NCUA’s power, 1978 law at center of board firing fight

A Washington, D.C., judge weighing whether to reinstate fired National Credit Union Administration board members focused on a central question: does the NCUA exercise executive power that subjects its members to presidential removal at will?

The case Harper v. Bessent stems from President Donald Trump’s April firing of NCUA board members Todd Harper and Tanya Otsuka, who filed suit claiming their removals violated statutory protections designed to preserve the agency’s independence. The case could have a ripple effect for similar independent agencies including the Federal Deposit Insurance Corp. 

U.S. District Judge Amir H. Ali on Thursday heard arguments from both parties about whether NCUA board members are removable at will. The current structure of the board was established with the Financial Institutions Regulatory and Interest Rate Control Act of 1978. The amendment to the NCUA’s founding statute eliminated language that explicitly gave the president authority to remove sitting members.

NCUA board members Todd Harper and Tanya Otsuka in April brought the case against a slate of defendants, including Trump, Treasury Secretary Scott Bessent and sole NCUA board member Kyle Hauptman. The plaintiffs are seeking a preliminary injunction and summary judgment to block what they claim is an unlawful takeover of the independent agency. 

The plaintiffs — represented by Christopher Kim of Holwell Shuster & Goldberg — argued that the firings violated Congress’s original intent behind the 1978 amendment. They said legislators deliberately removed the “at the pleasure of the president” language from the NCUA’s founding statute, replacing the single-administrator model with a three-member board not unlike independent regulators the Federal Trade Commission and Federal Deposit Insurance Corp. They also said Congress took such action cognizant of the precedent set by 1935 Supreme Court case Humphrey’s Executor in an effort to shield the board from political disruption.

By eliminating the president’s unfettered removal power, Congress intended to ensure these agencies remain independent from executive interference, the plaintiffs said. Kim said recent actions breach that legal safeguard.

The judge questioned the plaintiffs over their assertion that NCUA’s foundational law was written to protect members of the governing body from removal.

“It’s true that the language existed in the statute one time and it didn’t exist when they created the new version of the board, but it’s not as simple as a situation where there was text and then it was crossed out,” Ali said. “What are the indications that the removal of that language actually was intended to produce protection?”

The plaintiffs contended that the 1958 case Wiener V. United States demonstrated that agencies like NCUA with a nonpartisan, multi-member expert board enjoy removal protections. They also warned that politicizing the removal of financial regulators could destabilize markets, weaken the credit union regulator’s deposit insurance system and erode public confidence in the broader financial system.

The Trump administration’s counsel, Justice Department lawyer Elisabeth Neylan, emphasized three central claims in response. First, she argued the NCUA statute does not limit the president’s removal authority; even if it did, such a restriction would be unconstitutional due to the NCUA’s executive functions; and lastly, that even an unlawful removal would not entitle the plaintiffs to reinstatement. 

The government maintained that unlike the New Deal-era FTC protected under the 1935 decision, the modern NCUA exercises significant “executive power” through enforcement, investigation, rulemaking and penalties and therefore does not fit within what they view as the Humphrey’s Executor exception to “the president’s unrestricted removal power.”

“The critical difference, I think, is the investigative power, the prosecutorial power, the enforcement authority, the regulatory authority,” Neylan said. “The Supreme Court has stated that implementing the legislative mandate is the unique province of the executive branch.”

The judge inquired about overlap with other agencies and whether two recent cases dealing with removal protections at similar agencies Collins v. Yellen and Trump v. Wilcox had any bearing on the issue. In Collins, the Supreme Court ruled against restricting the president’s authority to fire the director of the Federal Housing Finance Agency, stating it violated the separation of powers. In Wilcox, National Labor Relations Board member Gwynne Wilcox won her case in district court challenging her removal, but the Supreme Court granted a stay of that decision, leaving her removed while the case continues.

The government leaned on Collins to argue that at-will removal applies and on Wilcox to show that even agencies with explicit for-cause protections are not immune. On the question of relief for Otsuka and Harper, the government emphasized historical limits on courts’ ability to reinstate removed executive officers and cited founding-era precedent and D.C. District Court cases to argue that reinstatement would be improper, particularly for principal officers like NCUA board members. 

While acknowledging that Humphrey’s Executor remains good law, the government argued that the NCUA today exercises significant executive power — unlike the FTC circa Humphrey’s, where the court found the agency’s authority did not constitute executive capacity. Neylan appeared to leave open the question of whether the FTC as it exists today would still qualify for removal protections under that precedent.

“The Humphrey’s Executor court understood the FTC in that case as a judicial and quasi-legislative function because it was making recommendations to Article Three courts and writing reports for Congress. I think those are completely different activities from what the NCUA does today,” she said. “And it’s not true that the FTC today possesses all the empowers that it did in 1935. The FTC didn’t have the ability to regulate deceptive practices until 1938 and it couldn’t seek monetary penalties against private parties until 1975.The fact that the NCUA exercises significant executive power beyond that, I think puts it outside of the purview of the Humphrey’s exception.”