Former National Credit Union Administration Chair Todd Harper’s decision to sue President Donald Trump over his firing was “more difficult than coming out of the closet,” he said during a conversation Thursday at the Brookings Institution in Washington, D.C.

“Taking on the United States president is not an easy decision,” Harper said. “The more I thought about it, the more I said, it had to be done.”

Trump fired Harper and Tanya Otsuka, the NCUA’s two Democratic board members, last month, leaving just one member on the regulator’s board: Republican Chair Kyle Hauptman. Harper and Otsuka sued the president Monday for their “patently unlawful removal[s].” 

Harper was appointed to the board during the first Trump administration and then served as board chair during President Joe Biden’s administration. His term wasn’t set to expire until April 2027.

Harper said he “indirectly learned” he had been let go, the day after Otsuka informed him of her firing. Access to his work phone and computer had been cut off, he said, and it took the Trump administration two days to find the email they had sent, intended to inform Harper of his firing.

“They had sent it to the wrong email address at the NCUA. I can’t make this stuff up,” he told Aaron Klein, a Brookings senior fellow. 

It was the first time NCUA board members were removed while within their terms, he said. The lawsuit seeks reinstatement. There was no mention of cause “whatsoever” in the email, and Harper said he’s “not doing anything related to offboarding” until the lawsuit is resolved.

Harper made it clear he views the Trump administration’s move as part of a broader strategy ultimately targeting the Federal Reserve. The president fired a Democratic member of the National Labor Relations Board in January and two Democratic commissioners at the Federal Trade Commission in March. 

“I think they’re chipping away, so that they can get to the Federal Reserve Board,” he said. “They’re using us as test cases.”

The firings reflect a desire to dismantle independence held by the federal financial regulators, Harper said. Alluding to the executive order signed in February that gives the White House more control over independent agencies, Harper said the administration is exerting more “pressure” on financial regulators, and he expects that will lead to fewer rules produced overall.

He jabbed at credit union trade groups, for “not coming out loudly” to advocate for his and Otsuka’s reinstatement. Republican lawmakers have pushed for multi-member boards to lead some agencies instead of a single head — that idea has been floated for the Consumer Financial Protection Bureau. But officials have “not been rushing to my defense,” Harper said.

Agency downsizing

The NCUA can continue to handle essential functions, such as conducting examinations, with a one-person board, Harper said. But without a quorum of two members, the board cannot vote to implement any policy changes or approve new enforcement actions.

On Wednesday, the NCUA liquidated Unilever Federal Credit Union, which had $46.6 million in assets. If the same were to occur with a larger credit union, board votes would be needed, Harper said.

“There's a real question out there, if it requires a board vote, what can happen?” he said. “There might be some institutions where it's more slowly to get resolved, which could compound the problem over time.” 

Additionally, rulemaking comes to a “grinding halt,” he added.

Amid the firings, the NCUA board has been weighing pressing issues: At a meeting set for May 22, the board planned to discuss a downsizing effort that will see the agency lose “a significant number of staff,” Harper said. Some 220 employees at the 1,200-person agency have accepted voluntary resignation offers, Bloomberg Law reported last week. 

The NCUA had already taken steps to effect a downsizing – which Harper said he voted for in a closed board meeting – when the Department of Government Efficiency set its sights on the agency, Harper said. DOGE met with career staff at the agency, and only briefly with Hauptman, Harper noted.

“How are we going to restructure the agency? What should the normal operating level be set at for the share insurance fund?” he said. “After all, if you have fewer examiners and fewer people, there are going to be fewer exams and there’s going to be greater risk.”

Harper noted there are nine credit unions with CAMELS ratings of 4 and 5 that have more than $500 million in assets, and another 69 credit unions of that same size that have a CAMELS rating of 3, Harper said. CAMELS stands for capital adequacy, asset quality, management, earnings, liquidity and sensitivity to market risk. An ordinal scale — 1 being the best to 5 being the worst — is used by regulators to evaluate a financial institution’s overall condition.  

Cumulatively, that group of credit unions has about $112 billion in assets, and “these are the credit unions we need to spend more time at and look at closely. And we need the eyes there,” Harper said.  

Harper’s “deeply concerned” with the NCUA’s ability to closely supervise those credit unions as the agency is downsized and loses retiring staffers. “That’s my worry,” he said. 

When asked about credit union taxation – given growing calls by bank trade groups to repeal tax exemption for credit unions because it allows credit unions to offer higher purchase prices for bank acquisition targets – Harper said he’s seen “a weakening in the position on [Capitol] Hill,” noting credit union taxation was included in a list of options for funding tax legislation. 

He also referenced a bill passed in Washington state last month that would tax transactions in which a state-chartered credit union acquires a bank.

“You’re seeing sort of some rumblings of this ‘don’t tax my credit union’ starting to break away,” he said. “I see that credit unions are in the most perilous place that they’ve been on the taxation issue in the 25, 26 years that I’ve worked on credit union policy issues.”