By Frank J. Diekmann
Was it right—or was it wrong? Were you paying attention? Or did you deliberately—or even more likely, subconsciously change the channel or click away because, hey, you already have a filter for your own conclusions?
Credit unions got an up-close look last week at how confirmation bias, cognitive dissonance and portable values work—in layman’s terms, how people selectively decide what’s right or wrong depending on their own views. But in this case, I’m not talking about the new textbook case study about those lenses, the kids from Covington Catholic vs. Native Americans on the Washington Mall. Instead, I’m talking about credit unions’ own Washington regulator
As CUToday.info reported here, the agency’s Internal Auditor has flagged expenses by NCUA Chairman J. Mark McWatters and his chief of staff, Sarah Vega, who were described by the Washington Post as “federal financial regulators who filed for expenses like corporate CEOs, seeking reimbursement for limos, deluxe air travel and meals in posh restaurants.”
The List of Expenses
Among the types of expenses you’d expect to see listed in a conservatorship order for a credit union whose CEO had been living large on the members’ dime and not those of a federal regulator were:
- An UberBlack ride from the District of Columbia to Alexandria, Va., where NCUA is headquartered, for $250. The distance from the center of D.C. to Alexandria across the river is about nine miles.
- A pair of airline tickets to a meeting in Vienna, Austria that cost $11,000 each. According to the IG’s report, an NCUA staffer had found similar tickets to the same WOCCU event for “a fraction of the price.”
- A meal for three at Joe’s Seafood near the White House that cost $450.
- A $45 charge for a glass of 18-year-old single-malt whiskey. “In 2016 and 2017, they expensed more than $2,500 worth of alcoholic beverages — most of it under Vega’s account — despite a written policy prohibiting reimbursement for the purchase of alcohol,” the Post reported.
- $22,000 worth of furniture for McWatters’ office in Alexandria, which he rarely uses, as he lives in Texas and commutes to NCUA for meetings. The Post quoted one of the IG investigators involved in the probe as saying during an interview she had been struck by the “sheer extravagance” of their spending. “There was a sense of entitlement,” the Post quoted Sharon Separ, who retired as assistant inspector general, as saying.
- In 2017, more than $60,000 in additional funding was moved from one account at NCUA to another to cover McWatters’ travel, lodging and per-diem expenses, the Washington Post said following its review of records.
To be clear, there have not been any illegalities found to have been committed by either McWatters or Vega, with NCUA stating, “The claims for reimbursement were within the parameters of agency policy. There being no violation of the law, rule or regulation, no disciplinary action was warranted.”
Indeed, in March 2018, the Inspector General passed on the findings about McWatters to the White House for review and referred both cases to the Justice Department’s U.S. attorney for the Eastern District of Virginia alleging “unauthorized receipt of expenses,” according to the investigative reports cited by the Post. The Justice Department declined to prosecute.
The Silent Scream
What’s screaming here is the silence of the credit union community’s response. I’d say the response has been “crickets,” but that’s really not fair to the insects, as at least crickets make some sound.
The non-reaction of the two credit union trade groups has been so noticeable that now, when crickets want to make their own point about how quiet it is, they say “credit unions.” For the last few years in particular, CUNA and NAFCU have been tripping over each other’s chains to cement their positions as alpha watchdogs of the NCUA budget (it’s “credit unions’ money,” they can’t remind often enough), doing everything but placing staff at the agency to monitor the thermostat and make sure both sides of the copy paper are being used.
But their response to the high-life T&E spending? Hey, everybody, look over there at all the good things credit unions are doing during the partial federal government shutdown.
‘What’s the Big Deal?’
Look, I get it. Credit unions can’t throw up enough googly eye emojis when Instagramming how very happy they are with the deregulatory approach championed by McWatters and even fellow board member Rick Metsger. I even read a commentary from one league chair—who sounded almost offended that the WaPo had even reported the story in the first place—who all but said of the T&E expenses, “What’s the big deal?” and urged people to see the big picture.
And certainly that big picture has to include the nearly three-quarters of a billion dollars the NCUA returned to credit unions during 2018 from the insurance fund, so, hey, if the chairman wants a $50 single-malt night cap, what’s the harm? Hey, we'd rather have a regulator who's drinking than one who's driving us to drink, I can hear credit unions saying.
But here’s the other big picture. The harm, as always, lies in the risk of a moveable line in the sand when it comes to the rules and even values. You either stand for something, or you don’t. Agency expenses matter, or they don't. Alcohol-related expenses of any amount, especially in the thousands of dollars, are not permitted to be reimbursed under NCUA policy. The IG report called the reimbursement an “oversight.” One wonders how many CAMEL ratings have been dinged by NCUA examiners who had little patience for “oversights” at credit unions and who dutifully made a notation that the rules were right there in black and white in the policy manual.
This is the same agency, after all, that fines some very small credit unions every quarter for late-filing their 5300s. No doubt these CUs have been told, “Sorry, we can’t bend the rules. When you start bending the rules for little things, well, you know what happens…”
That Schlep is a Member
If there is one comment in all of the Inspector General’s report that really should gall credit unions—although only if CUs really are who they say they are—it was around a finding that McWatters “lamented an agency decision to disallow the use of the luxury UberBlack, telling investigators that it has forced him to use the regular Uber car service.”
McWatters was quoted as saying, “I’m schlepping around in somebody’s Civic.”
That Civic could very well be financed by a credit union. And the schlep whose probably pretty proud of his car and working a side gig as an Uber driver to make ends meet? He’s likely a credit union member. You know, one of those everyday working-class Americans from Main Street not Wall Street whom credit unions can’t talk enough about.
What Do You Think?
If you’ve read this far you likely have your own conclusions, and I would welcome your feedback. What’s most interesting here is the expenses in the NCUA Chairman’s Office speaks to the extremely divided state of affairs in the country right now, especially in D.C. After all, were this another NCUA chair at another time, the security alarms would be alarming and the fire sprinklers sprinkling as a result of the angry mob gathered in the agency’s lobby with their pitchforks and torches.
Perhaps you’re reading this right now while also listening to the cable news channel that delivers the news in the way you want it, and occasionally even grumbling that the other side, whoever they may be, seems to always be saying one thing and doing another.
So, et tu, CUs?
Frank J. Diekmann is Cooperator in Chief at CUToday.info. he can be reached at Frank@CUToday.infoor @FrankCUToday.