NATIONAL CREDIT UNION 

ADMINISTRATION OPERATIONS 

AND BUDGET 

HEARING 

BEFORE THE

SUBCOMMITTEE ON FINANCIAL INSTITUTIONS 

AND CONSUMER CREDIT 

OF THE

COMMITTEE ON FINANCIAL SERVICES 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTEENTH CONGRESS 

FIRST SESSION 

JULY 23, 2015 

Printed for the use of the Committee on Financial Services 

Serial No. 114–46 

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NATIONAL CREDIT UNION ADMINISTRATION OPERATIONS AND BUDGET 

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NATIONAL CREDIT UNION 

ADMINISTRATION OPERATIONS 

AND BUDGET 

HEARING 

BEFORE THE

SUBCOMMITTEE ON FINANCIAL INSTITUTIONS 

AND CONSUMER CREDIT 

OF THE

COMMITTEE ON FINANCIAL SERVICES 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTEENTH CONGRESS 

FIRST SESSION 

JULY 23, 2015 

Printed for the use of the Committee on Financial Services 

Serial No. 114–46 

( 

(II) 

HOUSE COMMITTEE ON FINANCIAL SERVICES 

JEB HENSARLING, Texas, Chairman 

PATRICK T. MCHENRY, North Carolina, 

Vice Chairman 

PETER T. KING, New York 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

SCOTT GARRETT, New Jersey 

RANDY NEUGEBAUER, Texas 

STEVAN PEARCE, New Mexico 

BILL POSEY, Florida 

MICHAEL G. FITZPATRICK, Pennsylvania 

LYNN A. WESTMORELAND, Georgia 

BLAINE LUETKEMEYER, Missouri 

BILL HUIZENGA, Michigan 

SEAN P. DUFFY, Wisconsin 

ROBERT HURT, Virginia 

STEVE STIVERS, Ohio 

STEPHEN LEE FINCHER, Tennessee 

MARLIN A. STUTZMAN, Indiana 

MICK MULVANEY, South Carolina 

RANDY HULTGREN, Illinois 

DENNIS A. ROSS, Florida 

ROBERT PITTENGER, North Carolina 

ANN WAGNER, Missouri 

ANDY BARR, Kentucky 

KEITH J. ROTHFUS, Pennsylvania 

LUKE MESSER, Indiana 

DAVID SCHWEIKERT, Arizona 

FRANK GUINTA, New Hampshire 

SCOTT TIPTON, Colorado 

ROGER WILLIAMS, Texas 

BRUCE POLIQUIN, Maine 

MIA LOVE, Utah 

FRENCH HILL, Arkansas 

TOM EMMER, Minnesota 

MAXINE WATERS, California, Ranking 

Member 

CAROLYN B. MALONEY, New York 

NYDIA M. VELA ́ ZQUEZ, New York 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

MICHAEL E. CAPUANO, Massachusetts 

RUBE ́ N HINOJOSA, Texas 

WM. LACY CLAY, Missouri 

STEPHEN F. LYNCH, Massachusetts 

DAVID SCOTT, Georgia 

AL GREEN, Texas 

EMANUEL CLEAVER, Missouri 

GWEN MOORE, Wisconsin 

KEITH ELLISON, Minnesota 

ED PERLMUTTER, Colorado 

JAMES A. HIMES, Connecticut 

JOHN C. CARNEY, JR., Delaware 

TERRI A. SEWELL, Alabama 

BILL FOSTER, Illinois 

DANIEL T. KILDEE, Michigan 

PATRICK MURPHY, Florida 

JOHN K. DELANEY, Maryland 

KYRSTEN SINEMA, Arizona 

JOYCE BEATTY, Ohio 

DENNY HECK, Washington 

JUAN VARGAS, California 

SHANNON MCGAHN, Staff Director 

JAMES H. CLINGER, Chief Counsel 

(III) 

SUBCOMMITTEE ON FINANCIAL INSTITUTIONS AND CONSUMER CREDIT

RANDY NEUGEBAUER, Texas, Chairman 

STEVAN PEARCE, New Mexico, Vice 

Chairman 

FRANK D. LUCAS, Oklahoma 

BILL POSEY, Florida 

MICHAEL G. FITZPATRICK, Pennsylvania 

LYNN A. WESTMORELAND, Georgia 

BLAINE LUETKEMEYER, Missouri 

MARLIN A. STUTZMAN, Indiana 

MICK MULVANEY, South Carolina 

ROBERT PITTENGER, North Carolina 

ANDY BARR, Kentucky 

KEITH J. ROTHFUS, Pennsylvania 

FRANK GUINTA, New Hampshire 

SCOTT TIPTON, Colorado 

ROGER WILLIAMS, Texas 

MIA LOVE, Utah 

TOM EMMER, Minnesota 

WM. LACY CLAY, Missouri, Ranking 

Member 

GREGORY W. MEEKS, New York 

RUBE ́ N HINOJOSA, Texas 

DAVID SCOTT, Georgia 

CAROLYN B. MALONEY, New York 

NYDIA M. VELA ́ ZQUEZ, New York 

BRAD SHERMAN, California 

STEPHEN F. LYNCH, Massachusetts 

MICHAEL E. CAPUANO, Massachusetts 

JOHN K. DELANEY, Maryland 

DENNY HECK, Washington 

KYRSTEN SINEMA, Arizona 

JUAN VARGAS, California 

(V) 

C O N T E N T S 

Page 

Hearing held on: 

July 23, 2015 ..................................................................................................... 1 

Appendix: 

July 23, 2015 ..................................................................................................... 31 

WITNESSES 

THURSDAY, JULY 23, 2015 

Matz, Hon. Debbie, Chairman, National Credit Union Administration ............. 4 

APPENDIX 

Prepared statements: 

Matz, Hon. Debbie ............................................................................................ 32 

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

Neugebauer, Hon. Randy: 

Written statement of the American Bankers Association ............................. 61 

Written statement of the Credit Union National Association ...................... 63 

Written statement of the Independent Community Bankers of America .... 97 

Letter to Hon. Jeb Hensarling, Hon. Richard Shelby, Hon. Maxine 

Waters, and Hon. Sherrod Brown from 53 State Bankers Associations, 

dated July 23, 2015 ....................................................................................... 101 

Written statement of the National Association of Federal Credit Unions .. 103 

Written statement of the National Association of State Credit Union 

Supervisors .................................................................................................... 107 

Matz, Hon. Debbie: 

Written responses to questions for the record submitted by Chairman 

Neugebauer ................................................................................................... 110 

Written responses to questions for the record submitted by Representative Mulvaney ................................................................................................ 317 

Written responses to questions for the record submitted by Representative Sherman ................................................................................................. 378 

(1) 

NATIONAL CREDIT UNION 

ADMINISTRATION OPERATIONS 

AND BUDGET 

Thursday, July 23, 2015 

U.S. HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON FINANCIAL INSTITUTIONS

AND CONSUMER CREDIT, 

COMMITTEE ON FINANCIAL SERVICES, 

Washington, D.C. 

The subcommittee met, pursuant to notice, at 2:20 p.m., in room 

2128, Rayburn House Office Building, Hon. Randy Neugebauer 

[chairman of the subcommittee] presiding. 

Members present: Representatives Neugebauer, Pearce, Posey, 

Fitzpatrick, Luetkemeyer, Mulvaney, Pittenger, Barr, Rothfus, 

Guinta, Tipton, Williams; Clay, Scott, Maloney, and Sinema. 

Also present: Representatives Royce and Fincher. 

Chairman NEUGEBAUER. The Subcommittee on Financial Institutions and Consumer Credit will come to order. 

Without objection, the Chair is authorized to declare a recess of 

the subcommittee at any time. 

Today’s hearing is entitled, ‘‘National Credit Union Administration Operations and Budget.’’ Before I begin, I would like to note 

that there are several National Credit Union Administration 

(NCUA) staff members here today. And committee policy is one 

staff member per witness. This is to ensure public participation. In 

the event we have more public audience members come in, we will 

ask some of the NCUA staff to head to our overflow room upstairs. 

I would like to thank Chairman Matz for being flexible with our 

schedule. As you know, we were scheduled to have this hearing tomorrow. And then the leadership decided we weren’t going to be 

here tomorrow. The Chair was gracious enough to change her 

schedule. And we appreciate that. 

I am going to now recognize myself for 5 minutes for an opening 

statement. Good afternoon to the committee. Financial institutions 

are the backbone of Main Street America. Credit unions particularly share a unique relationship with communities. After all, they 

are the core of the cooperatives. They help bring unserved and underserved customers into the financial mainstream. They provide 

the first credit card for young adults trying to build credit. They 

help the first-time home buyer purchase the home they have been 

dreaming of. And often they are the last corporate citizen left 

standing in many rural districts, including many areas of my own 

district. Perhaps most importantly, though, they are experts on reVerDate Nov 24 2008 16:34 Mar 22, 2016 Jkt 097159 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 K:\DOCS\97159.TXT TERI
2 

lationship banking, helping to customize products to fit the needs 

of their customer base. 

Unfortunately, credit unions, like community banks, are suffering from the one-size-fits-all regulatory actions of the Federal 

regulators. For example, some credit unions now undergo stress 

testing like their larger bank counterparts. Because of this increased regulatory burden and the related compliance costs, we 

have seen a massive consolidation of credit unions, and inflexible 

product standardization, which has limited some of the customer 

choices. 

Data from the National Credit Union Administration shows that 

we lost nearly 1,000 credit unions between 2010 and 2014. This 

trend presents a threat to communities across the country, especially rural and semi-urban areas such as the 19th District of 

Texas. I worry that without some regulatory flexibility, credit 

unions will be less able to meet local needs, will stop offering products, or consolidate. To me, this signals problems in the health of 

the credit union industry. 

Today’s hearing will mark the first time since 2011 that the 

NCUA Chair has testified before Congress. As with any Federal 

agency, it is imperative that we conduct vigorous oversight of budgeting and operations. This ensures that the money paid into the 

system by the credit unions is being spent appropriately and that 

the taxpayers remain protected by a strong Share Insurance Fund. 

Further, it ensures rigorous debate of policy decisions made by the 

NCUA. 

NCUA has undertaken significant regulatory policy changes 

under Chair Matz’s leadership. And it is necessary to understand 

how these actions are affecting the health of the credit union system. Today, our Members will get to tackle both of those tasks. 

During today’s hearing, I am hopeful that Chair Matz will address 

two issues in particular. 

First, NCUA’s budget has increased each year since 2008, sometimes in double digit percentages. However, during the same time, 

the number of credit unions has dropped by nearly a quarter. I 

hope to hear Chair Matz outline clear justifications for this budget 

increase that does not appear to be matched to other supervisory 

demands. 

Second, I am concerned that the NCUA has not appropriately 

outlined how it will address the industry’s best practice of using 

capital buffers on top of regulatory capital requirements. The 

NCUA must clearly signal how it plans to supervise this industry’s 

best practice to ensure capital is efficiently put to use and that 

there remains robust and safe credit availability for our constituents. 

I look forward to hearing Chair Matz’s perspective on these important issues and more during today’s hearing. Thank you. 

And now, with that, I yield to the ranking member of the subcommittee, Mr. Clay. 

Mr. CLAY. Thank you, Mr. Chairman. 

And thank you, Chair Matz, for your testimony. And, Mr. Chairman, I would like to relay something pertaining to your remarks 

about credit unions and what purpose they serve. As a young adult 

with my first job, I applied for an auto loan with my community 

3 

bank, where I had checking and savings accounts, and was denied 

the loan and was forced to go join the Wright Patman Credit 

Union, where I was approved for the loan, which I paid off in half 

the time. So they took a chance on me. And I am certainly going 

to take a chance on credit unions. So thank you. 

Like most banking regulators, the NCUA’s budget is derived 

from the entities that they regulate, an arrangement designed to 

insulate the Administration from political pressure. Such an arrangement should not, however, trade the pressure of the congressional appropriations process for pressure from the credit union industry to shape their budget, an arrangement that was agency policy from 2001 to 2008, but that undermined the Administration’s 

ability to respond to financial crises and its ability to prevent losses 

to the Share Insurance Fund. 

I look forward to a discussion that actually reflects the concerns 

that credit unions have in their day-to-day core operations, whether they be proposals to allow them to raise supplemental capital or 

expand member business lending or other regulatory relief proposals. I look forward to hearing more about how we can work with 

the NCUA to ensure that the regulatory environment for our credit 

unions is one that allows them to thrive but that also protects 

members and the Share Insurance Fund. And thank you again for 

your testimony and your leadership. 

I yield back. 

Chairman NEUGEBAUER. I thank the gentleman. 

And now the gentleman from New Hampshire, Mr. Guinta, is 

recognized for 1 minute. 

Mr. GUINTA. Thank you very much, Mr. Chairman. 

Good afternoon, Chair Matz. 

It is a privilege and an honor to be representing the First Congressional District of New Hampshire, where the first ever credit 

union was founded in the United States. In 1908, St. Mary’s Bank 

emerged in a small town called Manchester, which is my hometown. Since then, Manchester has grown to be the State’s largest 

city. And surrounding the City came more credit unions and community banks. Now there are 27 credit unions in New Hampshire, 

14 of which are in my district. 

However, community banks and credit unions have been consolidating at an alarming rate. According to the quarterly data posted 

on the NCUA’s website, credit unions have declined 52 percent 

from 1990 to now. I sit here and ask myself, why is this happening 

to our community financial institutions? Consumer choice, I think 

and hope, is something that we as Americans all value. However, 

we have seen this negative trend continue and even be enhanced, 

I think, by rigorous regulatory requirements by the Dodd-Frank 

Act. 

You, Madam Chair, called 2015 the year of regulation relief. And 

I certainly hope that is true. I look forward to working with you 

in that approach because I think the harmful regulations our financial institutions have faced need to be addressed immediately. So 

I very much thank you for coming here today and working with us. 

And I look forward to hearing your testimony. 

I yield back the balance of my time. 

Chairman NEUGEBAUER. I thank the gentleman. 

4 

The gentlewoman from Arizona, Ms. Sinema, is recognized for 1 

minute. 

Ms. SINEMA. Thank you, Chairman Neugebauer and Ranking 

Member Clay, for holding this very important and timely hearing. 

As you may know, Congressman Mulvaney and I are sponsors of 

bipartisan legislation to bring greater transparency to the National 

Credit Union Administration’s budget process by requiring a public 

hearing on the budget before adoption. This legislation is simple 

and straightforward. It would require NCUA to publish a draft 

budget on an annual basis and then hold a public hearing with notice and opportunity for public comment before the NCUA Board 

makes a final determination on how funds are spent. 

As NCUA is funded almost exclusively through fees assessed on 

credit unions, we believe the public and the credit unions that are 

regulated should have an opportunity to weigh in as NCUA considers its annual budget. 

Between 2001 and 2008, NCUA held public hearings. I look forward to hearing from today’s witness about why these hearings 

have been discontinued and how the agency can improve the current budget process to make it more open and transparent. 

Again, thank you, Chairman Neugebauer and Ranking Member 

Clay for holding today’s hearing. 

And thank you, Chair Matz, for sharing your expert view with 

us today. 

Chairman NEUGEBAUER. I thank the gentlewoman. 

Today, we welcome Debbie Matz, the Chair of the National Credit Union Administration. Chair Matz was nominated by President 

Barack Obama to serve as the eighth Board Chair of the National 

Credit Union Administration after confirmation by the U.S. Senate 

on August 7, 2009. She was sworn in as the Chair on August 24, 

2009. Ms. Matz served on the NCUA Board from January 2002 to 

October 2005, and is the first NCUA Board member to return for 

a second turn. She was nominated for her first term by President 

George W. Bush. As the NCUA Chair, Ms. Matz heads the independent agency overseeing the regulation and supervision of the 

Federal credit unions and the National Credit Union Share Insurance Fund (NCUSIF), which protects the accounts of over 6,500 

federally-insured credit unions serving more than 96 million members, and managing more than $1.1 trillion in assets. 

Chair Matz, we are glad to have you here. You are now recognized for 5 minutes. And without objection, your written testimony 

will be made a part of the record. 

STATEMENT OF THE HONORABLE DEBBIE MATZ, CHAIRMAN, 

NATIONAL CREDIT UNION ADMINISTRATION 

Ms. MATZ. Thank you. Good afternoon, Chairman Neugebauer, 

Ranking Member Clay, and subcommittee members. Thank you for 

inviting me to appear before you. 

When I came back to NCUA as chairman in 2009, in the wake 

of the Great Recession, the credit union system was on the brink 

of collapse. To prevent this, we developed an unprecedented mechanism to securitize $50 billion in toxic corporate credit union assets. 

Within a few months, 351 consumer credit unions, holding nearly 

$52 billion in assets, were close to failing. 

5 

Compounding the situation, NCUA’s budget and staffing in the 

years leading to the crisis had not kept pace with credit unions’ 

growth and increasing complexity. In fact, during the 7 years leading up to the financial crisis, NCUA cut a total of 91 staff positions, 

even though credit union assets had increased by 73 percent. During the same period, NCUA’s budget, as a percentage of credit 

union assets, declined by 35 percent. NCUA was understaffed and 

underresourced. 

We soon rectified these problems while preventing any unnecessary budget and staffing growth. To efficiently manage shifting 

workloads, we reallocated existing resources wherever possible. For 

example, to provide more supervision to credit unions that pose 

greater risks to the Share Insurance Fund, we have reallocated 

exam hours away from smaller credit unions towards larger ones, 

rather than simply adding new examiners. 

The NCUA budget is developed from the bottom up each year, 

using a zero-based budgeting process. Every office in the agency 

must justify its staffing level and each expenditure. Through this 

process, we efficiently allocate resources towards priorities detailed 

in NCUA’s strategic plan. The full plan and budget details are 

posted on our website. 

NCUA leads financial institution regulators in budget transparency. Our website contains a dedicated budget resource center 

that includes annual fund audits, budget summaries and slides, office-by-office spending plans, and a host of other budget information exceeding what other financial regulators disclose. 

Among my top priorities are providing transparency and communicating effectively with all stakeholders. To this end, I have held 

18 in-person listening sessions, hosted 11 online townhall webinars, 

and crisscrossed the country speaking to and meeting with tens of 

thousands of credit union officials representing every State. This is 

one of the most important aspects of my job because I receive the 

most useful feedback when I hear from the people who actually run 

credit unions. 

I heard their comments about our exam process. I heard we 

needed to target regulations to risks. I heard our member business 

loan rule was too prescriptive. I heard we should remove the cap 

on fixed assets. I heard we needed to improve how we designate 

low-income credit unions. I heard we needed to streamline how we 

approve fields of membership. And I heard we needed to reduce 

burdens on small credit unions. 

So, I am here to tell you we listened, and we acted. We relieved 

unnecessary burdens as we have modernized our regulations. The 

NCUA Board remains committed to providing regulatory relief that 

does not compromise safety and soundness. We continue to act on 

all practical suggestions as we move toward a principles-based regulatory framework and enhance credit union powers within our authority. 

As NCUA eases regulatory burdens and responds to emerging 

risks, our supervision budget and staff must keep pace with credit 

unions’ growth and complexity. Reports by GAO and our inspector 

general underscore this need. 

Today, key credit union system metrics have recovered to pre-crisis levels. And, notably, the percentage of assets in troubled credit 

6 

unions has been reduced to a manageable level, down to just 1 percent. The recovering economy is, in part, responsible for the improvements in credit union performance. Credit is also due to the 

CEOs, managers, and boards who make tough choices to keep their 

credit unions solvent, as well as the NCUA staff who supervised 

credit unions under very difficult circumstances. 

We are now on the right track. Both the credit union system and 

NCUA are in remarkably better condition than when I became 

chairman. I will continue working to protect the safety and soundness of credit unions and protect the 100 million account holders 

who are federally insured by NCUA. I look forward to your questions. 

[The prepared statement of Chairman Matz can be found on page 

32 of the appendix.] 

Chairman NEUGEBAUER. Thank you. 

Chair Matz, the NCUA approved a budget in 2015 by a vote of 

2 to 1 of $279.4 million, an increase of 4.2 percent. Over the last 

7 years, the average increase in the budget has been about 8.49 

percent and is much—one, year I think it was 13 percent. This 

kind of contrasts dramatically from the budget, say, of the FDIC, 

which has been decreasing its operating costs for the last 5 years, 

including 3 percent for 2015. And they cut 325 positions this year. 

NCUA has reported to Congress that credit unions performed 

well during the financial crisis and continue to grow and serve 

their members. Further, the NCUA has previously justified these 

budget increases by saying the credit unions have become more 

complex. Can you kind of walk us through this pretty large budget 

increase, how it is justified, and kind of elaborate how credit 

unions have become more complex? 

Ms. MATZ. Certainly. And to your point about the FDIC versus 

the NCUA budget, FDIC has two budgets: a resolution budget; and 

an operating budget. During the crisis, the resolution budget went 

up very dramatically and has been coming down. But when you 

look at their budgets combined or their operating budget in isolation, it has been very comparable to ours throughout the past probably 5 or 10 years. So we are on parity with the way the FDIC has 

been operating in terms of its budget increases. 

But during the crisis, we lost 102 credit unions, which cost the credit union system about $750 million. We have been doing everything we can to make sure that doesn’t happen again. I believe that 

the reason we lost those 102 credit unions was because our staff 

simply did not have the resources to supervise them effectively 

heading into the crisis and during the crisis because we were down 

by 91 employees at the time that I got there. And so, it was my 

intent to make sure that we have the resources that we need to 

protect the safety and soundness of the growing industry. 

In front of you, you will see slide 3, which shows you our budget 

as a percent, per million dollars, of federally-insured credit union 

assets. And you can see that it was way down, when we had the 

budget hearings. It was way down. And it has trended up somewhat. But it is still considerably lower than where we were in the 

year 2000. At that point, our budget was $328 per million dollars 

of federally-insured assets and now it is $249. So, I think we are 

operating very effectively. 

7 

But we need to keep ahead of the complexity of the industry. I 

have said many times that NCUA should not be holding the industry back. And the industry, the credit union industry, needs to stay 

competitive. And so, they need to be providing electronic services 

to their members. They want—they asked for and we gave them 

derivative authority to hedge interest rate risk. They need more 

flexibility in the way they do business. Just today, at our Board 

meeting, we eliminated the cap on their fixed-asset investments. 

Chairman NEUGEBAUER. Let me change direction here, because 

we have a limited amount of time. A review of the NCUA’s inspector general materials, loss reviews for the limited number of credit 

union failures during the financial crisis, reveals that the NCUA 

examiners did routinely identify problems on a timely basis. In 

other words, the examiners, it is not the issue that we had enough 

examiners, but the problem, and they indicated they did uncover 

the problems, but what the report did indicate was that it wasn’t 

a function of not detecting the problems but the proper follow-up. 

And so, it would lead one to believe that what we don’t need is 

more examiners, but evidently, we need more competent examiners. What is your response to the report that said that your folks 

found out the problems but didn’t deal with them appropriately? 

Ms. MATZ. In fact, there was a series of material loss reviews. So, 

it depends on which one you look at. But their capping report, 

which summarized all of the material loss reviews, said we were 

not detecting problems early enough. And they did not comment on 

our staffing level. But we have held the staffing level constant for 

the past 4 years. So, our intent is not to increase the staff. We have 

been reallocating our workload, so that we have taken examiners 

from small credit unions and reassigned them to larger credit 

unions so that we can do our job effectively without increasing the 

staff. 

Chairman NEUGEBAUER. So the number of credit unions has decreased by 25 percent, but the budget has gone up. That seems to 

be contradictory. 

Ms. MATZ. It is not contradictory. In fact, because the number of 

assets and the complexity of the credit unions has gone up more 

rapidly than the number of credit unions has declined. And if you 

have more complex institutions, you need to have staff who are 

well-trained to supervise those institutions. 

Chairman NEUGEBAUER. My time has expired. 

I now recognize the gentleman from Missouri, Ranking Member 

Clay, for 5 minutes. 

Mr. CLAY. Thank you, Mr. Chairman. 

H.R. 2287 would provide credit unions and their trade associations the opportunity to participate in predecisional hearings on 

the NCUA’s operating budget. It is my understanding that, relative 

to other financial regulators, the NCUA is a leader amongst its 

peers in providing transparency around its budget process. 

Madam Chair, describe the information that you already make 

available to the public concerning the NCUA’s budgeting process 

and how would your budget transparency efforts compare to those 

of other financial regulators? 

Ms. MATZ. Thank you for that question. When I came onto the 

Board in 2009, one of my top goals was to improve transparency 

8 

and communication with all of our stakeholders. And to that end, 

I began to hold listening sessions around the country. I have held 

18 of them. I started holding virtual townhall meetings through 

webinars. I have held 11 of them. In fact, I have one coming up 

on Tuesday that was planned quite a while ago. And I have crisscrossed the country meeting with credit unions. I find it more effective to hear from the people who run the credit unions. 

When we held the hearings when I was on the Board last time, 

typically what we had were three or four representatives from the 

trade associations who read statements prepared by the trade associations. And the statements were consistent across the witnesses 

and through the years. And the message was cut your budget, cut 

the number of examiners, cut the time you spend in the credit 

unions. That was not productive. It was not constructive in terms 

of developing our budget. 

What is constructive is when I go out and talk to the credit union 

officials and I find out what things are really on their minds and 

how we can respond so that they can do their jobs better. But in 

terms of transparency, we have a budget resource website that has 

all of our budget advisory memos that are given to each of the 

Board members, describing in detail what the budget is. We have 

line-by-line budgets for each office in the agency. We have our audits from our accounting firms. It goes on. There are dozens of 

things on our website. I don’t really think there is much on our 

website that doesn’t answer every possible question, including frequently asked questions. No other financial institutions regulator 

does that. And no other financial institutions regulator holds hearings on its budget. 

Mr. CLAY. How would enhanced disclosure of the NCUA’s operating budget and the other funds it administers support the core 

operations of credit unions? I am just curious. 

Ms. MATZ. I don’t think it would enhance our budget process at 

all. In fact, our budget has a minimal impact on the credit unions 

themselves. Our budget, as a percentage of the actual credit union 

expenditures, is less than 0.02 percent. It is a very minimal 

amount. So, I don’t think they are adversely impacted at all by our 

budget. 

Mr. CLAY. In your experience in interacting with credit unions in 

the field, have you ever gotten requests from the credit unions 

themselves about further transparency into the NCUA’s budget or 

the other funds that it administers? 

Ms. MATZ. I can tell you, as I said, I have crisscrossed the country and met with tens of thousands of credit union officials. And 

I really can’t remember getting a question about the transparency 

or really about our budget in general. Now that the trades have 

whipped this up as an issue, you might be hearing about it. But 

I can tell you in all the years that I have been on the Board, meeting with credit union officials, this is not one of the issues that has 

come up. 

Mr. CLAY. Interesting. I appreciate your responses. And, hopefully, we all understand that this could be motivated by the trade 

associations. 

Mr. Chairman, I yield back. 

Chairman NEUGEBAUER. I thank the gentleman. 

9 

And now the gentleman from Florida, Mr. Posey, is recognized 

for 5 minutes. Mr. Posey has stepped out, so we are going to recognize the gentleman from Missouri, Mr. Luetkemeyer, for 5 minutes. 

He has also stepped out. 

Let’s go to the gentleman from South Carolina, Mr. Mulvaney, 

for 5 minutes. 

Mr. MULVANEY. I thank the chairman. 

Chair Matz, I get a lot of questions back home about the overhead transfer rate, the amount of money that you all take out of 

the security insurance fund to use for your overhead. You mention 

it in your testimony and say that the operating budget is reimbursed from the State insurance fund. That is the OTR, so the 

overhead transfer. You go on to say that your methodology for calculating the overhead transfer rate was validated in 2011 and 2013 

by PricewaterhouseCoopers. On your website, and I see you have 

something there as well, it says that: While 

PricewaterhouseCoopers made recommendations to improve the 

process on the OTR, overall, they determined that the methodology 

was sound and reasonable. 

So I did something that I think is fairly reasonable, which is I 

went to your website to get the overhead transfer rate review, 

which is the one that was done for you by PricewaterhouseCoopers 

that you mentioned in your opening testimony and on the website. 

And when I turned to the first section, which I think is a fairly reasonable section for somebody to go to to try and get up-to-speed on 

it, the executive summary, I got to page 5, and it says: ‘‘The findings and conclusions of this study, which are based on an analysis 

of available facts and circumstances, are presented below.’’ And I 

get an entirely redacted section. In fact, that happens a lot. There 

is a bunch of different places that are redacted. I think 15 pages 

are redacted. 

I tried to figure out why that was. And someplace on the website, 

you all also mentioned Section (b)(4) of the Freedom of Information 

Act. You go to read that, and it says that you don’t have to—or it 

is okay to redact essentially things that are trade secrets and commercial or financial information obtained from a person or privileged or confidential material. All of which is cool. Okay. 

Until I get to this, which is the unredacted copy of your agreement. By the way, did you know that I have this as you sit there 

today? 

Ms. MATZ. I didn’t know that you had it. I had no idea. 

Mr. MULVANEY. Okay. You did not know that I have it. Okay. I 

am going to read to you one of the redacted sections that you all 

cut out of the conclusions of the executive summary regarding 

transparency. Again, you can’t get this publicly. But you can get it 

if you get the unredacted version. It says: ‘‘Based on the 

PricewaterhouseCoopers review, the OTR methodology was considered lacking in terms of the extent to which the classification of 

NCUA’s activities between insurance and regulatory represents a 

consensual view.’’ 

It goes on to say that: ‘‘Further, there was found to be dissatisfaction within the industry with respect to NCUA’s efforts to 

communicate and explain the OTR methodology in adequate detail. 

It is recommended that the NCUA should consider providing more 

10 

visibility on how it characterizes its activity to the different industry groups and credit unions and possibly solicit their feedback 

with regards to the reasonableness and accuracy of the classification.’’ 

How is any of that a trade secret? 

Ms. MATZ. Sir, I should point out to you that when I learned, just 

recently, that that redacted version was on our website—and I 

have to say I was somewhat shocked by it myself—I discussed it 

with the staff and the unredacted version will be going up. However, I should point out— 

Mr. MULVANEY. When did you have that conversation? 

Ms. MATZ. Yesterday. 

Mr. MULVANEY. Yesterday. Why did you have it yesterday? What 

happened yesterday to prompt you to have a discussion with your 

staff? 

Ms. MATZ. I guess it was just a discussion of the things that were 

on our website about— 

Mr. MULVANEY. It had nothing to do with this hearing? You just 

happened to be randomly looking at your website yesterday and decided— 

Ms. MATZ. No. No. I was discussing with the staff what we have 

on our website that affects our budget and wanted to see it. 

But what I wanted to say is that subsequent to that, in 2013, we 

did have a study by PricewaterhouseCoopers— 

Mr. MULVANEY. I got that. And if I get a chance to get to that, 

I will. But let me ask you the question, who made the decision to 

redact the 2011 report before it went up on the website? Was that 

you? Or was that somebody else? 

Ms. MATZ. Our general counsel’s office. 

Mr. MULVANEY. Did you approve that decision? 

Ms. MATZ. I wasn’t aware of it. 

Mr. MULVANEY. Do you believe that information to be a trade secret? 

Ms. MATZ. I don’t. 

Mr. MULVANEY. And your answer is, you are going to go ahead 

and put it up? 

Ms. MATZ. Yes. 

Mr. MULVANEY. By the way, the irony of redacting something 

that says you should be more transparent— 

Ms. MATZ. Yes. I got the irony. 

Mr. MULVANEY. I got you. Thanks very much. 

Another thing you redacted, by the way, later in the document, 

it says that: ‘‘NCUA should also check if the OTR decisions are 

subject to the Administrative Procedure Act and if formal notice or 

comments are required on its OTR calculation process and results.’’ 

I won’t ask you if that is a trade secret. You will probably say 

it isn’t, and it is going to be on your website soon anyway. Let me 

ask you, have you done that? 

Ms. MATZ. Do you want me to answer the question? 

Mr. MULVANEY. No. I want you to answer the question I have 

asked you, which is, have you done what PricewaterhouseCoopers 

asked you to do in 2011 regarding the Administrative Procedure 

Act? 

11 

Ms. MATZ. Our general counsel has advised that we do not need 

to publish it. However, in my written testimony I indicate that we 

are, in fact, going to publish the formula for review and comment. 

Mr. MULVANEY. Lastly, you mentioned earlier that the budget 

was on your website. I have your budget. Thank you for sending 

it to me. It only took me 18 months to get it. I am really excited 

about having it. I got it yesterday. I appreciate that. Is the lineby-line budget that you gave me yesterday available on your 

website? 

Ms. MATZ. Not at this time. 

Mr. MULVANEY. When it will be available on your website? 

Ms. MATZ. We can put it up as soon as— 

Mr. MULVANEY. Finally, there is one thing redacted in the reports—I won’t read it verbatim because I don’t have time—it says 

that you should look at, explore future avenues of communication 

with the folks that you regulate. 

Would you agree that my bill with Ms. Sinema, going back to the 

original process of having input, direct input, and meetings on your 

budget could be one avenue by which you could increase your communication with the people that you regulate? 

Ms. MATZ. It would increase the communications, but it would 

not be effective. 

Chairman NEUGEBAUER. The time of the gentleman has expired. 

Mr. MULVANEY. I am certain that you think it won’t be. Thank 

you, Mr. Chairman. 

Chairman NEUGEBAUER. I now recognize the gentleman from 

Georgia, Mr. Scott, for 5 minutes. 

Mr. SCOTT. Thank you very much, Mr. Chairman. 

Chair Matz, let me make sure now, the NCUA, the National 

Credit Union Administration, your budget is funded through fees 

from your credit unions across the country, is that correct? 

Ms. MATZ. That is correct. 

Mr. SCOTT. So it is safe to say the credit union members themselves bear the total cost of the agency’s operations and expenses? 

Ms. MATZ. That is correct. 

Mr. SCOTT. Okay. Let me ask you this, do you hold public hearings for your budget? 

Ms. MATZ. No. 

Mr. SCOTT. Can you tell me why you do not do that? 

Ms. MATZ. I make it my business to go out and meet with the 

people who run the credit unions and have significant dialogues 

with them on any issue that they would like to discuss. When we 

had budget hearings in the past, we were just hearing from the 

trade associations, from one representative from each trade association. We were not hearing from the people who have their funds 

in the credit unions or really from the people who run the credit 

unions. 

Mr. SCOTT. Do you think that is a very good way of holding yourself accountable to these stakeholders? Do you think that it could 

be improved if you did have public hearings, where the people who 

are paying the freight would have an opportunity to interact with 

you and you have an opportunity to satisfy any concerns that they 

may have about your budget which they are paying for? 

12 

Ms. MATZ. When you say ‘‘they’’ are paying for, I assume you 

mean the credit unions. And I would take exception to that. Credit 

unions are cooperatives that are owned by their members. They 

can only raise capital through retained earnings. 

Mr. SCOTT. But, ma’am, you just agreed with me that the credit 

unions’ fees provide your budget. 

Ms. MATZ. Yes. But it is not their money. We assess the credit 

unions. But it is the members who own the credit unions. And it 

is the members’ funds. And if we don’t have adequate resources, we 

can’t protect those funds. 

Mr. SCOTT. Okay. Well, the members are the credit unions, and 

the credit unions are the members. 

Ms. MATZ. No. That is not true. 

Mr. SCOTT. And the members come from them. 

Ms. MATZ. I disagree with that. 

Mr. SCOTT. What do you disagree with? 

Ms. MATZ. I don’t believe that the credit unions necessarily represent the members. And if they did, they wouldn’t be asking us 

to cut our budget because I think the members would like us to 

protect their life savings and would like us to have the resources 

that we need to do that adequately. 

Mr. SCOTT. That is why I think it would help you and help with 

the transparency if you did have hearings. The record is clear. I 

don’t see how you could have such a negative attitude toward the 

very people who, through their fees, are paying your salaries, your 

operating expenses. 

Let me go on. I have another question here. Is it true that you 

have a secure room, in quotes, ‘‘a secure room’’ at your headquarters? 

Ms. MATZ. Yes. 

Mr. SCOTT. What is the purpose of this room? 

Ms. MATZ. It is a sensitive compartmentalized information facility, known as an SCIF. And we are required to have it by Executive Order so that we can communicate sensitive information. 

Mr. SCOTT. And how often is this room used? 

Ms. MATZ. There is somebody there every day monitoring it. 

Mr. SCOTT. And how much did it cost to create this room? 

Ms. MATZ. It cost over a million dollars. I don’t know exactly how 

much. 

Mr. SCOTT. And did you do a cost-benefit analysis before to determine what the cost and benefits were? 

Ms. MATZ. We knew what the cost was going in, and we knew 

we were complying with an Executive Order and that we can’t receive or disseminate classified information without it. We can’t do 

our job without it. 

Mr. SCOTT. Without this— 

Ms. MATZ. Correct. In this— 

Mr. SCOTT. Why do you say you can’t do your job without it? 

Ms. MATZ. Because if there is classified information to be transmitted, we wouldn’t be able to either transmit or receive it. We 

would have to go to somebody else’s facility. In other words, before 

we had it, we would have to go to the Treasury Department, for 

instance, in order to be part of the classified discussion, in order 

13 

to receive the information. And so now, just like all of the other 

Federal financial regulators, we have that facility on the premises. 

Mr. SCOTT. Okay. I think, from what I have heard you say, that 

it would not be a bad idea for you to consider—I think it would 

help with the relationship building with your credit unions. They 

play a vital role in what you are doing. And it is very important 

for transparency. So I think from your testimony here, it shows 

that there is a need for you to consider having public hearings for 

those who are paying the freight. 

Chairman NEUGEBAUER. The time of the gentleman has expired. 

I now recognize the gentleman from Florida, Mr. Posey, for 5 minutes. 

I will say to the Members, I am going to try to strictly adhere 

to the 5-minute rule. We are going to have votes here in a little 

bit. And I would like to get as many Members in as possible before 

that. We do plan, if Members intend to continue with the hearing, 

to come back after votes. But we would like to get through as many 

as we can. 

Mr. Posey, you are recognized for 5 minutes. 

Mr. POSEY. Thank you, Mr. Chairman. 

Madam Chair, the NCUA has said that a limited number of credit unions would be downgraded if the risk-based capital proposal 

was in place today. I am interested in what impact this proposal 

would have had if it had been in place at the height of the fiscal 

crisis in 2009. Has the agency prepared or seen any analysis of how 

many credit unions would have been downgraded during the crisis? 

And of those that would have been downgraded under the proposal, 

how are they doing today without the proposal having been in 

place at the time? Do you kind of follow that question? 

Ms. MATZ. I think I do. 

Mr. POSEY. Okay. Did they all go away? Or are most of them 

doing fine today? 

Ms. MATZ. Our analysis is that if we had that risk-based capital 

proposal in effect prior to the crisis, we wouldn’t have lost all of 

the credit unions that we lost during the crisis. I don’t have the 

exact number with me, but I can get it for you. 

Mr. POSEY. Yes. 

Ms. MATZ. Is that what you were asking? 

Mr. POSEY. Yes. I have some credit union data which indicated 

that had the proposal been in place during the financial crisis, it 

is estimated that only 45 credit unions would have been downgraded. And of those, 41 would be well-capitalized today. The point 

is, that is the pain this proposal will cause all credit unions worth 

the gain of regulating a few bad actors that NCUA could have already reined in through the normal exam process? 

Ms. MATZ. Back-testing has shown that had we had that in 

place, it would have caught a large number of those 102 failed 

credit unions, in fact. First of all, we are required by statute to 

have a risk-based capital rule comparable to the other financial 

regulators. And so, this is meeting our statutory responsibility. But 

we have modified the rule. We feel that it is important to have a 

forward-looking indicator. So it was not intended to really catch 

credit unions now. It was intended to get them to start planning 

14 

so that they monitor the risks in their portfolios and have sufficient 

capital to cover those risks going forward. 

Mr. POSEY. Okay. The Risk-Based Capital Study Act was recently introduced in the House to require the NCUA to examine 

certain issues with respect to this proposed rule. Under the legislation, the NCUA would not be able to move forward on the proposal 

until after this study is completed. Given that the second riskbased capital proposal received an even higher number of comments than the first, has there been any discussion at the agency 

to slow down the process here and, perhaps, study the issue further 

before proceeding ahead with the final rulemaking completion? 

Ms. MATZ. Thank you. We studied the issues exhaustively between the first and second proposal, which is why it was almost 

completely rewritten in response to the comments we got from 

Members of Congress and from the credit unions. So, I don’t intend 

to delay it. We are reviewing the comments that we have gotten. 

And the ones that are substantive, and we are responding to, are 

mostly positive. There were a lot of form letters, mostly form letters, and most of them simply stated: Don’t pass another risk-based 

capital rule. We do have a statutory responsibility to go forward. 

Mr. POSEY. My thought was that if it took 12 months last time 

to come up with a new proposal, shouldn’t we kind of be giving it 

the same amount of time and effort to review the current one just 

to make sure we get it right? 

Ms. MATZ. I feel like we have gotten it right. 

Mr. POSEY. Many more comments to respond to and a whole lot 

more input. 

Ms. MATZ. The comments are mostly form letters saying we don’t 

need a risk-based capital rule. So they really weren’t very constructive or prescriptive. But we have studied it. I don’t know what 

more we can study. We have studied it in-depth. And we feel that 

this is a very fair rule that will not immediately impact more than 

about 20 credit unions which can either raise more capital or shift 

some of the risk out of their portfolios. For the rest of the credit 

unions, it actually adds to their capital or net worth. 

Mr. POSEY. How many do you regulate? So we are saying 20 out 

of how many? 

Chairman NEUGEBAUER. I’m sorry, the gentleman’s time has expired. 

Ms. MATZ. 6,100. 

Chairman NEUGEBAUER. I now recognize the gentlewoman from 

New York, Mrs. Maloney, for 5 minutes. 

Mrs. MALONEY. Thank you very much. 

Chair Matz, I speak to my credit unions all the time. And, quite 

frankly, they have never raised transparency of the budget. Is this 

a really big issue with the credit unions, the NCUA? 

Ms. MATZ. I have heard a lot from the trade associations about 

it. But when I go out and talk to the credit unions, up until now 

I really have not heard about it at all. 

Mrs. MALONEY. Okay. Despite the very significant and substantial revisions to your risk-based capital rule, the credit union industry continues to express concerns that some of the risk weights 

assigned to credit unions will unnecessarily require them to hold 

additional capital and will ultimately restrain their ability to lend 

15 

as much as they would like. So my question is, how do the risk 

weights under your revised proposal for credit unions compare to 

similar risk weights for banks? 

Ms. MATZ. Thank you. Many of the risk weights that we have are 

comparable to banks. In fact, about 75 or 80 percent of the assets 

in credit unions would be weighted exactly the same as they are 

for banks. And I think another 15 or so percent would actually be 

weighted less than they are for banks. So we are pretty comparable 

to how the banks are risk-weighted. 

Mrs. MALONEY. Do you think credit unions should be the same 

as banks? 

Ms. MATZ. We have exempted credit unions that are under $100 

million because they are not complex. But for the complex credit 

unions, yes, I do. 

Mrs. MALONEY. Okay. And I have heard a whole disparity of 

opinions on your third-party vendor proposal. The GAO and the 

FSOC support your position for enhanced authority. But the credit 

unions make the argument that it is not necessary and would lead 

to increases in regulatory burden in your budget. Can you tell me, 

what are gaps in your regulatory authority, and whether it would 

increase your budget? 

Ms. MATZ. If there is one thing that keeps me up at night, it is 

the cyber threat, and our lack of vendor authority. We are the only 

financial banking regulator that does not have vendor authority. It 

really ties our hands in being able to make sure that the system 

is secure. So we are requesting the legislative authority because if 

we see a red flag, we need to be able to go in and examine, supervise that third party, and, if there is a problem, to get them to correct it, and to let credit unions know about it. We simply don’t have 

that authority now. 

Mrs. MALONEY. Okay. That is a consideration. 

I am also aware of legislation that is pending that would require 

NCUA to hold budget hearings before your budget has actually 

come out. But I understand that you are a peer leader in transparency. Can you describe the information you make available? 

Ms. MATZ. We have a budget resource page on our website which 

has very extensive information. I don’t know any other financial institutions regulator that provides any budget information on their 

website or at least it might be minimal. But we provide very extensive information on our website. I believe we are more transparent 

than any other Federal financial institutions regulator in terms of 

our budget. 

Mrs. MALONEY. And can you explain how your supplemental capital proposal could work with the revised risk-based capital rule 

when finally implemented? 

Ms. MATZ. NCUA has the authority to permit credit unions to 

raise supplemental capital, but only for the purposes of their riskbased capital ratio. And that is not included in our risk-based capital proposal. So at the time that we finalize it, we intend to put 

out a proposed rule which would permit credit unions to raise supplemental capital for the purposes of their risk-based capital ratio. 

Mrs. MALONEY. And, finally, in your written statement you mentioned your support for H.R. 1188, bipartisan legislation that would 

16 

permit more small business lending by credit unions. Can you describe how that would help credit unions across the country? 

Ms. MATZ. Credit unions now operate under a statutory cap, 

which I feel is very arbitrary. 

Mrs. MALONEY. What is the cap? 

Ms. MATZ. The cap is 1.75 times net worth, required to be wellcapitalized. And so, as a regulator, I would like to see credit unions 

diversify their portfolios. I think business lending is an important 

part of that portfolio. 

Mrs. MALONEY. My time has expired. Thank you. 

Chairman NEUGEBAUER. I thank the gentlewoman. 

I now recognize the gentleman from Missouri, Mr. Luetkemeyer, 

for 5 minutes. 

Mr. LUETKEMEYER. Thank you, Mr. Chairman. 

Madam Chair, last year, the day before this committee scheduled 

a markup on H.R. 4042, which is my legislation to require a stop 

and study of MSAs, you sent a letter asking that, and I quote, ‘‘the 

House Financial Services Committee refrain from considering 

amendments to tomorrow’s markup related to NCUA’s risk-based 

capital rule.’’ 

I have never received a letter from an Executive Branch agency 

asking me not to do my job, which is to legislate. Can you please 

explain? 

Ms. MATZ. I just felt as a regulator, that it was important for the 

safety and soundness of the system. And I was concerned about it. 

Mr. LUETKEMEYER. Let’s figure out first here the responsibilities 

of each branch of government. My understanding is that the responsibility of the Legislative Branch is to propose legislation. And 

in each bill we pass, there is a clause that always says that the 

Executive Branch and the departments that pertain to whatever 

the legislation is about have the ability to implement and promulgate rules that will implement the law. And so I don’t know where 

the Executive Branch has the authority or the reason to tell us 

what to do. 

Ms. MATZ. I wasn’t telling you what to do. I was just— 

Mr. LUETKEMEYER. Madam Chair, you asked that the House refrain from considering amendments. You were telling us not to do 

any amendments to the capital-based rule. 

Ms. MATZ. I was telling you to, yes, as a consideration so that 

I could do my job and protect the safety and soundness of the system. 

Mr. LUETKEMEYER. My point is that the Executive Branch should 

carry out the wishes of the Legislative Branch. 

Ms. MATZ. Absolutely. 

Mr. LUETKEMEYER. And this is the problem with this entire Administration. Right now, the Legislative Branch is being compromised because they believe the Executive Branch can go out 

through Executive Order and through bureaucratic fiat create law. 

That is not the way the Founders designed these three branches, 

coequal branches, by the way, of government. This is not what they 

intended for the Executive Branch to do. And, quite frankly, I hope 

from now on you will refrain from telling us what to do. 

17 

Also, I am kind of curious, you came up with a risk-weighted 

rule. I was wondering if you did any sort of study to evaluate with 

regards to MSAs their performance during the financial crisis? 

Ms. MATZ. I believe that we did, yes. I don’t have the information 

handy. 

Mr. LUETKEMEYER. Okay. One of the things that I am working 

on is with regards to SIFI designations, both for banks and 

nonbanks. NCUA sits on FSOC, is that not correct? 

Ms. MATZ. Correct. 

Mr. LUETKEMEYER. Can you explain to me how you could vote for 

designating four nonbanks, three insurance companies and another 

industry, as SIFIs? 

Ms. MATZ. Yes. 

Mr. LUETKEMEYER. What criteria did you use? 

Ms. MATZ. We used the criteria that was set out in the DoddFrank Act. 

Mr. LUETKEMEYER. What did you use? 

Ms. MATZ. The criteria that were set out based on their size, 

interconnectedness, their leverage. 

Mr. LUETKEMEYER. Okay. How big is the biggest credit union? 

Ms. MATZ. About $65 billion. 

Mr. LUETKEMEYER. Is it a SIFI? 

Ms. MATZ. Not within the financial system, but certainly within 

the credit union system. What I am saying is that it is systemically 

important to our fund in the credit union system. But it would not 

be considered systemically important to the entire financial services system. 

Mr. LUETKEMEYER. Right now, there is a threshold of $50 billion. 

Anybody above that has to comply with the stress tests and all 

sorts of other rules and regulations. Does this credit union comply 

with that? 

Ms. MATZ. Yes. 

Mr. LUETKEMEYER. Okay. Are you considering designated—would 

you support designated as a SIFI then? Is it interconnected 

enough? 

Ms. MATZ. The financial institutions that have prudential regulators are not considered as SIFIs under the FSOC designations. 

Those are for nonbank institutions. 

Mr. LUETKEMEYER. I only have 30 seconds left. I have one more 

question I want to get to before we run out of time, with regard 

to designating these insurance companies as SIFIs. I was in the insurance business for 30 years. I have no idea how you can tell me 

that one insurance company, if it goes down, destroys the entire 

economy. Can you give me an example of how this works? 

Ms. MATZ. We look at mainly their leverage, their interconnectedness. 

Mr. LUETKEMEYER. On FSOC, Mr. Woodall is one of the members, and he represents the insurance industry, and he voted 

against that. 

Ms. MATZ. That is right. 

Mr. LUETKEMEYER. Why would you vote against him, somebody 

who actually knows the industry and represents them? 

Ms. MATZ. I think that is why the Act was written the way it 

was, where it brings diversity, and we bring our individual perspecVerDate Nov 24 2008 16:34 Mar 22, 2016 Jkt 097159 PO 00000 Frm 00025 Fmt 6633 Sfmt 6633 K:\DOCS\97159.TXT TERI
18 

tives. And we get briefed by the staff. We get information from the 

entity. And then we each make up our respective minds. 

Chairman NEUGEBAUER. The gentleman’s time has expired. 

Mr. LUETKEMEYER. So you are going to ignore the one person 

who has best knowledge of the industry. 

Thank you. 

Chairman NEUGEBAUER. I now recognize the gentleman from 

North Carolina, Mr. Pittenger, for 5 minutes. 

Mr. PITTENGER. Thank you, Mr. Chairman. 

Chair Matz, I would like to kind up pick up on that. In 2014, and 

again on July 20, 2015, the former chairman of this committee, 

Barney Frank, an author of the Dodd-Frank bill, stated that he did 

not believe that asset managers should be regulated as SIFIs. 

Would you state your perspective then on why you believe that 

they should be? 

Ms. MATZ. Asset managers? We are now looking at the asset 

manager activities rather than designating specific asset managers— 

Mr. PITTENGER. Do you believe they are systemically risky? 

Ms. Matz. Pardon me? 

Mr. PITTENGER. Do you believe that asset managers are systemically risky? And if so, how? 

Ms. MATZ. We are looking at the activities that they perform. 

And there might be activities that are systematically risky. But we 

have not finished that analysis at this point. 

Mr. PITTENGER. Can you name any specific asset managers that 

you believe are of concern to you as chairman of NCUA? 

Ms. MATZ. We are looking at all the asset managers. 

Mr. PITTENGER. But you can’t? 

Ms. MATZ. I would rather not. We are looking at all the asset 

managers. We are not, I am one member— 

Mr. PITTENGER. Systemic risk— 

Ms. MATZ. Pardon? 

Mr. PITTENGER. —to the financial system in this country. Can 

you name any? 

Ms. MATZ. We are not designating asset managers. We are looking at the activities of asset managers. And until I am briefed on 

it, I don’t have an opinion. 

Mr. PITTENGER. We received testimony, this committee did, that the SIFI designation for asset managers would result in $100,000 

in cost to each investor. Are you aware of that? 

Ms. MATZ. No. But we are not designating asset managers now. 

We are looking at the activities of the asset managers. And that 

is a long way off. We are only beginning to have those studies done. 

Mr. PITTENGER. But that is where you are probing. That is what 

is on your radar screen. Do you believe that any action taken by 

FSOC to designate asset managers and their activities systemically 

important would be consistent with the congressional intent of 

Dodd-Frank? 

Ms. MATZ. I think if we finally got to the designation, we 

wouldn’t make that designation unless we believed that. And I certainly wouldn’t support it unless I believed that. 

Mr. PITTENGER. Chair Matz, what do you understand is the business of an asset manager? Would you explain to me their business? 

19 

Ms. MATZ. It is managing the assets of individuals. 

Mr. PITTENGER. All right. They have the obligation to their clients to invest, is that right? 

Ms. MATZ. Correct. 

Mr. PITTENGER. And these are owned by the clients, they are 

third-party custodians? 

Ms. MATZ. Yes. 

Mr. PITTENGER. They have contractual obligations. They are advisers, and they are agents, aren’t they? 

Ms. MATZ. They are— 

Mr. PITTENGER. They are advisors, and they are agents on behalf 

of their clients. Is that correct? 

Ms. MATZ. Yes. 

Mr. PITTENGER. I think it is important to note that these managers don’t also employ the balance sheet leverage. Is that correct? 

Ms. MATZ. To the best of my knowledge, it is. 

Mr. PITTENGER. Thank you. I yield back. 

Chairman NEUGEBAUER. I thank the gentleman. 

And now the gentleman from New Hampshire, Mr. Guinta, is 

recognized for 5 minutes. 

Mr. GUINTA. Thank you very much, Mr. Chairman. 

Chair Matz, as I stated in my opening statement, financial institutions across the Nation are merging or consolidating at what I 

would consider a pretty alarming rate. And that concerns me because, to me, that represents less access to credit for a whole host 

of individuals for a whole host of needs that families, average families require. There were 12,891 credit unions back in 1990. And 

today, I believe we have about 6,200, according to the first quarter 

data that you put out. So would you talk to me a little bit about, 

over the last 25 years, why there were so many consolidations and 

if you think—what, if any, portions of Dodd-Frank would have 

something to do with that? Or if you don’t think Dodd-Frank had 

anything to do with that, I would like to know that as well. 

Ms. MATZ. We provided some slides. Just in reference to that last 

question, slide 1 shows the decline in federally-insured credit 

unions since 1990. And you can see the trajectory started in the 

early 1990s and has just continued after Dodd-Frank. It did not 

start with Dodd-Frank. So, personally, I don’t think Dodd-Frank 

was related to credit union failures. But it is a sad story. And it 

is one that has been very frustrating to me because we lose about 

250 credit unions a year. And that has been consistent for the past 

20 years. It is a result, I think, of not being able to achieve economies of scale, of not being competitive in the marketplace. Frequently a manager who has been running the credit union for 25 

years decides to retire, and there is no succession plan. And the 

Board realizes that their members could probably be better served 

by merging. So, the vast majority are voluntary mergers. 

We have an Office of Small Credit Union Initiatives, which I 

helped to create when I was on the Board last time, which works 

with small credit unions and provides free consulting services for 

them. And they have helped about 600 credit unions grow from the 

definition of small to large. So, in that number there, that includes 

some credit unions, I believe—I might be wrong—but there are 

20 

about 600 credit unions that aren’t considered small anymore because now they are over the limit. 

But it is a source of frustration because small credit unions frequently are located in areas where there are no other insured financial service institutions. And so we really try to work hard and 

do a lot of hand-holding and we have exempted small credit unions 

from a number of our regs so that we can—where we can—mitigate 

the regulatory burden on them. 

Mr. GUINTA. So because of the trajectory before Dodd-Frank, you 

are saying, Dodd-Frank, because of the losses post and pre are essentially similar or identical, you are saying Dodd-Frank has nothing to do with it? 

Ms. MATZ. I haven’t seen any evidence of it. 

Mr. GUINTA. Okay. 

When I talk to bankers who are running credit unions in New 

Hampshire, they talk to me about the regulatory burden, the compliance requirements. Anywhere from 10 to 30 percent of their time 

is now focused on regulatory. So I couldn’t speak to pre-DoddFrank. But I can tell you that post-Dodd-Frank, that is the single 

largest concern expressed to me by credit union executives. If that 

is what they are telling me, and they are on the ground, it is not 

consistent with your opinion relative to Dodd-Frank. 

Ms. MATZ. I just haven’t seen evidence of it. I know that there 

is a burden on small credit unions. There is a burden on all credit 

unions. Small credit unions have a very difficult time dealing with 

the regulatory burden, but it is the regulatory burden in general. 

It is not necessarily NCUA. 

The one I hear most about is BSA. They have a great deal of difficulty complying with BSA. So if I had to pick one, that would be 

the one that I hear most about. 

But I just can’t answer that. I just don’t know, but it is very frustrating to me that we are losing so many small credit unions. And 

we work hard to meet with them and to see if there are ways that 

we can change our policies so that we can help them out. 

Mr. GUINTA. In New Hampshire, we have about 1.3 million people, so we are very community-based. So I understand the concerns 

or the items that you ticked off, economies of scale. I disagree with 

that, because in New Hampshire we tend to go look to our local 

community bank or credit union for help. But I would invite you 

to come to New Hampshire with me, and meet some of these credit 

union execs because I would love to— 

Ms. MATZ. I would welcome the opportunity to do that. 

Chairman NEUGEBAUER. The gentleman’s time has expired. 

Ms. MATZ. I would like to do that. 

Mr. GUINTA. Thank you, Mr. Chairman. 

Chairman NEUGEBAUER. I will now go to the gentleman from 

Colorado, Mr. Tipton, for 5 minutes. 

Mr. TIPTON. Thank you, Mr. Chairman. 

And thank you, Chair Matz, for being here. In NCUA’s 2014 annual report, it is noted that 17 of its 15 credit union failures occurred because of instances of fraud and ended up costing the 

Share Insurance Fund $36.5 million as well as, in October 2014, 

at the NCUA Board meeting, your CFO Mary Woodson stated that 

94 percent of the losses to the Share Insurance Fund were related 

21 

to fraud. Are these fraudulent-related losses to the Share Insurance Fund, are those of concern to you? 

Ms. MATZ. They are a concern on the one hand because it is 

fraud. But in terms of the impact on the Share Insurance Fund, it 

is a minimal impact. But, yes, unfortunately, mostly the fraud occurs in small credit unions because they tend not to have internal 

controls or have very few internal controls. So— 

Mr. TIPTON. And that is part of your oversight— 

Ms. MATZ. It is. 

Mr. TIPTON. It is. And perhaps a little follow-up on my colleague 

Mr. Guinta’s comments with regard to the regulatory process. You 

discussed several NCUA priorities and initiatives, including a proposed rule on risk-based capital for credit unions, vendor examination authority, and stress testing for credit unions. If the NCUA is 

unable to prevent $36.5 million in losses to the Share Insurance 

Fund this last year, is it really going to be capable of handling expanded regulatory authority? 

Ms. MATZ. I believe we are, yes. The fraud— 

Mr. TIPTON. How many more people will you have to add? 

Ms. MATZ. None. We are not planning to add any more people. 

We are reallocating resources, but we don’t intend to add any. We 

intend to train people differently, but we are not planning to add 

any more. 

Mr. TIPTON. Do you own any responsibility on that? because you 

said that part of this failure was regulatory in nature. What are 

you doing to address that? 

Ms. MATZ. The fraud failure? 

Mr. TIPTON. Yes. You didn’t identify it. 

Ms. MATZ. We have given our examiners more training on dealing with fraud, and we have provided certifications for a number 

of examiners, fraud certification. 

Mr. TIPTON. Is all of that training completed now? 

Ms. MATZ. It is ongoing. 

Mr. TIPTON. It is going to be ongoing. Chair Matz, in 2014 the 

NCUA issued a final rule that was going to require the submission 

of capital planning proposals and stress testing for credit unions 

with assets greater that be $10 billion. The rule applies to five 

credit unions that already conduct their own stress testing. 

What was inadequate about the internal stress test that spurred 

the NCUA into creating a stress-testing rule that is not required 

by Dodd-Frank? 

Ms. MATZ. We couldn’t validate the individual stress testing that 

they are doing, and so we weren’t. They are our largest credit 

unions and they certainly pose, each individually and certainly as 

a group, a large risk to the Share Insurance Fund. We needed to 

make sure that they are holding sufficient capital, and so we are 

doing the stress tests now. But after 3 years, when we have a 

record and know how they operate, they can apply to us to then 

just do their own stress testing. 

Mr. TIPTON. You just used the words, ‘‘We couldn’t verify the veracity of their stress tests. We couldn’t monitor it.’’ Do you do the 

stress testing through the NCUA? 

Ms. MATZ. No. We contract that work out. 

22 

Mr. TIPTON. So it is not you at all. You don’t have the expertise 

to be able to do this? 

Ms. MATZ. No, that is correct. That is correct. 

Mr. TIPTON. That is correct. So what do you pay for that? 

Ms. MATZ. For the contract? It is $4 million. 

Mr. TIPTON. $4 million, and that is in your budget, I assume. 

One other question I would like to be able to address is the expansive powers that we are seeing out of Dodd-Frank, FSB, FSOC, 

organizations that you are affiliated with, obviously, in terms of the 

broadening regulatory net. We see General Electric now trying to 

be able to dispose of assets in order to not be classified as a SIFI. 

That is going forward. 

Chair Matz, as a member of the FSOC, are you willing to be able 

to give some kind of a roadmap so that these businesses are not 

just shooting in the dark as to whether or not they are going to 

be designated? Because from what I am hearing from you and from 

other representatives of the Administration, once we put one marker down, we are then going to go after shadow banking, which will 

require more regulation, which will require more Administration. 

So are you willing to give a roadmap so the businesses know what 

to be able to do? 

Ms. MATZ. I think that is very important, yes. 

Chairman NEUGEBAUER. The time of the gentleman has expired. 

Mr. TIPTON. Thank you. 

Chairman NEUGEBAUER. The gentleman from Texas, Mr. Williams, is recognized for 5 minutes. 

Mr. WILLIAMS. Thank you, Mr. Chairman. 

And thank you, Chair Matz, for being here today. Chair Matz, 

we have become aware of an NCUA policy of awarding on-the-spot 

bonuses and cash awards to employees, cash bonuses of up to 

$2,500 that can be paid to employees twice a year, and they get 

these for services going above and beyond the call of duty. We have 

heard that the NCUA’s HR department bragged, actually bragged 

about paying over $1.2 million in these bonuses in 2014, frankly, 

for just doing your job. 

Now, from what I can see, there appears to be little to no control 

over these payments. Any manager can give a cash award to anyone with as little as a one-paragraph justification. We are told that 

this program has become commonplace within the agency. So my 

first question is, who approves these bonuses, and what policies 

and controls are in place to manage the distribution of these cash 

rewards? 

Ms. MATZ. For the smaller ones, the $250 on-the-spot awards, it 

is the first-level supervisor. They can only give a certain budgeted 

amount each year. So, that is somewhat prescribed. They can’t just 

keep giving them. They only have a certain number that they can 

give. The larger it is, the more signoffs they need on it. 

Mr. WILLIAMS. Have you personally awarded such bonuses to 

your staff? 

Ms. MATZ. Yes. 

Mr. WILLIAMS. To whom and in what amounts? 

Ms. MATZ. That is a good question. I believe I— 

Mr. WILLIAMS. It is only money. 

23 

Ms. MATZ. I believe I awarded $2,500 to my chief of staff, who 

had not received a pay raise in 5 years. 

Mr. WILLIAMS. A lot like the private sector. 

Ms. MATZ. I’m sorry? 

Mr. WILLIAMS. Much like the private sector that hadn’t received 

any pay raises. 

Ms. MATZ. And I provided a cash award to my administrative as- sistant, and I believe that was either $1,000 or $1,500. 

Mr. WILLIAMS. When was the last time you awarded one of these 

bonuses? 

Ms. MATZ. It was probably a year ago. 

Mr. WILLIAMS. Okay. Now, how about in 2015? How many onthe-spot bonuses or cash awards has NCUA given out? 

Ms. MATZ. I don’t know, but it is on our internal website. We 

post it so our employees are aware of who is getting awards. 

Mr. WILLIAMS. But you are not sure how many went out? 

Ms. MATZ. I don’t know. As I said, we have a total amount, a prescribed amount, beyond which the agency can’t go. 

Mr. WILLIAMS. Okay, now correct me if I am wrong, but this is 

money that the credit unions give to you through fees. 

Ms. MATZ. I’m sorry. 

Mr. WILLIAMS. This is money that the credit union gives to you 

in fees? 

Ms. MATZ. Correct. 

Mr. WILLIAMS. Okay, and for the purpose of supervision to ensure safety and soundness? 

Ms. MATZ. Correct. 

Mr. WILLIAMS. But I bet some of these credit unions would actually love to be lending out the money to their customers rather 

than having some bureaucrat in Washington get a bonus for just 

doing her job. So what would you say to the credit unions that I 

have back in my district? I have quite a few. What would you say 

to the credit union community about these bonuses? 

Ms. MATZ. I would say that they are bonuses to people who work 

very hard to protect the safety and soundness of the deposits that 

members have in their credit union, and that when people go above 

and beyond, they deserve to be recognized so that we can retain 

our talented employees. 

Mr. WILLIAMS. And you think the credit unions would agree with 

you as opposed to having that money to loan out to small business 

owners like me? 

Ms. MATZ. I have no idea. 

Mr. WILLIAMS. It might be a question you want to ask them the 

next time you meet with them. 

Ms. MATZ. I am sure they give bonuses to their employees as 

well, using their members’ money. 

Mr. WILLIAMS. Finally, since this hearing is focused on transparency, would you provide this committee with a complete list of 

employees who have received these bonuses in 2014 and 2015, so 

that we can shed some light on the policy and learn more how it 

works? 

Ms. MATZ. Sure. 

Mr. WILLIAMS. Would you do that for us? 

Ms. MATZ. Absolutely. 

24 

Mr. WILLIAMS. I would appreciate it. 

Mr. Chairman, I yield back. 

Chairman NEUGEBAUER. I thank the gentleman. 

And now the gentleman from Kentucky, Mr. Barr, is recognized 

for 5 minutes. 

Mr. BARR. Thank you, Mr. Chairman. 

Chair Matz, I want to continue along the lines of questioning 

from Mr. Williams over here regarding not just bonuses but some 

of the, what I would consider irregularities, in the NCUA’s 2015 

budget. 

In the Office of Consumer Protection, pay and benefits for 2015 

are $7.3 million, up 9 percent, I believe, or equal to $600,000, yet 

the office has only added 2 people. What accounts for this large 

budget increase? 

Ms. MATZ. I would have to get back to you on that, sir. 

Mr. BARR. Okay, if you could, that would be great. 

And given the fact that the Consumer Financial Protection Bureau has now been with us for 4-plus years, how is this Office not 

duplicative of the mission of the Bureau? 

Ms. MATZ. It deals with the fact that the CFPB examines financial institutions over $10 billion. Our Office of Consumer Protection 

does fair lending exams on credit unions of all other sizes, which 

we are required to do by law. 

Mr. BARR. But, obviously, the Bureau has—the Bureau’s policies 

impact credit unions that have less assets than $10 billion. Do you 

agree? 

Ms. MATZ. They impact them, sure. 

Mr. BARR. Sure. And so my question is, why is an Office of Consumer Protection necessary within your agency? 

Ms. MATZ. As I said, they do exams, fair lending exams, which 

the CFPB doesn’t do. They also respond to consumer complaints 

about their credit unions because CFPB only handles complaints on 

institutions above $10 billion. 

Mr. BARR. How about the Office of Small Credit Union Initiatives? Your annual report says that half of all small credit unions 

shrank in 2014 with an average return on assets of just 4 basis 

points. Obviously, these institutions are struggling. Yet, your budget cuts the programming budget to offset a 5-percent pay increase 

for office staff, the overall budget is unchanged, so this appears to 

be a pure shift from programming to employee pay. Am I misinterpreting that, or is that accurate? 

Ms. MATZ. I don’t know. I would have to go back and look at it. 

Mr. BARR. Okay. I think the credit unions would appreciate you 

looking at that because it may not be the right message to send, 

particularly to struggling credit unions. 

Ms. MATZ. And I would be happy to come up and discuss this 

with you once I get briefed on it and understand it myself. 

Mr. BARR. Thank you. One other question on this, on the 2015 

budget, for the Office of Human Resources, why does the NCUA 

need 44 human resources staff to service fewer than 1,300 employees? By my calculation, that HR-to-staff ratio is 1 to 30, which is 

3 times higher than the average for a large company. So why such 

a robust HR division? 

25 

Ms. MATZ. We have 9 percent turnover, so they are constantly 

putting out vacancy announcements, arranging interviews, doing 

outreach, handling all of our benefits. I can’t— 

Mr. BARR. And yet. 

Ms. MATZ. I can’t defend the exact number, but I am just telling 

you what they do. 

Mr. BARR. Okay. No, I hear that, and yet also the HR office is spending $3 million on contracted services. So you have a very 

large staff plus you are contracting out. 

Ms. MATZ. They also handle all of the training for our examiners, 

so that is part of their budget. And the contracting also includes 

the hotels that they use for the training. 

Mr. BARR. Okay, let me shift really quickly to, again, this idea 

of the conflicting missions of the NCUA and the CFPB, and I will 

just take an example on payday lending. On page 24 of NCUA’s annual report, that report mentions NCUA’s effective payday alternative loans rule, under which Federal credit unions may charge 

up to 28 percent on short-term loans meeting certain conditions. 

The Bureau has proposed its own payday proposals that are widely 

expected to prohibit credit unions to continue to offer the product 

that your rules specifically permit. Can you address this apparent 

contradiction? 

Ms. MATZ. I have, and the parameters of our rule are exempted 

from the CFPB rule. They didn’t exempt our rules explicitly, but 

they wrote it so that our— 

Mr. BARR. I understand the way it is written, and I understand—but as a matter of policy, okay, this is the policy of the government, on the one hand. One agency, the Bureau, accuses these 

providers of short-term credit as predatory on the one hand, and 

yet, you are offering the same products? 

Ms. MATZ. No. 

Mr. BARR. —or permitting the same product, rather? 

Ms. MATZ. No. Our product is an alternative because it can only 

be a maximum of— 

Mr. BARR. I don’t believe it is necessary—I am not saying it is 

predatory. I am just saying there is a conflict in how the Federal 

Government is treating these products. 

Ms. MATZ. They are looking at the predatory loans, which are 

maybe 300 percent, and the credit union loans have a maximum 

APR of 28 percent. So we provide guidance so that credit unions 

can make those loans in a way that competes with the more expensive loans, but is much more reasonable for their members. 

Chairman NEUGEBAUER. The time of the gentleman has expired. 

Mr. BARR. I thank the chairman, and I yield back. 

Chairman NEUGEBAUER. I ask unanimous consent that the gentleman from California, Mr. Royce, a member of the full Financial 

Services Committee, be allowed to join the panel and ask questions. 

Without objection, Mr. Royce is recognized for 5 minutes. 

Mr. ROYCE. Thank you, Mr. Chairman. 

And thank you very much, Chair Matz, for being with us today. 

It is good to see you. I want to thank the NCUA for its recent efforts in working to provide regulatory relief to credit unions that 

are sound, and safe, and stable. And I think doing so will be beneficial not only to the credit union members, but also to the AmerVerDate Nov 24 2008 16:34 Mar 22, 2016 Jkt 097159 PO 00000 Frm 00033 Fmt 6633 Sfmt 6633 K:\DOCS\97159.TXT TERI
26 

ican economy. I also appreciate your testimony today in support of 

legislation that Mr. Meeks and I have crafted to provide relief to 

credit unions from the member business lending cap. As you expressed, particularly for smaller credit unions, the current statutory cap makes it very difficult or impossible for credit unions to 

successfully support the small business community. 

While your testimony specifically cites your support for this bill, 

H.R. 1188, the Credit Union Small Business Cap Jobs Creation 

Act, I also want to get your thoughts on H.R. 1422, the Credit 

Union Residential Loan Parity Act. As you know, this bipartisan 

bill would correct the disparity between banks and credit unions in 

the treatment of loans made to finance the purchase of one-to-fourunit non-owner-occupied residential dwellings. I see this as a simple straightforward fix, especially when you consider the potential 

positive impact in helping finance investment in multi-family and 

affordable housing. 

So I was going to ask you, Chair Matz, in this legislation, would 

the NCUA support this, and do you see a difference between oneto-four-unit loans and commercial business loans? 

Ms. MATZ. Thank you, yes. And thank you also for your sponsoring the IOLTA Parity bill. Yes, we certainly support that legislation, and in fact, in the risk-based capital rule, we treat the one 

to four residential units as consumer loans rather than business 

loans. But that is as far as we can go because of the statute. So, 

we would welcome that relief. 

Mr. ROYCE. I appreciate your support for that. I also encourage 

other members of the committee to join me in supporting this bill 

because it would unlock about $11 billion in credit union lending 

for small business. That is important. 

On another front, as you indicated in your testimony, improving 

the field of membership rule is a priority for the NCUA. You have 

even set up a separate working group to address regulatory relief 

needs on this front. I know the NCUA has a proposed rule addressing proposed streamlined field of membership procedures and is 

working to address issues related to community charters and occupation charters. And my question is, while much of this work could 

be left to the NCUA alone, is there anything Congress should be 

doing to address the field of membership issues in the statute? 

Ms. MATZ. Thank you for asking that. Yes, there are several 

things that can be done, but probably the most impact would occur 

if community charters would be allowed to take on underserved 

areas. That would help keep the Federal charter competitive and 

would provide relief to a number of community charters, which 

really would like to take on underserved areas, but can’t do it. And 

it really makes no sense. I can’t figure out any reason for it. And 

we hate to say no, but we have no choice. 

Mr. ROYCE. Thank you, Chair Matz, very much, for your testimony here today. 

And, Mr. Chairman, I will yield back the balance of my time. 

Chairman NEUGEBAUER. I thank the gentleman, and now the 

gentleman from Pennsylvania, Mr. Fitzpatrick, is recognized for 5 

minutes. 

Mr. FITZPATRICK. Thank you, Mr. Chairman. 

I would like to yield my time to Mr. Mulvaney of South Carolina. 

27 

Mr. MULVANEY. I thank the gentleman. Chair Matz, thank you 

for the second round of questions, and the opportunity to follow up 

on a couple of things you said earlier. You may have seen many 

of us on the dais react in a stunned fashion when you said something that I can’t actually believe that you said. You said you don’t 

believe that the credit unions represent their members. 

Ms. MATZ. Yes. 

Mr. MULVANEY. You are nodding your head ‘‘yes’’ as if that was 

actually what you said. So who do the credit unions represent? 

Ms. MATZ. The credit unions in asking for budget hearings and 

telling us that we need to cut our budget and cut our exam hours 

are not representing the best interest of their members. 

Mr. MULVANEY. I got you. When they ask to cut the budget, 

whose money are they trying to save? It is their members’, isn’t it? 

Ms. MATZ. Yes, it is. 

Mr. MULVANEY. Isn’t that exactly what you would expect them 

to do, try and protect their members’ money? 

Ms. MATZ. No, I would expect them to want to have— 

Mr. MULVANEY. You wouldn’t expect them to protect their members’ money? 

Ms. MATZ. Not in that way. That is not protecting the members’ 

money, sir. 

Mr. MULVANEY. Okay, so tell me again who you think the credit 

unions represent? If they don’t represent their members, who do 

they represent? 

Ms. MATZ. Credit unions by and large haven’t been asking for 

this. It is the trade associations. 

Mr. MULVANEY. I didn’t ask you that, although it is a really good 

answer to a question I didn’t ask. So I will ask it again. If the credit unions don’t represent their members, who do they represent? 

Ms. MATZ. I can’t answer that. You would have to ask them. 

Mr. MULVANEY. You don’t have any opinions about it? They represent themselves? Are they preying on their own members? Have 

you talked to the CFPB about this? 

Ms. MATZ. Credit unions—when they ask us to cut our exam 

hours—are not representing the best interest of their members. 

Mr. MULVANEY. I am a credit union member. Are you a credit 

union member? 

Ms. MATZ. I am. 

Mr. MULVANEY. I am a credit union member. I think they are 

representing me when they ask you to do that. In fact, I happen 

to believe that my credit union represents me fairly well. And as 

a member of that credit union, I like the fact that they are trying 

to guard my money and be fairly conservative with it. 

Ms. MATZ. How are they guarding your money? 

Mr. MULVANEY. You have a budget that has gone up much higher than the rate of inflation. You have a staff that is going up higher than the other regulatory bodies, but let’s continue this line of 

reasoning. 

You said, when I asked you about why you didn’t like my bill, 

that you didn’t think that input from the credit unions into your 

budget process, more input, would be helpful. But you also said in 

response to a question to another Member earlier today that you 

28 

really thought that input from your own employees was helpful in 

that budget process. 

So what I hear, as a member of a credit union, is that you don’t 

think the input from the people who pay for you is helpful, but you 

do think that the input from the people that you pay is helpful. So 

help me reconcile what an ordinary human being would describe as 

self-serving crazy talk. 

Ms. MATZ. I go out all the time and speak to credit union officials 

and board members. I have been doing this for 6 years in this term 

and 4 years in the last term. And I can tell you, the NCUA budget 

is not something that comes up. They talk about our regulations. 

Mr. MULVANEY. It comes up with me. 

Ms. MATZ. But it doesn’t come up with me. 

Mr. MULVANEY. I represent one of the most heavily credit union 

districts in the country. It comes up with me all the time. So you 

are saying they never raised with you concerns about your budget? 

This is something that a trade association has drummed up in 

order to raise dues or something like that? 

Ms. MATZ. That is what I am saying. 

Mr. MULVANEY. So you think that the credit unions are happy 

with your budget? 

Ms. MATZ. I don’t think the credit unions really care about— 

Mr. MULVANEY. Now, wait a second. Let’s go back and say that. 

If it is not an issue for them, then what is the harm in going 

through the process that is laid out in my bill? What is the harm 

of having meetings with them, of having them have the opportunity 

to go over the line-by-line budget? If they are happy with your 

budget, and it is just an issue that is being ginned up by a trade 

association, what is wrong with passing my bill? 

Ms. MATZ. We are an independent regulator, and while it might 

have a good intention, I don’t think it is good government to have 

the people who are regulated trying to participate in the budgetmaking process of the regulator, the regulator who determines how 

many exam hours it needs and where those hours are going. 

Mr. MULVANEY. Why not? 

Ms. MATZ. Because I think it is influencing, negatively influencing. When I was on the Board last time— 

Mr. MULVANEY. Would you rather we just put you on a budget 

here? Would that solve a lot of problems, just not make the credit 

unions pay for you here, but have you be an appropriated regulator? Would you like that more? 

Ms. MATZ. I am fine with the way it is. 

Mr. MULVANEY. Well, you are. But evidently the people that you 

regulate aren’t. So I am asking you, as opposed to having to answer 

to the credit unions because you don’t think it is right that they 

have input—that is what you just said. You said you don’t think 

it is right to have input in the budget if you are the one that is 

regulating them. That is fine. You don’t regulate us. You can come 

to us and ask for money. Would you rather have Congress looking 

over your shoulder than the credit unions? 

Ms. MATZ. An independent regulator is not answerable to the entities it regulates. 

Mr. MULVANEY. Or to anybody, evidently. You are not answerable to us. It took me 18 months to get a copy of your budget. So 

29 

I will ask you one last time over the last 8 seconds: Would you 

rather leave it the way that it is, or would you rather come into 

the appropriations process and have Congress oversee you? 

Ms. MATZ. I am fine the way it is. 

Mr. MULVANEY. I figured you probably would be. Thank you very 

much. 

And thank you, Mr. Chairman. 

Chairman NEUGEBAUER. I thank the gentleman. I would like to 

thank Chair Matz for appearing before the panel today. 

And, without objection, I would like to submit the following 

statements for the record: the Independent Community Bankers of 

America; the American Bankers Association; the National Association of Federal Credit Unions; the Credit Union National Association; the National Association of State Credit Union Supervisors; 

and the Joint State Banking Trade letter. 

The Chair notes that some Members may have additional questions for this witness, which they may wish to submit in writing. 

Without objection, the hearing record will remain open for 5 legislative days for Members to submit written questions to this witness 

and to place her responses in the record. Also, without objection, 

Members will have 5 legislative days to submit extraneous materials to the Chair for inclusion in the record. 

I would also like to recognize some folks who are working for the 

people in the 19th District. We have some interns who are here at 

the hearing today, and we are glad to have them and glad to have 

them up for this summer. 

Without objection, this hearing is adjourned. 

[Whereupon, at 3:50 p.m., the hearing was adjourned.] 

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A P P E N D I X 

July 23, 2015 

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