During his June 27 confirmation hearing, NCUA Board nominee Richard Metsger dodged what might have been his most controversial question. Is raising the member business lending cap a good idea?
The former Oregon state senator responded to the question from Rhode Island Democratic Sen. Jack Reed by saying, “I think it’s a good idea to recognize the purview of Congress to make such decisions.”
Metsger was nominated to fill the NCUA Board position vacated by Gigi Hyland, who exited the board last October after serving beyond her term’s expiration. Following the confirmation hearing, Metsger must receive a majority vote by the full Senate before he is sworn in.
Senate Banking Committee Chairman Tim Johnson (D-S.D.) asked Metsger what additional steps the NCUA should take to implement lessons learned from the financial crisis.
Metsger said that one of the key lessons is that regulators should be watchful in good times and bad. Additionally, he said the NCUA’s regulations need to be modernized to look for threats in the modern marketplace. Interest rate risk topped his list of threats.
“Credit unions are very involved in the mortgage industry,” he said. “We all know what happens in low rate environments, and you don’t know when, where or how much rates will rise. Look at the last 30 days of mortgage rates or the 10-year Treasury bill.”
Metsger added that if confirmed, he would make sure credit unions are prepared for rising rates.
He also discussed credit union access to emergency liquidity.
“Because of the crisis that hit, in the last five years, the Central Liquidity Facility is not subscribed to now by a lot of credit unions,” he said. “All credit unions must have a plan to access emergency liquidity.”
Metsger further said the NCUA must be as contemporary as possible to meet the risks cybersecurity poses to credit unions, which he described as a systemic risk.
Sen. Elizabeth Warren (D-Mass.), who in her first six months in the Senate has already developed a reputation for asking difficult questions during committee hearings, only asked Metsger if he still owned his ’57 Chevy. In his opening statements, Metsger said he bought the car with his first loan, which he obtained at age 19 from Portland Teachers Credit Union, where he served as a board member 20 year later.
He did not still own it, Metsger replied, but had he kept it, it would have been a good long-term financial decision because it would be worth so much more today.
Those three questions were the only ones directed at Metsger during the hearing, which featured four other nominees.
Rep. Mel Watt (D-N.C.), nominated to head the Federal Housing Finance Agency, received most of the questions from committee members. In his opening statement, Watt stressed he would cooperate with Congress to implement whatever housing finance reform is legislated, including more private capital, the winding down of Fannie Mae and Freddie Mac, and even the elimination of the Federal Housing Finance Agency. Should he find himself out of a job, Watt said in answer to a question, that would mean the crisis had been over.
Sen. Pat Toomey (R-Pa.) initiated an exchange with Watt that is of high interest to credit unions. Would Watt support principal forgiveness as FHFA director? Toomey said he was concerned about Watt’s support of principal forgiveness as a congressman, when he signed a letter in December supporting the strategy that would force Fannie and Freddie to forgive part of the principal owed by underwater borrowers.
Watt opened by saying he didn’t think the issue was a relevant today as when it was first posed to the FHFA 18 months ago because home prices have increased and fewer homeowners are underwater on their mortgages. However, should Watt be asked to consider principal forgiveness–and he said he suspects he would–he would carefully study how the original decision was reached, consider any new information and make a responsible decision.
As for his support of principal forgiveness in the House, Watt said he signed the letter because he was representing his constituents in North Carolina, many of whom were underwater on their mortgages.
“I will be as strong an advocate for taxpayers in this role because I would view them as my constituents,” he said.