[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]





                         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




[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]














                         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
                           
                           
                           
                           
         [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]                  
                           
                           
                                  ______

                         U.S. GOVERNMENT PUBLISHING OFFICE 

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                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                    JEB HENSARLING, Texas, Chairman

PATRICK T. McHENRY, North Carolina,  MAXINE WATERS, California, Ranking 
    Vice Chairman                        Member
PETER T. KING, New York              CAROLYN B. MALONEY, New York
EDWARD R. ROYCE, California          NYDIA M. VELAZQUEZ, New York
FRANK D. LUCAS, Oklahoma             BRAD SHERMAN, California
SCOTT GARRETT, New Jersey            GREGORY W. MEEKS, New York
RANDY NEUGEBAUER, Texas              MICHAEL E. CAPUANO, Massachusetts
STEVAN PEARCE, New Mexico            RUBEN HINOJOSA, Texas
BILL POSEY, Florida                  WM. LACY CLAY, Missouri
MICHAEL G. FITZPATRICK,              STEPHEN F. LYNCH, Massachusetts
    Pennsylvania                     DAVID SCOTT, Georgia
LYNN A. WESTMORELAND, Georgia        AL GREEN, Texas
BLAINE LUETKEMEYER, Missouri         EMANUEL CLEAVER, Missouri
BILL HUIZENGA, Michigan              GWEN MOORE, Wisconsin
SEAN P. DUFFY, Wisconsin             KEITH ELLISON, Minnesota
ROBERT HURT, Virginia                ED PERLMUTTER, Colorado
STEVE STIVERS, Ohio                  JAMES A. HIMES, Connecticut
STEPHEN LEE FINCHER, Tennessee       JOHN C. CARNEY, Jr., Delaware
MARLIN A. STUTZMAN, Indiana          TERRI A. SEWELL, Alabama
MICK MULVANEY, South Carolina        BILL FOSTER, Illinois
RANDY HULTGREN, Illinois             DANIEL T. KILDEE, Michigan
DENNIS A. ROSS, Florida              PATRICK MURPHY, Florida
ROBERT PITTENGER, North Carolina     JOHN K. DELANEY, Maryland
ANN WAGNER, Missouri                 KYRSTEN SINEMA, Arizona
ANDY BARR, Kentucky                  JOYCE BEATTY, Ohio
KEITH J. ROTHFUS, Pennsylvania       DENNY HECK, Washington
LUKE MESSER, Indiana                 JUAN VARGAS, California
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

                     Shannon McGahn, Staff Director
                    James H. Clinger, Chief Counsel
       Subcommittee on Financial Institutions and Consumer Credit

                   RANDY NEUGEBAUER, Texas, Chairman

STEVAN PEARCE, New Mexico, Vice      WM. LACY CLAY, Missouri, Ranking 
    Chairman                             Member
FRANK D. LUCAS, Oklahoma             GREGORY W. MEEKS, New York
BILL POSEY, Florida                  RUBEN HINOJOSA, Texas
MICHAEL G. FITZPATRICK,              DAVID SCOTT, Georgia
    Pennsylvania                     CAROLYN B. MALONEY, New York
LYNN A. WESTMORELAND, Georgia        NYDIA M. VELAZQUEZ, New York
BLAINE LUETKEMEYER, Missouri         BRAD SHERMAN, California
MARLIN A. STUTZMAN, Indiana          STEPHEN F. LYNCH, Massachusetts
MICK MULVANEY, South Carolina        MICHAEL E. CAPUANO, Massachusetts
ROBERT PITTENGER, North Carolina     JOHN K. DELANEY, Maryland
ANDY BARR, Kentucky                  DENNY HECK, Washington
KEITH J. ROTHFUS, Pennsylvania       KYRSTEN SINEMA, Arizona
FRANK GUINTA, New Hampshire          JUAN VARGAS, California
SCOTT TIPTON, Colorado
ROGER WILLIAMS, Texas
MIA LOVE, Utah
TOM EMMER, Minnesota




























                            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
 
                         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 
relationship 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 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.
    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.
    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 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.
    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 
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.
    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 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?
    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 line-by-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?
    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 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 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 risk-based 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 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 
risk-based 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 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 
well-capitalized. 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.
    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 
Dodd-Frank 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 
perspectives. 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?
    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 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-Dodd-Frank. 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 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.
    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.
    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 
assistant, 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 on-
the-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.
    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?
    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 American 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-four-unit 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 one-to-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.
    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 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 budget-making 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 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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                             July 23, 2015
                             
                             
                             
                             
                             
                             
                             
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