McWatters' TARP Past: NCUA Board
Mark McWatters, President Obama's choice for the NCUA Board, advocated for easing the regulatory burden on financial institutions as a member of the Troubled Asset Relief Program Congressional Oversight Panel.
“With the ever-expanding array of less-than-friendly rules, regulations and taxes facing businesses and consumers, we should not be surprised if businesses remain reluctant to hire new employees, consumers remain cautious about spending, and the commercial credit and small business lending markets continue to struggle,” McWatters and fellow panelist Paul Atkins said in a May 2010 oversight report on the small business credit crunch and the impact of TARP.
Atkins and McWatters, whose selection to succeed Michael Fryzel as the Republican member of the three-person board was announced on Dec. 18, also said, “In our view, the administration could encourage the robust recovery of the commercial credit and small business lending markets—as well as the overall U.S. economy—by sending an unambiguous message to the private sector that it will not directly or indirectly raise the taxes or increase the regulatory burden of commercial credit and small business market participants and other business enterprises.
“Without such express action, the recovery of the commercial credit and small business lending markets will most likely proceed at a sluggish and costly pace.”
Both authors opposed the creation of the Small Business Lending Fund, arguing that providing financial institutions with capital at below-market rates could lead to “imprudent lending activity and, perhaps, the inflation of a series of government sanctioned and subsidized asset bubbles.”
“If the government convinces—or pressures—financial institutions to accept cheap credit based on financial incentives for the recipients to off-lend the proceeds, then we fully anticipate the government will accomplish just that,” they wrote.
“Yet, is this not what we recently experienced in the sub-prime and securitized debt lending crisis— too much money chasing transactions of diminishing credit quality?”
McWatters and Atkins said the proposed SBLF appeared to share the design and business model of Fannie Mae and Freddie Mac. To date, the Treasury Department has invested more than $4 billion in 332 institutions through the SBLF program, including $3.9 billion in 281 community banks and $104 million in 51 CDLFs.
“Treasury should have learned from Fannie and Freddie that the combination of easily accessible below-market credit matched with pressure to lend—regardless of credible demand or the employment of prudent underwriting standards— serves as the perfect recipe for the extension of problematic loans and the creation and implosion of asset bubbles,” they wrote.
McWatters served as counsel for Rep. Jeb Hensarling (R-Texas) in 2009. He was a member of the TARP Congressional Oversight Panel in Washington from December 2009 to April 2011. McWatters is the dean for graduate programs at Southern Methodist University's School of Law in Dallas, Texas.
If confirmed, McWatters would fill Michael Fryzel's spot on the three-person board. Fryzel has been on the board since July 2008. The current chairman is Debbie Matz. Richard Metsger also sits on the panel.
McWatters holds a bachelor's degree from Texas Christian University, an MBA from Michigan State University, a J.D. from the University of Texas School of Law, and LL.M. degrees from Columbia University School of Law and New York University School of Law.