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Hey everyone. This is Mark Trankel with another episode of with flying colors. I got a special guest today. It's Lenwood Brooks, formerly of NCOA. He was the chief staff. Hey, they change you guys change the name so many times. I can't remember what your last title was, but you were the kingmaker for board member Rodney Hood. That's the title. I would give the chief of staff when you were when he was the chair and.
And anyway, so Lenwood, let's let, I'm going to give you an opportunity to introduce yourself and we'll talk about, your most recent gig at NCUA.
Thanks for having me, Mark. It's great to be with you. I've enjoyed following this podcast and others in the movement. You really have a lot of insight and it's now good to be a guest now that I've left the agency after about four and a half years.
Four and a half years. Yeah. So I was there four and a half years ago, I guess I've been gone three years. And, you and I, God rest his soul. We had a mutual friend, Nick Owens and. I think, as I recall, Nick, may have, had some background things going on relative to, Rodney coming in and some advice for Rodney and some advice for you, because when I was the deputy executive director back in 2000, Nick was there in PAC and when you came in.
You came in to PACA, Public and Congressional Affairs, which now has a different name, but so let's talk a little bit about your journey and what you did there at NCUA position wise.
Nick Owens goes to show you a lot of things in D. C. will go in a circle. Nick was very influential and it's how I actually got to know Rodney was through Nick Owens and his first job in D. C. was working for Chairman Dollar. at the N. C. U. A. When he was chairman. But when I came in, Mark, I came in and I let our congressional affairs and public relations team. We had a lot of issues going on. We were dealing with the taxicab medallions.
we were dealing with issues, and then we went straight into the pandemic. But during that time, I transitioned as well into the chief of staff role. And now that I've left the agency and reflecting back, I have a whole new level of appreciation for the staff, people like you, you'll have a very hard job. You were very gifted market managing up. I've never seen anyone manage up so well and people genuinely like you. And that is very important in the role that you had. But it's hard for staff.
To train up people like me that came in. I didn't come in with a lot of crediting experience. My experience was limited to working in other trade association and also Capitol Hill. So I had very valuable experience. The congressional relation side of things, but I wasn't an expert say at the time and filled a membership. There's a lot of really nuanced things and. It has to be tiring for staff to continue to on board. But I think that's part of the process.
The wisdom of our founding fathers, they didn't want people to have too much power. And I think coming in, like I did from the outside, I think I had a different way of viewing things independently. I think into is a great place to work mark. So a lot of people they've been there their whole career. So they can be I guess my open can viewing some things because that's the only way they've known. I'm not trying to be critical. I'm just making a statement.
And I know when we first got know each other, we work very tireless on the budget. I asked a lot of questions, but, I've told this to people again, and I know some of our career staff might not like this at NCUA, but if I could do things again, I would have tried to hire a political appointee, Mark, that was full time budget. Hire someone from the Hill on a Corporations Committee, because, the other agencies dealing with Congress, they're doing budget is a 12 year, 12 month process.
It's very detailed and oriented. It gets very, it's a shorter process at NCA, but I think that's something that I would have done differently, but I think we did make a mark on the budget and speaking of NCA has one before right now.
They do. Yeah. And I always viewed when I was executive director or deputy executive director, I viewed the budget as my Superbowl because you had all the new initiatives of what. The chairman would want, the other board members might want, you had NAFCU, you had CUNA who was interested. You had staff who was interested because either they wanted raises built into it or new positions built into it. And then of course you, you have the politics of are we the right size? Should we shrink?
Should we grow? Do we need different specialists? So I truly love the budget process and viewed it as really. The culmination of a year and preparing for the next year. And I think, your idea of, a special. Political appointee that deals with that.
I get that because when I, again, when I was the executive director, I lived and breathed the budget every day, all day, and it would always, culminate in this time of year when we, they'd have the budget briefing and then the budget release, the big reveal which just recently happened. There was what a 65 page document that just came out.
Yeah. Yeah, let's chat a little bit about the budget process and or your take on this current budget or where you might see the budget going in any way in 2024 and beyond at N. C. U. A. Well,
there's a saying in Washington that people are policy, and that's very true in terms of political appointees coming in and bringing their people also the budget's policy. And I think you can see that in the budget that's been put out the staff draft. It's you and I both know Mark, it's called the staff draft, but it's really the chairman's draft would be probably a more appropriate terminology for that budget.
And I think chairman Todd Harper is clearly laying out his priorities of where he'd like to take the agency. And if I was a Fred Union, I'm looking at the new program for credit unions, and the staff draft, I believe is three to $10 billion for consumer compliance.
Beefing up on their lending exams and like you can clearly see Where todd is wanting to take the agency and it should come as no surprise todd has been very consistent in his positions ever since he came back to the agency in april of 2019 todd has been very consistent in where he wants to take the agency. So I think in terms of where the NCA is headed, I think I would look 1st to where the budget is taking the agency into 2024 and there's a lot of key takeaways.
Yeah, I, I totally agree with that on every count, particularly, Todd's been consistent before, before he left NCUA when he was back in the Director of Public and Congressional Affairs, I could tell he was very passionate about consumer compliance. He mentored a group that was looking at, okay, how can we do better here? And so that was just a signal to his interest. And. I like to read through 64 pages of documents and pull out, a few key sentences.
And for example, I, I did a LinkedIn post recently. And I've got a guy who works for me named Steve Farr. When we get a new credit union that has a particular issue, he'll do a word search of keywords. And so I've always used keyword search, but. Steve taught me to embrace this. So I pulled up that PDF 65 pages. I typed in safety and soundness, and I typed in consumer compliance.
And if my recollection is correct, The budget for 2024 mentions consumer compliance six times and it mentions its safety and soundness once and while in and of itself. Does it mean anything? No. But does it tell you where Todd's focus is? Because again, it says staff draft, but it really is the chairman's draft. And then along those lines. Two sentences that popped out recalibrating exam and supervision for the 10 to 15 billion to reflect risk.
So that, that references the fact that one's credit unions used to have a 10 billion threshold. They now have a 15 billion threshold. But when he went into a acted on that back when you were there acting on that that shift, they talked about, still having to do some stress testing at the 10 10 billion level. And then the other 1 sentence that really jumped out at me was right. Sizing the NCAA exams of credit union compliance.
With consumer financial protection laws and regulations, so right, right sizing consumer compliance kind of dovetails right into what you said that there's going to be a bigger footprint. They're adding specialists in that area. I'm very curious to see, you know how that all plays out, but it's credit unions really need to be, be good gatekeepers on those regulations because it's always going to have a bigger footprint exam wise relative to them.
They are, I think this is going to be an interesting thing to watch out, watch as this budget unfolds. I think the Institute does a good job on consumer financial protection. I think we could do more, but I think it gets to a key point. A staff member made to me when I was at the agency, Mark, a credit union has never failed because of consumer financial protection. And of course they have for safety and soundness.
And I bring that up just to the environment we're in interest rate, risk, liquidity, risk, credit risk. It's an interesting time to be making a lot of these changes proposed when we really don't know what the future holds in 2024. And it could get messy. So I look forward to watching this needle be thread threaded. I'm confident the board. Can do that I think the board dynamics now or it's a highly functioning board and I think they're going to be able to find compromise.
Part of the negotiation. If you come in asking for what you want, or oftentimes more than what you want, Martin, or you're going to land somewhere in the middle. And I don't know how this is going to unfold, but I. I know many times I was the agency that goes into the process.
Even though the hearing for the budget's coming up later this month, they're already working on, in my view, I don't know this, but they're already working on the final budget now and making changes just because it's such a truncated timeline from the board meeting after the board meeting is when they're going to have the open forum for people, leagues and others to comment. And then, Okay. December being the shorter month.
This where the holidays fall it'll only give a really a, I don't have the counter for me. I think it's two or three weeks mark between that meeting and when the budget has to be finalized. And that's pretty quick. So Yeah. Yeah. They're already thread that needle.
Yeah. They've gotta be, and as you said, you, you aim as my dad who was a hunter, said, you aim high and allow for windage. So you gotta have a little bit of fluff in there. We know there's a little bit of fluff in there. What will fall out? Or will the trades actually, come to the table and say, Hey, you should do X. And they'll go, that's a brilliant idea. We'll tweak it a little bit more. But you made a really good point there about About no one's ever failed from consumer compliance.
You have follow failed from safety and soundness. And I had a podcast where I made reference to the fact that Todd Harper at the board table talked about my podcast and the fact that back in the day when I was a problem case officer, I had a supervisor was like, I just want to make sure they're making money. I'm less concerned with consumer compliance. He was a little bit more. Abrupt than that. But I, this is a clean a clean podcast and Todd took umbrage with that.
And I did a, a little mini podcast on that topic. But it reminded me also when you brought that up back in 06, 07, 08, when I was a regional director for a few years the then chairman.
And the then executive director wanted to shrink staff, and we had a meeting with the RDs and you, I appreciate you appraising my people skills and ability to manage up, but in that meeting, it was probably I could have tapped into my skills in that regard a little bit more because they were taking hacks at the field staff budget, and I was like, the time is wrong because delinquencies are going up. Okay. Asset quality is a problem. Earnings is a problem. Capital is going to be a problem.
Why are we doing this now? The time is wrong. So here we are and the budget kind of One of the, one of the budget tricks is when units go away and you need more specialists or you want to do something else, you can let those generalist examiner positions go away and then you fund those other positions. So the budget doesn't go up as much. And you can see that's one of the tools that they're using here.
And as you put more people in consumer compliance or build out an office what's the office of the executive secretary, which is getting built out those types of initiatives cost money, and sometimes you can fund it by taking away from the safety and sound aside and the is the timing right for that right now. That's a rhetorical question. You've said, Hey, is the time right? I think personally, the time isn't right for that.
And it's going to be interesting to see where this where the where and how this plays out. So
They've got to thread that needle. And I do want to say, Mark, although I did say that no credit union has failed for consumer financial protection, that doesn't mean it's not important. There are a lot of reputational risk, and quite frankly, it is the law. So it's important to follow, of course. But as you mentioned these are really uncertain times. And I feel like a lot of credit unions are waiting for the shoe to drop. Where's this going to go?
We don't know, but I think it might not be pretty.
I think it might not be pretty and if you and you were there at every board meeting when they talk about the insurance fund briefing and one of my favorite slides is where our camel codes. It's the one. It's the one public reveal where you can see how many camel code there are at certain levels and that.
The numbers are still low, generally, but if you look at the trajectory and the velocity of the increase, there's more and more threes, fours, and fives, which means things are getting a little restless out there. Enough on, on that side of it. The, let's talk a little bit behind the scenes, the there's the sunshine laws that you and I are familiar with. You've got three politically appointed board members. You've got their executive staff. The things have to be done in the sunshine.
So if the board is having a dialogue or asking questions of each other, that needs to be done. So the public can see it and the only way things can really get done is people like you Sarah bang. Catherine Galicia having conversations about what their board member might consider. So behind the scenes, relative to that, any thoughts you want to share with the audience on all the seventh floor really works?
It is. It is fascinating. I'll say the Sunshine Act gives the board advisors a lot of power, more so than other agencies, because the SEC, the board members, or the commissioners can speak to each other. They have a large number where 3 is not quorum. Or 2 or not for him and with 2 being for him, the board members cannot speak together 1 on 1 about policy. So they rely a lot on the executive director's office, others office, the agency, but the real shuttle diplomacy is done by the advisors and.
It means you're an extension of your boss, even more so since they can't speak to each other. I felt like it was my job to be an extension of Rodney. I felt like my job was to bird dog the things he wanted to get done. It was very important to Mr. Hood when he went out and about traveling across the 50 states to visit with Craig Younes. It was very important to him to be accessible and Credit unions came up with questions about the Office of Cure and others. We wanted to get answers.
And we tried to be accessible to any credit union who came to us. And I think we did a good job of that, Mark. But I think the board is well served by all three advisors now. Sarah Bank has a wealth of experience, too in the credit union industry.
I've seen that play out many times on final rules the board has considered, where The experience she has being on the other side of an examination table, the experience she has understanding the business of PUSOs and Cregions was tremendously valuable to the work the board did. And Catherine Galicia, her experience at CFPB, the Hill, and other places, she is a loyal soldier to Todd and has been very effective in managing the agency to get Todd's priorities across.
But I think there was a respect among all three advisors and you just try to get things done. That's the color I had to how the seven floor works. I would be interested to hearing your thoughts since you were up there for so long, too,
Mark. It's you summarized it real well. I will tell you that there, the, those positions have a lot of power and you did a particularly good job of understanding what Rodney Hood wanted when he was chair, when he was a board member and carrying his water, so to speak to. enable his vision to be become part of policy and procedure. And, we talked, you talked a little bit about the respect you gained for staff over time.
I would always gain respect for individual people for, of the political appointees. And like you said, it would, it was challenging for staff to have new people come in and have to, explain the federal credit union act and, and what always happens is NAFQ and CUNA. Would come in and, they have different things they want to get through and they might have general counsel saying, no, we can't do that, or the executive director's office saying, yeah, we could do it, but it's not a good idea.
And so every time there's a change at the top, that's a new opportunity for the trade associations to. influence the new people. But it's also very healthy because it's, it creates this, I refer to this book called the wisdom of crowds because people come in, you got new blood, NCA has to explain themselves.
And inevitably there are things that each staff member, political appointee like yourselves or our board member, like Rodney Hood, you'll pose a question in a way that we hadn't thought of it before. And it might be.
Something in that whether it's tied to the field of membership or, the definition of of in danger of closing, which allows you to merge credit unions and over time fact patterns change the body of law changes and you might be able to, the internet has a bigger influence than it did 10 years ago, 20 years ago. And how does that impact field of membership? Yeah. The new blood at the top of the board is always questioning NCA staff to say, Hey, have you thought about it this way?
And sometimes we go, Nope. If federal credit union acts as this, it's cut and dried. You can't do it. But those conversations do leave to, we never thought of it that way. Let's think about it. And then, it's not, it's, it doesn't happen super quick. But during the term of the individual, you can see changes that where they can influence the policy where a regulation that NCA staff would have said, no, we can't do this. A year later, it's yeah, we can do this.
And here's a proposal and it passed muster. And, so that's the exciting 10, 000 foot level of having been there as a, as a. A long time career staff interacting with the different people that come in. It is fascinating to see how the changes can happen in regulations because of the political appointees that come in and. For lack of a better term, force NCUA staff eyes wide open to say, Hey, might we be able to consider this? And it's cool when that happens.
You mentioned NCA staff. I just wanted to say I think for government agency NCA is very blessed. They have staff that by and large, generally believe in the mission of the agency, but also the overarching mission of the movement of credit unions. And I think they really care about. What they do every day. I'm not sure. It's like that elsewhere in government. I worked on the hill. That's my only other student government.
So it's not necessarily apples to apples, but I have to imagine other agencies. Maybe it could be just a job to a lot of people. I could get into a, people by and large are happy to get up every day and go to work and. Almost all the people at the NCA are really good people and really love their job. NCUA is a great place to work and going forward as the industry continues to contract, I'll be interested to watch how this all unfolds.
I think, as much as credit unions can complain about NCUA, that I think they're lucky to have the NCUA.
And I think it's critical for credit unions to make their voice heard about the importance of having a strong, independent regulator that gets credit unions, that are specialized to the credit union industry, because Credit unions are not banks, and I think it's critical for regulators to understand that, and I think the way the system's set up now, Mark is very helpful because it is carved out just to credit unions and not something
broader. That's very well said and NCOA does have a good team and they believe in the mission. It's a good mission, which I think makes it easier, with credit unions play such a great role and can do so many good things for their members. That just gets NCUA well positioned to have to hire good people because of the mission. And like you said it's a good team there. I look forward to seeing where it goes. Like you said, the consolidation is a real issue. Credit unions. I agree with you.
Toll hearted. They're fortunate to have NCUA around because. The footprint that that FDIC might have on a credit union hour wise is substantially different for the same size type institution, and that's something that's not really talked about a lot, but. You take a pick a number 10 billion, 8 billion, 4 billion. If you look at the time NCOA spends on an exam versus the time FDIC spends, I know credit unions sometimes complain, hey, they're here too long. The FDIC people are there much longer.
And I think I view that as NCOA being efficient and focusing on majors. Yeah I I, as I started thinking about that, I started thinking about the consumer compliance dialogue we already had. So they may be expanding over time into that arena as well. Anya Otsuka is any thoughts relative to thank you. Correct me if I'm wrong, she's had her hearing and that can play out quickly or that can play out.
A little bit slower and that's where the politics come in the D's and the R's and how quickly might that move any thoughts relative to that you
She's had her hearing. I would expect pretty soon. The Senate bank committee will vote on her nomination. Once she's voted out, it will send her to the floor. Usually after hearing the committee will see questions for the record. So it's take some time to. Compile those, but, at that point, they'll be, they'll try to broker a deal for her nomination to pass by unanimous consent and.
The Senate is a they run by, I was told by one of my former bosses when I interned for Trent Lott of Mississippi the Senate runs by unanimous consent or exaltion.
So there's a lot of arcane procedures there, but, it's just very hard to always predict the cadence and rhythm of the Senate, but I think, todd he is very smart and savvy and I think just like how Cal Hauptmann came from the Senate with the new nominee from the Senate, I think, that will probably put her, if I'm guessing, towards the top of the queue, but it's always hard to guess the rhythm and cadence of the Senate, although they have a typical, reputation for, taking their time.
They like to call it deliberating.
Deliberating. Very good. Very good. And if you think about that too, all three, so let's just assume she, at some point she gets on the board, all three board members will have that political background, right? The Federal Credit Union Act limits. I might not paraphrase this exactly right, but there can be 11 board member that comes from credit unions, right? And credit union experience. So there have been credit union people with credit union experience on the board in the past.
And this board really won't have that. Do you see this as a trend that down the road you'll see the next that this is where board members are going to constantly come from? Or might there be a pivot at some juncture where, you know, someone who ran NAFCU or someone who ran a large credit union or someone who served on a board, for a long time will find their way back onto the NCWA board?
It's always hard to predict, but as I said earlier people or policy, and that would be no truer statement than the members of the NCUA board. I don't think this is unique to NCUA if you look to the SEC and other regulators. When he was chairman of Senate Banking Committee, Senator Shelby had a long list of alumni at the SEC and other financial regulators.
And again, I think this trend started many years ago because You People or policy, and if you're putting someone on there, who's your policy advisor, you're going to understand where they are on policy when they make it to a regulated entity. I do think again, it's valuable having credit union experience. I mentioned all the insight the board has gained from Sarah Baines knowledge in the industry.
I think that's 1 reason while the vice chairman Houtman I think it was important for him to have someone who'd been on the other side of the examination table. So there's no question that is important. But I would think this is a trend, though, of having congressional staff be regulators. This is a trend that's been going on for quite some time. It's just taken a little while for it to make it to N. C. U. A. But I don't see this necessarily.
Changing anytime soon, but at the same time mark, every nomination is different. It's really up to the president, presidential personnel and again if it's also up to the member of the other party, the president, who's a leader of the Senate. They can be the one to determine who is the minority representative on the board. So they have a lot of influence too. So that's the long way of saying is the way nominations are made or. Unique to every situation and circumstance.
But I do think it's a larger trend of congressional staff being regulators. And again, to repeat myself, people are policy. And I think that's one reason why this trend is
ongoing. Yeah, that makes sense. That's that's enlightening. So I know that Your time at NCWA is is at an end. I know that, from the dialogues I have with staff there and the time that I spent with you, you're going to be missed by the staff. You're going to be missed by the credit unions. I know Rodney has someone filling in board memberhood as somebody Nagi Khalid filling in for you and those are big shoes to fill at as particularly at this time with the budget and everything.
But I want to thank you for being on the podcast. Thank you for the things you've done for credit unions over your 4. 5 years. And Lenwood, is there any questions I should have asked you here today that I didn't. No, I
think you pretty well covered it, Mark. But before we end, I just want to thank board member and former chairman Rodney Hood. He took a chance in hiring me. Any hiring decision, you take a chance on someone and he places full trust and confidence in me and really just let me get the job done and be an extension of him. And it was an honor to serve. I'm very proud of the record that board member and Chairman Hood accomplished in his time.
I think with him going back for his second tour NCUA, he was able to make even more of an impact. And I think, he left an indelible mark yeah. At the agency that credit unions will be thanking him for many years on Fintech loan participation on what he did with the QSO rule and others.
I think Rodney has really been a trailblazer in his time at the NCA, especially his 2nd tour of duty here in 2019, but I really enjoyed the time we've spent together today, Mark, and I appreciate everything you do.
You've got it. Thanks, Linwood. That's a great summary, and I want to thank you for being available today to chat about your journey at NCUA. My pleasure. Yes, it was a lot of fun, a lot of fun catching up. And listeners, I want to thank you for listening. I hope you'll listen again soon. This is Mark Treichel signing off with Flying Colors.
Thank you for joining us on this episode of with flying colors, subscribe on your favorite podcast app to hear future episodes where subject matter experts of all varieties will provide tips on how to achieve success with NCUA. If you would like to learn more about how we assist credit unions, check out our services at marktreichel. com.