HOLLYWOOD—“I don’t know if you noticed, but there was an election this week. It made the news in my neighborhood,” quipped J. Mark McWatters, chairman of the National Credit Union Administration, speaking during the California and Nevada Credit Union Leagues’ annual conference here.
McWatters noted it America now has a divided government. “This has been regarded as ‘novel,’ and it has been prognosticated that things will not go well with one party holding the House and the other party holding the Senate. On the NCUA board we have had a divided government for two years now – a Democrat, Rick Metsger, and a Republican, me. We realize reasonable minds can disagree.”
Both members of the two-person board have had their turn holding the chairman’s gavel, but neither sought to push his ideas down the other’s throat, McWatters said. While President Trump has nominated former board member Rodney Hood to fill Metsger's seat, Mcwatters noted that he has no information on when a nominee for the third seat will be announced.
At NCUA, “We are regulator, that is all,” he continued. “We need to issue rules that address risk, and we address risk with the lightest touch possible. Credit unions are different from the big banks, and you should be regulated differently.”
The chairman’s remarks came just days after Michigan became the latest state to vote to legalize recreational use of marijuana. With both Nevada and California legalizing recreation use of marijuana in 2016 but financial institutions in both states hesitant to touch the business end due to federal banking restrictions, McWatters was asked for NCUA’s stance on cannabis. He noted the Cole Memo told local U.S. Attorneys to put prosecuting marijuana-related crimes in a state in which cannabis is legal at the bottom of their priority lists.
“FinCEN then came out with guidance,” he said of the Financial Crimes Enforcement Network. “Now former Attorney General [Jeff} Sessions withdrew the Cole Memo, but the FinCEN guidance is still out there. I see it as a public safety issue. There is a lot of cash on the street. That cash needs to be in the banking system to create an audit trail. I hate to be the one to break this, but when you pay cash for something, not all the cash gets reported.”
“Anyone who is thinking about being in this business needs to read the FinCEN guidance, be aware of it, and be aware of the possibility the federal government might prosecute you,” he added.
Greatest hits
McWatters’ remarks also touched on some of the major issues during his time working alongside Metsger, chief among them, finalizing the agency’s risk-based capital rule. While the pair could not agree on all potential aspects of the proposed rule, they looked for areas where they could agree.
“We saw it was not a safety and soundness issue,” he said. “Our agreement resulted in 1,000 credit unions being freed from the shackles of risk-based capital. We compromised in a bipartisan way.”
McWatters said since began serving on the NCUA board in 2014, his style has been “the best idea has to prevail.”
“If the best idea is my idea, great, but my idea is not always the best idea. That is why you should surround yourself with smart people, so you can listen to other ideas A lot of times regulators want their idea to prevail, in a ‘look at me’ fashion. NCUA should not double down on a bad idea.”
He said the agency has also made efforts to ease the exam process for credit unions, spending “a lot of money” on examination modernization and improvement. But, he said, the hope is still that CUs will see real results rather than just the line items on the published budget. “We are moving toward outside examinations, virtual examinations – a lighter touch,” he said.
