NCUA Chairman Todd M. Harper’s Remarks at the 2023 Diversity, Equity, and Inclusion Summit

As Prepared for Delivery on November 1, 2023

Good afternoon, everyone. And, thank you, Miguel, for the warm introduction. And, thanks to everyone joining us here today.

This year’s Diversity, Equity, and Inclusion Summit is off to a great start with last night’s DEI Tuesday event, as well as this morning’s pre-summit workshops on alternative sources of credit, recruiting and retaining young professionals, financial inclusion, and DEI strategic planning. I hope many of you participated in these networking and learning events.

Before turning to my prepared remarks, let’s first acknowledge the many members of the NCUA team for their extraordinary efforts in organizing this industry-wide summit on diversity, equity, and inclusion. As you can imagine, it isn’t easy to plan, coordinate, and execute an event with such a packed agenda.

That’s why I’d like to recognize our teams in the Office of Minority and Women Inclusion, the Office of the Chief Economist, the Office of the Credit Union Resources and Expansion, the Office of Consumer Financial Protection, the Office of External Affairs and Communications, the Office of Human Resources, and the Office of the Executive Director, among others. Their work behind the scenes, their collaborative spirit, and their attention to detail will ensure this fourth NCUA Diversity, Equity, and Inclusion Summit is a success for all who participate. Let’s recognize their good work with a round of applause. Thank you, all.

Today is also the first day of National Native American Heritage Month, when we honor the broad spectrum of vibrant cultures indigenous to our nation. This month serves as a time to acknowledge the past; to reflect on the legacies and contributions of indigenous people; and to amplify Native American voices, stories, and issues. The Shawnee chief and warrior Tecumseh once said, “A single twig breaks, but the bundle of twigs is strong.” The same can be said about the “people helping people” philosophy that underlies the credit union movement. In pooling resources and meeting the credit and savings needs of their members, especially those of modest means, the credit union system has the potential to advance financial inclusion and create an economy that works for all.

Our summit today is a forum where we can remember the roots of the credit union movement as a financial system meant to work for everyone, share and learn best practices in advancing DEI, and commit ourselves to serving under-resourced and marginalized communities though action, advocacy, and allyship.

That’s why allyship is a focus for this summit, and its priority is reflected in this year’s theme, “DEI: It Starts with Me.” It starts with our individual actions, our allyship. But, it should come as no surprise that becoming an effective ally has its own demands and different interpretations. In my mind, allyship requires five essential elements: perspective, courage, action, reflection, and vision.

Allyship Requires Perspective

We each come with unique backgrounds to our jobs, and those assorted backgrounds give us the many different perspectives needed to make a difference in the credit union system. I, for example, grew up in Northwest Indiana’s industrial belt of steel mills, refineries, chemical plants, and other heavy manufacturing industries. That upbringing exposed me to different cultures, races, and ethnicities, and it gave me an appreciation for hard work and fairness. Additionally, from my parents and grandparents, I gained a commitment to community service.

What’s more, as the first openly gay man to lead a federal financial institutions regulatory agency, I strive to understand the importance of representation in an organization’s words and deeds. Together, each of my own experiences have taught me that working for diversity, equity, and inclusion is more effective when I am the strongest ally that I can be. But, what does that really mean?

In a recent podcast episode from Indiana University, my alma mater, there was an interesting discussion about a study published in the Journal of Experimental Social Psychology that explores perceptions of white allyship by Black Americans. During two experiments, the researchers found that if a white ally spoke out against a racist remark directed to a Black person, the ally’s motivations for standing up against prejudice directly affected the level of self-esteem the Black participants reported afterwards.

To quote the study, “[a] white person saying that an anti-Black remark isn’t okay because it violates their personal beliefs and values was more beneficial to Black perceivers than saying the remark isn’t okay because it can upset other people.” That’s because doing the right thing is usually more meaningful than just trying to keep the peace.

While this conclusion may seem obvious, acting out one’s earnest beliefs is easier said than done. Effective allyship requires a certain measure of self-awareness and perspective, as well as an honest assessment of the reasons behind making a stand against prejudice and exclusion.

Allyship Requires Courage

In addition to perspective, allyship requires courage, the ability to break a pattern and swim against the current.

On that note, I’d like to retell an experience of Dr. Sybil Jordan Hampton, the noted higher education administrator and philanthropic leader from Arkansas.¹ Dr. Hampton has spoken often about being a member of the second class of Black students entering Little Rock Central High School in 1959.

Her high school experience was one with few fond memories about homecomings, proms, extracurricular activities, and graduation. Instead, over those three years, Dr. Hampton endured constant racism. So, when she reluctantly returned for her 20^th class reunion — or “back to the scene of the crime,” as she put it — Dr. Hampton had very low expectations.

But, when she walked in, Ron Hughes, a white classmate, who had never spoken to her while in school, greeted her. And, Ron made Dr. Hampton and her parents feel especially welcome at the reunion by sitting with them at the same table. His actions were followed by classmate after classmate offering Dr. Hampton their apologies for how they treated her during high school or admiration for her bravery in integrating the school.

Dr. Hampton and Ron Hughes remained close friends until he passed away a few months ago. But, Dr. Hampton will never forget Ron’s courage in standing as an ally. Ron’s actions embodied the principle of, what Dr. Hampton calls, the “power of one” — where one person creates the space for others to be better. Ron’s actions that evening demonstrated the courage needed for allyship to succeed.

That’s because going against the popular sentiment can make an individual the subject of ridicule and an object of suspicion. I have certainly experienced each of those things as a gay man. And, I’m sure many of you here have also experienced hatred and derision, likely in even greater ways.

But, what I take away from those experiences aren’t the bad things. It’s actually the good things. Namely, acting from the heart and practicing the “power of one” can make any individual a change agent. When one classmate became Dr. Hampton’s ally, others found the courage to follow his example. And, that’s what each of us here needs to do to advance DEI and allyship within the credit union system.

Allyship Requires Action

But, allyship requires more than just perspective and courage; allyship also requires action.

Ron Hughes took that action in befriending Dr. Hampton. And, for our part, the NCUA has taken several recent actions to help those whom society has historically excluded.

Last month, for example, we hosted an MDI Symposium to promote the visibility, financial prospects, and opportunities for minority depository institutions and their members across the credit union system. In focusing on and by serving historically under-resourced communities, MDIs are advancing efforts to close the racial wealth gap, foster greater economic growth in underserved communities, build brighter financial futures for all Americans, and allow people of color to pass on intergenerational wealth to their families.

Yet, MDIs face unique challenges, like building and maintaining larger reserves to mitigate the credit risk of lending to consumers with lower credit scores.

The Community Development Revolving Loan Fund is another important tool for the NCUA to assist low-income and MDI credit unions in addressing those challenges. At the NCUA’s request, Congress more than doubled the funding available for fund grants in 2023, to $3.5 million. As a result, the NCUA awarded more grants and bigger grants to eligible institutions this year. This increase, along with Congress’s decision to expand eligibility to all MDI credit unions, allowed the agency to increase the number of grantees from 90 last year to 142 this year, and more than double the total dollar amount of technical assistance grants awarded to eligible credit unions.

In September, the NCUA announced the 2023 Community Development Revolving Loan Fund grant recipients. The agency awarded $3.1 million in technical assistance grants. And, in this 2023 round, 42 MDI credit unions received a total of $1.4 million in grant awards. That’s a five-fold jump in the total dollar amount from last year, when 16 MDIs received a total of $270,000 in grants.

Another recent action by the NCUA highlights the agency’s commitment to allyship. Specifically, in meeting with credit unions, I have often heard about the difficulty of evaluating MDI performance against comparably sized non-MDIs during the examination process. To rectify this issue, the NCUA modified its policies and started using new procedures to examine MDIs this year. With this more constructive basis for comparison, the NCUA is now comparing MDIs to other MDIs.

This switch in peer metrics — to allow for apples-to-apples comparisons — better tailors NCUA’s examination procedures to the business models of MDIs, which often allow for higher expenses and delinquencies when compared to federally insured credit unions overall. With these changes, the NCUA will have a more accurate picture of an MDI credit union’s performance and MDIs will have better metrics to benchmark their work against their true peers.

But, there’s one more NCUA allyship action worth reporting on. Last year, the NCUA established the Small Credit Union and MDI Support Program as part of our commitment to addressing the needs of small and MDI credit unions. Through this initiative, we have dedicated field resources to address operating concerns in areas such as staff training, strategic planning, examinations, and earnings.

For 2023, the agency budgeted 10,000 staff hours across its three regional offices for the initiative, including 5,500 hours for direct support to MDI credit unions. So, as an ally, the NCUA is taking action with several concrete and sustainable measures that build momentum toward true financial inclusion.

Allyship Requires Reflection

In acting as an ally, it’s also important to reflect on what you do well and where you can do better.

Because representation matters, I recognize the NCUA must lead by example by working to improve the diversity of its workforce, its leadership, and its supplier network. In 2022, two out of every five new hires at the NCUA were people of color. And last year, nearly two out of three participants in the agency’s leadership development efforts were women.

What’s more, one in three leadership candidates were people of color, and one in five had a disability of some form. This diverse leadership pipeline is setting the agency up for success in the future. Our supplier pipeline also merits recognition. In 2022, 45 percent of the agency’s reportable contracting dollars were awarded to minority and women-owned businesses, an increase of 8 percentage points from the prior year.

That’s a good start, but it’s not enough. Hiring and retaining Hispanic employees at the agency is an area for improvement. That’s why our team is conducting a barrier analysis to determine how we can be better in this area.

None of these achievements could have occurred on their own. Instead, they required reflection that led to action.

Office of the Chief Economist Research Note

Even though credit unions have likewise made strides in their DEI journeys, they too have room to improve, according to a new analysis by the NCUA’s Office of the Chief Economist. In a research note being issued today, our economists used a “Social Index” framework — developed by the Federal Housing Finance Agency for Fannie Mae and Freddie Mac — to evaluate the extent to which credit unions are extending mortgages to historically under-represented groups and marketing to areas with limited access to credit.

The Social Index framework scores a given pool of mortgages on eight criteria, including whether a loan was made to a low-income borrower, to a minority borrower, in a low-income area, or in a minority census tract, among other criteria. Using these measures, a pool can be given a Social Criteria Score, the percentage of the mortgage pool’s underlying loans that meet any of the eight social criteria.

When NCUA economists applied the Social Index framework to mortgages originated by HMDA-reporting credit unions in 2022, the analysis yielded mixed results. First, the good news: Credit unions, overall, had higher Social Criteria Scores than many financial institutions regulated by other federal supervisors. Now, the bad news: Credit unions trailed entities regulated by the Department of Housing and Urban Development, including non-depository institutions. Those institutions scored 62.3 percent under the index criteria, compared to 56.0 percent for credit unions overall. Said another way, credit unions originated loans with a somewhat smaller Social Criteria Score than non-financial institutions.

To live up to their statutory mission of meeting the credit and savings needs of members, especially those of modest means, credit unions can do better in making mortgages to people of color, in underserved communities, and for low-income borrowers.

Additionally, the analysis suggests that larger credit unions, as a group, had higher Social Criteria Scores than their smaller credit union counterparts. Credit unions with more than $10 billion in assets scored 59.2 percent, while credit unions with less than $1 billion in assets scored 54.6 percent. Some of these differences in performance may result from field of membership limitations. Regardless, I encourage all credit unions to read the NCUA’s research note, available on the NCUA’s website, and to reflect on how they can become better allies to more of their members in mortgage lending.

Allyship Requires Vision

The last ingredient for successful allyship is vision.

Without a vision of where you and your credit union want to go, you’ll likely just march in place without any progress. And, you won’t have any yardstick against which to measure performance. Each credit union is different, so each credit union will have its own unique sense of vision. But, one overarching vision that should unite all credit unions is the concept of financial inclusion, the very basis on which the credit union movement was built.

The NCUA is fostering financial inclusion through its own efforts to enhance and measure access to the financial system. And, as part of that initiative, the NCUA is in the process of implementing a system to measure NCUA’s financial inclusion efforts. I always say, if you don’t measure it, you can’t manage it.

So, you, too, need to measure your efforts to achieve your allyship vision. Set that vision, and then create metrics to measure your performance. For those of you who attended the “Developing and Implementing a DEI Strategic Plan” pre-summit workshop this morning, I hope you will take the lessons learned to bring your DEI vision to fruition.

Closing

In closing, the power of allyship is critical to achieving our collective DEI goals. Vice President Kamala Harris once wrote:²

If we are lucky enough to be in a position of power, if our voice and our actions can mobilize change, don’t we have a special obligation? Being an ally can’t just be about nodding when someone says something we agree with …It must also be about action. It’s our job to stand up for those who are not at the table when life-altering decisions are made. Not just those people who look like us. Not just those who need what we need. Not just those who have gained an audience with us. Our duty is to improve the human condition — in every way we can, for everyone who needs it.

Indeed, that’s what this DEI Summit is about. It’s about how we can each be better allies to all and promote greater inclusion within the financial system. The work ahead of us will likely be hard, but it will be rewarding. And, it will change the financial prospects and futures of families. That’s important work, and I challenge all of you to do your very best.

Again, thank you for participating in this year’s diversity, equity, and inclusion summit. I look forward to chatting with you during breaks and other events throughout the summit.

Thank you.