What Humphrey's Executor Means for the NCUA and Why It Matters Now

A legal fight over NCUA board removals could reshape the future of credit union regulation.

By Jeff Olson, President-CEO, Dakota Credit Union Association 

Are they or aren’t they?  That is the question as it pertains to the current situation of the NCUA Board.  Let’s recap and bring you up to speed to where we are today and where this may be heading.
 
Earlier this year, two Democratic appointees of the NCUA board including Chairman Todd Harper and Board Member Tanya Otsuka were abruptly removed by President Trump.  However, a federal district court in July ruled their removal unlawful and ordered their reinstatement, finding that the NCUA’s structure prevents the president from removing board members without cause. That ruling allowed Harper and Otsuka to participate in the July NCUA Board meeting. But a subsequent ruling a few days later removed them once again.
 
Now, in a new legal twist, the removed board members have filed an emergency motion in federal court, asking the court to deny the Trump administration’s request to delay their reinstatement.
 
In their filing, they argue that a continued delay would: undermine the functioning of the NCUA, create uncertainty in the financial system; and jeopardize regulatory oversight and consumer confidence in credit unions across the country. Their argument continues to say that allowing the Trump administration to delay their return would “paralyze the agency” and harm the credit union system at large.
 
This case has serious implications not just for the credit union movement as a whole or for the NCUA, but for the broader principle of regulatory agency independence across the board. If courts were to allow the removals to stand without cause, it could erode long-standing norms about how regulatory agencies operate and set a new precedent that puts partisan interests above public service and oversight.

There’s a lot on the line, and this drama is raising serious questions about how much control a President has over independent federal regulators.

To understand the significance, we need to open our political history books and revisit a landmark Supreme Court case from nearly a century ago: Humphrey’s Executor v. United States (1935).
 
The case involved William E. Humphrey, who was appointed by President Herbert Hoover to the Federal Trade Commission (FTC). When Franklin D. Roosevelt became president, he asked Humphrey to resign because his views didn’t align with the New Deal. When Humphrey refused, FDR fired him. However, the FTC Act said commissioners could only be removed for “inefficiency, neglect of duty, or malfeasance in office.”

After Humphrey died, his executor (the person handling his legal affairs after death) sued the federal government for the unpaid salary he would have earned had he not been removed.
 
In Humphrey’s Executor, the Supreme Court ruled that the President cannot remove members of independent regulatory agencies — like the Federal Trade Commission (FTC) — without cause. These agencies aren’t directly under presidential control, and their leaders exercise a mix of executive, legislative, and judicial authority. Because of that unique role, the Court said Congress could protect their independence by limiting the President’s power to fire them at will.
 
This precedent has shaped how independent agencies function ever since — and it has direct implications for the NCUA and this current situation.
 
How This Applies to the NCUA
As we know, the NCUA is an independent federal agency that regulates and insures credit unions. It is governed by a three-member board, with no more than two members from the same political party, each serving a fixed six-year term. More importantly, like the FTC, the NCUA board is considered an independent regulatory body.
 
While the law is somewhat vague on how board members can be removed, courts have consistently interpreted such agencies as falling under the protections established in Humphrey’s Executor. That means the President likely cannot remove an NCUA board member simply for political or ideological reasons. There must be clear causes such as misconduct or neglect of duty.
 
Why It Matters to Credit Unions
For credit unions, the implications are significant. The NCUA oversees the safety, soundness, and insurance of federal credit unions and many state-chartered institutions. Instability or leadership voids at the agency could delay decisions, stall examinations, or disrupt rulemaking — all of which directly affect how credit unions serve their members.
 
Moreover, if independent agencies become vulnerable to political pressure, it could undermine trust in the regulatory process, discourage long-term planning, and reduce the consistency that financial institutions depend on. Critics argue this move will politicize the agency, aligning its regulatory actions more closely with the administration’s agenda.
 
However, if we’re truly being honest here—politicization already exists, just in reverse order. Any agency with politically appointed leadership will always be subject to influence. The NCUA’s 2022-2026 strategic plan, for example, included several initiatives mirroring those of the administration at the time and infusing the President’s agenda into their guidance and rulemaking.
 
Looking Ahead
The courts will ultimately decide whether the removal of the NCUA board members was lawful — and whether they should be reinstated while the case proceeds. But one thing is clear: Humphrey’s Executor remains a powerful precedent in defense of agency independence, and the outcome of this case could have lasting consequences for how federal regulators — including the NCUA — are allowed to operate.
 
Credit unions, Leagues, and policymakers alike are watching this closely. Because the issue isn’t just about who occupies a board seat — it’s about safeguarding strong, stable, and independent oversight of the credit union system for the future.