Hey everyone, this is Mark TriCal with another episode of With Flying Colors. This is my part three of NCA's reorg, or not reorg, but their downsizing plan. They did on May 22nd, and in this episode, I am going to predict what I think NCUA will do may do, might do relative to its future structure. As previously discussed. NCUA is losing about 25% of their staff from buyouts. Those will be staff who were either eligible to retire or eligible for early retirement.
Meeting over 50 with 25 years of service is would be eligible. And then over the mini minimum age of retirement, which today, if someone was going to retire today, I believe they'd have to be 57, at least with 30 years to do full retirement. The backdrop is the Trump administration wanted credit union or wanted agencies to get smaller. The Trump administration wanted agencies to come up with a plan, and CUA came up with a plan.
And that plan led to 25% of staff leaving, which I. Is going to have a huge impact on NCUA. Now. They even said so at their board briefing that some things were going to be coming and so I'm taking what they said, I'm taking what I know and predicting where I think they might go problems they might have with that, et cetera, et cetera. So I threw together a quick PowerPoint to keep me focused here. You should see it on your screen if you're watching on YouTube.
And again, this podcast is about predicting NCOs future structure based on their most. Recent board briefing on downsizing. But before we start, I, whenever I talk about reorganizations or planning something new, I think of two quotes. And this goes back to when I was involved in the first restructuring that I was involved in back in the Dennis dollar era, 2000 2001, 2002 NCA. Went from six regions to five regions. And these two quotes became.
Part of my quote list at the time because of how challenging reorgs can be. The first one is by Pius who said we trained hard, but it seemed every time we were beginning to form up into teams, we would be reorganized. I was to learn later in life that we tend to meet any new situation by reorganizing and a wonderful method, it can be for creating the illusion of progress. While producing confusion, inefficiency, and demoralization.
So reorgs are painful, they're demoralizing, they're confusing, they're inefficient, but sometimes they're necessary. I'll let you decide at the end of this podcast, if you think some of the things I predict NSU A will do are good things, bad things, or immaterial things as it relates to you a credit union. The next quote would be a Machiavelli quote on creating a new system, which in bracket here I have org creating a new organization.
Machiavelli once said, it must be remembered that there is nothing more difficult to plan, more doubtful of success, nor more dangerous to manage than the creation of a new system. For the initiator has the enmity of all who would profit by the preservation of the old institutions and merely lukewarm defenders. In those who would gain by the new ones. I'll repeat that last sentence and I'll pause for the initiator has the enmity, which is hatred.
Had to look that back up in the day, has the enmity of all who would profit by the preservation of the old institutions and merely lukewarm defenders in those who would gain by the new ones. Someone who might pick up something and get a little bit more powerful in the structure of an organization will be a lukewarm defender. 'cause, status quo people tend to like, and those who would lose you will have hatred from. So that's what happens in an organization. Excuse me. In a reorganization.
And so I wanted to kind of preface that with on the front end of this discussion, this podcast, this YouTube video on what NCA may do. So these are some points from the NCA briefing that I took away. Some of the things that I am. Taking their comments and then intuiting. So Halman mentioned that there were 23 department heads at the time, and now that comment at the time that they sought out advice on what could be done relative to buying people out.
That could imply that there are less department heads. Now that could imply that some future state will have less department heads. You could easily interpret that comment to mean either of those things, or perhaps he meant someone something else. I don't know what his intent was, but I'm taking it to mean one of those two things on NCA slide 13 of their consolidation meeting. They talked about consolidating business use. Consolidating business units, increasing supervisor to employee ratios.
So right there in their presentation, they're talking about consolidating business units. That mean there will be, that means they'll be contemplating having less offices and I'll. Talk about what I think that could mean there. There are references to shifting HQ functions to the regions. Now sometimes you centralize, sometimes you decentralize. It's my understanding the Trump administration is more of a decentralization that is centralization type organization.
I do contemplate one way in which they could centralize here on a later slide, but. Keeping that in mind they specifically NCOA, talked about shifting HQ functions to the regions. I have a couple thoughts on what that might mean, and then hiring aligned to a desired future state. That means that to me, when NCUA loses four bodies, that doesn't mean four bodies will come back. As a matter of fact, under the Trump initiatives, if you lose four, you need to lose four before you can replace one.
And oh, by the way, that's not until they take the hiring freeze off, and there currently is a hiring freeze. They will hire aligning to a desired future state. We know a future state. State is coming. They've made reference to it. They've made reference to shifting functions to regions. They've made references to consolidating business units. I. Then they talked about mission prioritization, high value, high impact work only. What does that mean? That means exams.
That doesn't mean feel good positions in the central office. That doesn't mean DEI because the Trump admin administration has come out against DEI both guns blazing. That doesn't mean affinity groups having all sorts of time to. Get together and talk about their feelings. And again, I'm not saying this is my position, I'm saying this is the agency's position, but high value, high impact means it has to contribute to an exam getting done because oh yes, that's our mission.
I. All right, so here is N NCAA's organizational chart from their website, we have the board up top. We have Kyle Halman and the two VA vacant board members, and they make up the NCA board. And then there's dotted line over to the positions that report directly to the board, which would be the ombudsman.
The Office of the Inspector General, the Office of External Affairs and Communications, the Office of Minority and Women Inclusion, and the office of the secretary of the board, the office of the secretary of the board when I was there was one person, and it's always reported directly to the board and was supervised by the board chair. I think we'll be able to take that and put it somewhere else. Office of Minority and Women Inclusion.
NCUA has a couple of legal opinions out there, or did, they might not actually be in their records, but there was one that said the Office of Minority and Women Inclusion could be, could report to the office of the executive director. Then a board chair came in that was a Democrat and decided that should report directly to the board and that was more in line with the true intent of the creation of am I Office of Minority and Women Inclusion? And you could argue that's true.
But you could argue that the first legal opinion is one that they might wanna rely on, particularly in a Trump administration. So I'm gonna predict that will move somewhere. Office of External Affairs and Communications, those are led by political appointees. And oh, by the way, political appointees can only be supervised by other political appointees. Schedule C or, I can't remember what the schedule is for the board members.
But Schedule Cs can report to board members because they're politically appointed or they can report to other Schedule Cs. So the Office of External Affairs and Communications, unless they decide to spin some of that off needs to report. To the board and should continue that way. The ombudsman there's references in the creation of the ombudsman and basically that's the complaint department. There are references in creation of the ombudsman that talk about it, reporting to the board.
There was an old legal opinion when I arrived as executive directors, so sometime 2012 or before that said the ombudsman can report. By issuing a report. So there was an annual report, there was a semi-annual report. There was a quarterly report. So previously, NCUA concluded that reporting qualified and met the terms of the requirement. It's quite possible that you'll see the ombudsman disappear into another office. The office of the inspector General? No way.
No. How will that ever report to anybody other than the board? For obvious reasons. Then you get down old when I was there, the office of the executive director and OGC were a little higher on this pecking chart. There weren't so many of these offices reporting directly to the board. So it's ironic that when I was there, the office of the executive director supervised everyone other than.
The general counsel, the ig and the board secretary, everybody else came to the office of the executive director and then they moved the ombudsman. They moved ethics, which I'll get to. They moved owi, et cetera, et cetera. Then you get to the office of the executive director, which will still report to the board in future structures. They might pick up a few things, a few areas, the office of General Counsel. That's always reported to the board.
I believe the ACT requires it to be done that way. But in any event, I think the General counsel typically is separate from the rest of staff office of ethics. If you go back a few years, there was an ethics situation within the office of the general counsel and the general counsel served as the ethics officer. So the solution was decided to make a big office of the office. Of the Ethics Council, they promoted that person to a high level executive. They added staff.
You could argue that they need to do that. You could argue that they didn't need to do that, but I will argue that they will move that back into the Office of the General Counsel. I guess I'm tipping my hand on that one. The Central liquidity facility has a president and a vice president, and I think you could argue that you could move that, but it does have to have some reporting directly to the board. I believe that they may consider moving that.
Now on this org chart, they show a deputy director. When I was at NCOA, there was myself and John Kuchi. Wa who's still at NCOA, was my deputy director. They added, two deputy director positions to the NCA budget last year, so they were going to have three. John and I ran it ourselves, but they decided they needed to have two more deputy directors and then as soon as they added it, Trump put the freeze in.
I've heard rumblings that they'll probably want to keep that, which I don't think will play well with staff with all these other consolidations, but I don't think they're worried about it playing with staff. But I think potentially they may still end up having three deputy directors because of the. Large weight that they're creating of reporting and other things in, in, in the building since I left. But some of those board members requiring that large level of reporting have disappeared.
So who knows? Maybe they'll go back down to one deputy director, NCA, if you're listening, I think that's what you should do. The rumors are that they may keep some of those added Deputy Director positions while eliminating others. Not sure that's logical, but rumor has it. They may do that.
You also have the Office of examination of insurance, and you can see that reports to the office of the executive director, and you have the field program offices, which will be the regions, the Office of National Exams and Supervisions, which I will refer to as ones and amac the. Asset management and acquisition and assistance center, which is where liquidations happen with. Think about the NGN program when the corporate situation happened. Think about the medallions.
Think about conservatorship. Think about liquidations. That's what happens at emac. And I believe AMAC may be may be consolidated. And I think you could make an argument for keeping ones, and I think you could make an argument for getting rid of ones. If your goal is to make it look like you made a lot of changes, I think they might get rid of ones. All right, so under the deputy. Executive director, you have the Office of the Chief Economist. I think that will move.
You have the office of the Chief Financial officer. I don't think that will move. You have the Office of the Chief Information Officer. Don't think that'll move. Unless of course they move to different deputy directors. If they decide to have three, they're gonna have to have reports to all of these people. The Office of Consumer Financial Protection, I don't think that'll move, but I think they'll pick some things up. The Office of Human Resources, I don't think that will move.
My understanding is. Nearly every or all of NCAA's, office of Human Resources supervisors took the buyout, which is going to be challenging as how do they get all the retirement paperwork done? How do they get, when the freeze comes off, how do they get their new job announcements out? Where do they get the people who need to do this? They'll be able to promote from within, and I'm sure there are very talented people there. If you're listening in hr.
I know you've got a lot of good skills there, but you're going to need some leadership and finding that leadership is gonna be challenging in any position. But the impact on hr, from what I'm hearing at NCA, was the hardest hit of all the offices of credit union resources and expansion. I think that. Office will go away. And I think those things will be split up.
And I think the previous slide where they're talking about consolidating business units and shifting functions to the regions you could see that here as it relates to the Office of Credit Union and Resources and Expansion, office of Continuity and Security Management. That's a skiff, that's security. That I think you could make an argument that goes away in what I've put here in my PowerPoint.
I don't have it going away, but it's quite possible you could see that move into the chief Financial Officer position, potentially being supervised by that. The Office of Business Innovation they helped work on converting the exam program to merit from Aries. There.
Working on crypto type things, initiatives, blockchain they work on, most likely, although I don't know this for sure AI type initiatives or evaluations, that office could easily be moved into another office and we will walk into that here shortly. Alright, so then you have the field programs. I mentioned them, AMAC ones and the regions. And I think a few things will happen relative to that. Consolidation office. This is the low hanging fruit.
I think you can make an argument to get rid of ombudsman. I think you can not get rid of. Move ombudsman. Move owi. Move the board secretary, move the office of ethics Council. Move the CLF and move amac. Consolidations, which are a heavier lift would be ones the Office of National Exams and Supervision and the Office of Cure Credit Union Resources and Expansion. But I think NCA will contemplate doing both of those and will definitely most likely do the cure. Things that I'm about to show.
So the Office of National Exams and Supervision would require a regulation change and basically. There is a regulation out there that establishes each office and it establish what each office is responsible for. So in my opinion, they would need at least two board members. To make a regulation change that gets rid of an office. Why? Because I don't believe that, and I don't believe Helpmann believes, but I don't believe that the General counsel believes.
I don't believe that they will be willing to make drastic changes to regulations because I believe. They're worried about getting sued. I believe they won't do these things until they have two board members and until Trump can at least two board members and Trump can put a Republican in so that they have a full Republican quorum. So what else happens in the Office of National Exams and Supervisions? They do the big stress testing. They require stress testing for 10 billion plus.
As a reminder, the 10 billion plus to 15 billion currently report to the regions, the 15 billion plus report to the Office of National Exam and Supervisions. When they set that up, they said they were going to train the regions on that. I don't know how well that's going but. Theoretically, some of those skill sets are moving to the regions already from the 10 billion plus to the 15 billion plus category.
Back in the day the corporates, when there was a corporate failure, there was past GA reports that didn't like the fact that those reported to the regions. So should they go back to the regions? I don't know that. That to me is a potential challenge, bigger challenge about the Office of National Exam and Supervision. And there's what, less than 10, six to eight corporate credit unions these days. But could those go back to the regions?
And could the $15 billion plus credit unions go back to the regions back when ones was established? It was during. Shortly after, during, or shortly after the Great Recession when too big to fail became an issue for banks. NCA decided it needed to have a too big to fail, and the too big to fail was the line drawn in the sand was at the 10 billion and it created the Office of National Exam and Supervision. And it also helped create something for the Office of Corporate Credit Unions to do.
At the time there were. Factions. Going back to those quotes those who gained were lukewarm and those who lost weren't excited about it. The regions did not wanna lose the big credit unions. They liked having those big credit unions in the regions. They liked doing super exams. They would take all star teams of the regions and put them in the big credit unions. And I think the regions still probably believe they lost more than they gained by that. And I think the people in.
Ones would say we gained more than we lost. And I think both can make compelling arguments, but if they're trying to reduce their footprint and or because they're losing so many bodies, they're just doing triage saying, Hey, we can't, we don't have enough executives, we don't have enough leadership after this to have three regions and ones, you can make an argument that unwinding ones would make sense. Then you get into the credit union resource and expansion. So what do they do?
Expansion equals field of membership. That was in the regions that was centralized that was centralized, ironically based on a project by the current executive director, Larry fao. So he could potentially unwind that project here. But when they talk about functions, and I'll go back here. When they talk about functions going, shifting HQ functions to the regions, the most logical one. That would shift is field of membership. It was there once before.
The regional directors can supervise the field of membership issues in their regions. Some would argue that would be a little bit better control for the regions and the people that report to cure could just report to the regions. So I'm anticipating that might something that they would it's a definite maybe, but it's a definite, I would say more definite than a maybe. And then the resources.
The small credit union functions and things like that that could easily move to consumer and financial protection. Here we have we have corporates going back to the regions. We have 15 billion plus going back to the regions, what they would do at the stress testing function, that would probably be something that might you could argue they, they put some of those folks in e and i thinking out loud it might.
It might be that they split that up, but I don't think there's enough of those employees to split them up across the regions. How they do that is a work in progress. All right. We went through this asset management and assistance center. Now this is based in Austin, Texas. This had previously been moved to the southern region FYI, that was moved to the southern region. At my recommendation.
It was an odd recommendation at the time but it was a wise recommendation in my opinion, and here was the fact pattern behind that. There was a board member who left and then a new board member who came on who said, we need to move the asset management and assistance center to the central office. I thought that was a horrific idea because none of the people would've moved. We had big challenges going on at the time, the medallion situation and a couple others.
And I just didn't think it made sense. Makes sense because if you ordered people to move, and this was before, everybody worked from home. If you ordered everybody to move, I thought they would've lost a lot of corporate knowledge. I ironically si similar to what they're going through now, but I said, how about if we merge it into the southern region? And we have cost savings in this way, that way, in another way, they were open to that. I put the plan together.
And because the Southern regional director was multi-talented, that would be Keith Morton. Keith, if you're listening hat tip to you. Sorry I did that to you back then, but guess what? I think it might be happening again. So asset management and assistant center was moved into the southern region supervised by the Southern regional director and then it was spun out and I'm anticipating with.
The loss, the magnitude of the loss of the executives that they might just consider putting it back into the southern region. Pendulum swing. All right. So what I mentioned other things that might move somewhere. What could come to the Office of examination of insurance? That's what e and I stands for. I think they will add the Office of Business and Innovation, and again, that's the builders of the merit, the people who keep merit moving the exam program.
So there's a natural link to e and I think they will move the Office of the Economist. To the to the office of ENI. When that was established at a, at as an office, it was because the board member at the time, Debbie Mats, wanted to raise the bar on the thinking at NCUA. I think in general it did a lot of that. But if you're looking to consolidate, have less chiefs and last. SSP threes, which is the highest ranking position at the agency. Staff wise.
You can put this I think, pretty easily into ENI and you could also add the CLF, although there may be some sort of reporting that technically makes it have to report to to the board. I think you could, you, you could and would house these people at least part-time in ENI, which I think they're already doing. So what would be happening? To the new OED, would they have two more deputies? I don't think they should, but they might. I think that they could easily move the ombudsman back.
That's where it was when I was at NCUA early in my e ed reign. And the same with oi. I think both of those could be moved in. Should be moved to the office of the executive director. What will go to the new general counsel? That I would believe that what they'll do is the office of ethics will go to the general counsel, and I believe the board secretary who has typically been required to have a law degree, will move to the general counsel that's been talked about doing that.
Ethics was there, the board secretary has been talked about for years and years. So I believe those things will happen draconian, what could happen long term. How about eliminating the regions? How about requiring all credit unions to be in one region that's housed out of the central office on Duke Street? Could it happen? Yes. Is it draconian? Potentially, yes. I. And it looks like I misspelled NCUA here. I've got NCA once had nuc. NCA had nine offices, but they nuked them I guess.
So there once were nine regional office. Then there were six, then there was five when California was closed. California and Chicago were closed. And I. Tempe, Arizona, Phoenix was established. And then then there were three they closed Albany in Atlanta. I was involved in that restructure and actually flew out to Albany in Atlanta to break the news to those staff. One of the challenges of keeping all the regions while the pay structures broken, the, they.
As I understand it, office analysts were given a grade increase, so they're now fourteens. The specialists are fourteens, the supervisors are fifteens, the supervisors, locality pay oftentimes bumps them up, so they're making as much as executives. Long story short getting people to move in this world is harder. Getting people to move when they're not gonna get much of a pay increase, I think, is gonna be a non-starter. So at some juncture.
Five 10, not, probably not this iteration, but at some juncture I. Envision there won't be three regions, there won't be two regions. There'll be one field program, and that field program will be based in Washington, dc Alexandria, or who knows, they could sell that building and move it to the middle of St. Louis because there were people at NCUA who are still there in high positions. That thought moving the agency to the Midwest would be wise. It certainly, theoretically would be cheaper, but.
Will that happen short term? No. Will it happen at some juncture? Potentially, yes. Back to the issue of there being one board member. If offices exist in the regulation, they cannot be dissolved, in my opinion. When does Har, when does Trump replace Harper and Ska? Will that be soon? Will Trump, will Harper and Ska give you, get put back on the board? I think based on other recent. Supreme Court decisions, that's not likely. And then when might this happen?
So assuming that at least one R comes on before the end of the year, you could see some. All of this happening at the December board meeting when they would roll out their new budget. Now, if they've only got one board member, I don't think they can do a budget. I think they will go off the old budget, and I will think he will control this purse strings as if he's operating under a new budget. Lastly. This is my contact information from my PowerPoint. There's my web address.
We have the With Flying Colored podcast, which I'm speaking to you on now. We have another podcast called Credit Union Regulatory Guidance Podcast, which is ai. Reading of guidance, I'll think of books on audio books. It's gonna say books on tapes that was dating me. There's my LinkedIn address, there's my email address and I'm going to stop sharing here and get back to the full screen. And that's it guys, ladies, gentlemen. I think NCUA is going to have some challenges ahead.
I think people will rise to the occasion. I think that the reorg, I think, I wouldn't say I'm spot on, but it's pretty, some of that's pretty easy to take a look at if you're talking about consolidating, if you're talking about pushing things to the regions, it's pretty easy to figure out what that might be.
But, i'll do a postmortem on this once NCUA does their budget and actually does some reconfiguring, I will compare what I recommended here to what happened and what I missed, and I'm gonna leave it at that. As always, I appreciate you listening. This is Mark TriCal signing off with flying colors.