing, Cotton praised the nominee, suggesting the industry could benefit from Hauptman’s expertise.
“Our loss will be the NCUA’s gain,” he said.
Hauptman’s written testimony referenced experience as a Senate staffer working with Arkansas-based credit unions and the Cornerstone Credit Union League. Sen. Sherrod Brown, D-Ohio, pushed back on that, noting that Hauptman has not worked inside the industry.
“Mr. Hauptman has no credit union experience,” Brown said during the hearing. “He says he wants this job because people who love their financial institution are usually credit union members. But being glad that credit unions serve their customers isn’t a reason that he is qualified to be one of the three top credit union regulators, it means he should be a credit union customer.”
Experience within the movement is not a prerequisite for serving on the board. McWatters had no credit union experience prior to his nomination in 2013.
A frequent critic of NCUA and Hood, Brown also knocked Hauptman for his opposition to the Dodd-Frank Act. The hearing coincided with the legislation’s 10th anniversary. The Ohio Democrat suggested that since the president took office, NCUA has chipped away at consumer protections put in place after the last crisis.
"Mr. Hauptman was a trader at Lehman Brothers when it failed, accelerating the financial crisis,” he said. “You’d think he’d understand what a financial crisis can mean, yet he has spent his career railing against the Dodd-Frank Act."
While Hauptman has voiced opposition to significant parts of Dodd-Frank, on Tuesday he also gave some indication of what topics he would focus on as a member of the board.
Hauptman indicated capital reform as one of his top priorities, referring to the subject as “the holy grail” of regulation, particularly during a crisis. If confirmed, he could join the board at a crucial time. Last summer the agency once again delayed implementation of its risk-based capital rule in order to buy time for a broader rework of credit union capital standards. A proposal on risk-based net worth was expected at the board’s June board meeting but was tabled at the last minute because it did not have the votes to move forward. If Hauptman is confirmed quickly, he could have an opportunity to shape that discussion.
He also expressed support for measures that would ease the chartering process and enable the creation of more new credit unions, particularly those that would be minority depository institutions. He emphasized the need for diversity, equity and inclusion in the credit union movement, citing interest in expanding the second-chance initiative the agency introduced late last year that would make it easier for those with low-level criminal convictions on their records to work at a credit union.
“That’s an example of an untapped pool of talent that this country would be better off using,” Hauptman said.
Hauptman also said he would prioritize expanding the role of technology in reaching the underserved. That could align him well with Hood, whose own testimony last year touched on the need to increase financial services access for consumers in rural areas. But Brown pushed back against Hauptman, raising concerns that technology can also further predatory behaviors from tech companies, and that new and innovative services often come about through the exploitation of low-wage workers.
Despite Brown’s reservations about Hauptman, his nomination is likely to move forward, but it remains unclear when the full Senate might take up the vote to confirm him. The Senate is in session for the next two weeks and will then go into recess until September. With Congress currently focused on additional coronavirus relief efforts, the vote may not occur until after Labor Day.
If confirmed, Hauptman likely wouldn’t sit for an NCUA board meeting until mid-September at the earliest.