NCUA Chairman Todd M. Harper at the NCUA's headquarters in Alexandria, Virginia.
As Prepared for Delivery on March 9, 2021
Good afternoon, everyone! And thank you, Cathie, for that generous introduction. Inclusiv’s commitment to helping those who live in distressed and underserved communities achieve true financial inclusion and economic empowerment is both indispensable and inspiring, so I am truly honored to join you for today’s Town Hall.
Priorities & Philosophy as Chairman
When I became the Chairman of the NCUA Board earlier this year, it was truly the greatest honor of my career. My whole heart is in the agency’s vital work and the credit union movement, and in my new role, I look forward to working with all its stakeholders, including all of you, as we:
- Respond to the economic fallout created by the COVID-19 pandemic,
- Position the agency for future challenges, and
- Strengthen our commitment to consumer financial protection.
As the COVID-19 pandemic continues, we must smartly, pragmatically, and expeditiously address the economic fallout within the credit union system. To that end, my priorities include:
- Capital and liquidity;
- Consumer financial protection;
- Cybersecurity; and
- Diversity, equity, and inclusion.
- These priorities will guide the NCUA’s decisions.
In my remarks today, however, I would like to focus primarily on diversity, equity and inclusion, which are vital to strategy, sustainable growth, innovation, talent acquisition, and employee retention, and are, thus, necessary for the continued health and success of the credit union system. And because a key part of inclusion is the NCUA’s work to help minority depository institutions to grow and thrive, I will also talk briefly about what we at the NCUA are doing to support our nation’s MDIs during this unprecedented and challenging time in our nation’s history. But first, let me speak to diversity, equity and inclusion.
Economic Equity & Social Justice
Over the years, I have frequently noted in my public remarks that an effective financial institutions’ regulator must be inclusive. Numerous studies have demonstrated that organizations that prioritize the creation of a more diverse and inclusive workplace experience greater staff motivation, improved customer service, and higher employee retention, all of which lead to greater efficiencies and better financial performance. Beyond diversity and inclusion, though, we need economic equity and justice.
Last year’s Black Lives Matter protests across America in response to the killing of George Floyd coupled with the COVID-19 pandemic, which has disproportionately affected poor communities and communities of color, have illustrated the economic and financial challenges of these communities and the extent of our nation’s income inequality. Besides being at increased risk of getting COVID, residents of underserved communities and communities of color are at increased risk of experiencing pandemic-related economic and financial disruptions, like losing their jobs or getting evicted from their homes.
Many minority-owned businesses have also been acutely affected by the suddenness and depth of the economic shock resulting from the lockdowns that were put in place to contain the spread of the virus. Rural and underserved communities, too, have been hard hit by COVID-19, and these are the areas that MDIs and low-income designated credit unions predominately serve.
As cooperative, member-owned financial institutions that reinvest their profits, credit unions have the needed flexibility to do what they do best: care for their member-owners directly and individually. And within the cooperative system, there are many examples of credit unions doing just that.
Sara’s Story
Take, for example, Portland, Oregon, resident and new American Sara Rodriguez, who is a member of a low-income designated credit union that strives to lift up the underserved through financial inclusion and empowerment.
While at the credit union to get a loan for new tires for her family’s car, Sara happened to bring along some of her homemade Oaxacan tamales. Because those tamales smelled so delicious, Sara’s loan officer had the presence of mind to ask whether she might also be interested in starting a catering business.
One thing led to another, and by the time she left that day, Sara had a $500 member business loan that literally changed her life. With that loan, Sara began serving her tamales at Portland’s People’s Food Cooperative Farmers Market.
That was more than ten years ago. Today, her successful business, Sara’s Tamales, has moved Sara and her family toward financial independence. And Sara’s dream is to open a restaurant with her family, so she can share her tamales with the world. All of it began with a low-income credit union that was focused on serving the underserved, including new Americans, communities of color, and small businesses.
The same credit union that made Sara’s member business loan a decade ago stepped up to support its member small businesses through the Paycheck Protection Program, just like many of you watching now. Often, these loans have been for very small amounts, amounts so small that they hardly justify the fee that the Small Business Administration reimburses lenders.
For example, Sara’s credit union along with several others have made individual PPP loans of just $650. But some credit union PPP loans have been as small as approximately $300, and one was for just $150. At a reimbursement rate of just five percent, the credit union made $7.50 on that transaction, but I guarantee that his $150 member business loan made a world of difference for recipient, helping to pay essential bills during these very difficult times.
MDI Preservation
Minority Depository Institutions are among those credit unions on the front lines of participating in the Paycheck Protection Program and serving the underserved. As of year-end 2020, 508 federally insured credit unions had self-certified as MDIs. Together, these credit unions served almost 4 million members, held more than $45 billion in assets, and represented nearly 10 percent of all federally insured credit unions.
To better support these credit unions, the NCUA committed the majority of its 2020 Community Development Revolving Loan Fund allocation to COVID-19 assistance. Specifically, the agency awarded more than $4.6 million in zero-interest loans and grants to more than 300 low-income credit unions nationwide to help them better serve their members and communities during the pandemic. Also last year, the NCUA and the U.S. Department of Treasury hosted a two-day MDI Forum, which included training from NCUA staff members on the Bank Secrecy Act, small-dollar lending programs, cybersecurity, and other topics.
In the fourth quarter of this year, the agency plans to hold another MDI Forum, so I encourage you to stay tuned to the NCUA’s website for more details. The NCUA’s Office of Credit Union Resources and Expansion also holds numerous webinars covering topics not only for MDIs, but also for credit unions that serve low- to moderate-income, and underserved populations. The office also maintains a Learning Management Service, an on-demand platform for credit unions to receive training free of charge. I encourage all of you to use these free resources.
Additionally, through the Revolving Loan Fund, the NCUA provides financial support in the form of technical assistance grants to low-income credit unions. One example of the NCUA’s technical assistance is the MDI Mentoring initiative, which encourages strong and experienced credit unions to provide guidance to small MDIs to help them thrive and better serve low-income and underserved populations. Last year, the NCUA awarded $75,000 in grants to three low-income MDIs to support mentoring programs with larger credit unions. And that is important, because mentoring relationships not only help MDIs to better support their members and communities, but they also foster greater economic inclusion.
Additionally, last year, the NCUA completed its MDI Cohort, a 12-month pilot that was initiated as a companion to the 2019 MDI Mentoring Grant Pilot. In all, six credit unions participated in the pilot, with three mentees and their respective mentors. The second cohort, launched by the NCUA in January, will run through December.
Looking ahead, MDI Regional Roundtables are being planned within each of the NCUA’s three regions. These roundtables will provide MDIs with an opportunity to hear from their regional office regarding trends and discuss ways in which NCUA can assist them.
The Emergency Capital Investment Program (ECIP)
These and other efforts are important, not only because MDIs help support small businesses and consumers in their communities, but also because the economic crisis caused by the pandemic has disproportionately affected low-wealth and low-income communities.
Significant job losses have made it increasingly difficult for individuals and families in these places —many of whom are people of color — to pay for essential needs like food, shelter and medicine.
To provide a measure of relief, Congress recently enacted the Emergency Capital Investment Program, which authorizes the U.S. Department of the Treasury to make investments in CDFI-certified and minority depository institutions to support their efforts to “provide loans, grants, and forbearance for small businesses, minority-owned businesses, and consumers, especially in low-income and underserved communities.”
One important aspect of the program is that the total investments from ECIP cannot exceed $9 billion, so if an eligible credit union wants to apply for ECIP funding, time is of the essence in applying for this money. It is noteworthy that $4 billion of this funding is set aside for institutions with less than $2 billion in assets, and $2 billion is set aside for institutions with less than $500 million in assets.
The Treasury Department launched the initiative on March 4, and applicants have until May 7 to file. On February 3, the NCUA and the Treasury Department also co-hosted an informational webinar about this program. In case you missed the webinar, simply go to the COVID-19 Information for Federally Insured Credit Unions page on the NCUA’s website, and you will find the link there.
Further, the ECIP aligns with the mission of the credit union movement to expand access to affordable financial services to those of modest means. I believe this important—albeit short-term—program has the potential to make a real difference in the lives of many Americans. The funding is patient capital and available at very low rate. That is why I strongly encourage eligible credit unions, like most if not all of Inclusiv’s members, to tap into the ECIP to support the communities they serve.
Due to their size and their business plans focused on fostering economic development in economically challenged communities, ECIP-eligible credit unions are uniquely positioned to step in and step up. And that is important, because after the last economic downturn, research found that credit unions that leaned in and increased lending within underserved communities recovered more quickly than those that did not.
Research has also shown that there are three primary ways to close the wealth gap. One is to open and regularly fund a retirement account. Another way is to own a home. And the third way is to start a business.
Given the cooperative philosophy at the heart of the credit union movement, I believe credit unions have a moral obligation to step up and help poor communities and communities of color recover and start anew in the months ahead. In delivering more financial products and services—free of discrimination or unfair practices—to these communities, your efforts will help ensure a more equitable economic recovery.
Ultimately, the NCUA and federally insured credit unions must do all they can to advance economic equity and justice. By enhancing support for MDIs, enforcing fair lending laws, and advancing initiatives to close the wealth gap, we can address the disparities created by centuries of systemic discrimination and exacerbated by the COVID-19 pandemic. Additionally, we can ensure that the cooperative nature of the credit union system lives up to its mission of meeting the credit and savings needs of consumers, including those of modest means.
Each one of us has an obligation to address these issues directly and chart a better course for our nation’s future.
Closing
Obviously, much work lies ahead of us.
But it is important work that can change the lives of people like Sara Rodriguez, who rely on a credit union to achieve their financial goals. By staying focused on diversity, equity, inclusion, and social justice, credit unions can help ease the financial impact of COVID-19 and systemic racism on communities of color. And the end result will be a more vibrant economic outcome for everyone in society.
So, I encourage all of you to stay focused on serving your members. They will remember who supported them during their times of need, and that loyalty will lead to better earnings in the future. In serving everyone, your credit union, your members, our country, and our democracy will be better for it.
I look forward to working with all of you in support of the great promise embedded within the credit union movement. Thank you again for inviting me to participate in today’s Town Hall.
And now, I look forward to answering any questions you might have.