Michael Affuso brings a wealth of political know-how to his work at the New Jersey Bankers Association. He’s run governmental relations for the organization since 2008, after serving first as campaign manager and then deputy district director and general counsel for U.S. Rep. Albio Sires, D-8th District. Before that, he was associate general counsel for the New Jersey General Assembly Majority Office.
Affuso starts a new chapter at the association on July 1, when he takes over as president and CEO, replacing John McWeeney, who is retiring. McWeeney noted his successor’s background in the announcement of his promotion, calling him the “natural choice.”
“His knowledge of the banking industry and legislative process combined with leadership skills will allow him to continue to move the Association and banking industry forward,” McWeeney said.
NJBIZ recently spoke with Affuso about how he will meet the challenges wrought by economic and geopolitical turmoil. “What I bring I think is this cumulative knowledge of how government works in New Jersey, how politics works. And what I’ve learned over the past 14 years about how banking works,” he said. “It’s really just kind of an amalgam of both of those portfolios. I have some definite ideas about how we have to move ahead in the future … Our industry is rapidly changing so the trade association that represents them needs to change at the same pace.”
What follows is an abridged version of that discussion. The questions and answers have been edited for length and clarity. A video of the full interview is available at njbiz.com/njbizconversations.
“Right now, attraction of talent is a major issue for particularly community banks in New Jersey,” incoming New Jersey Bankers Association President and CEO Michael Affuso tells NJBIZ Editor Jeffrey Kanige.
NJBIZ: All right, I want to spend most of our time talking about your priorities. First of all, as a prelude to that — you’ve been in government and politics and you’ve worked on the trade association side. I’m curious about your assessment of the political climate, for lack of a better word, now in New Jersey and nationally. It seems like a very strange time for those of us who are observing it for a living. What do you make of where we are now in New Jersey and the country?
Mike Affuso: I quite honestly, nationally, the whole thing just saddens me. And I look at it, not from a practitioner of government relations. My real love is for American history. The 1850s were a time that the country was torn asunder with the prelude to the Civil War. But what we have now, we have people that can’t get along that live next to one another. It’s not lost on me that I’m taking part in a press event right now, but the way the press portrays issues, whether it’s on the left or on the right, it’s just tearing apart people and there’s some value in this. So it just really saddens me.
And I think what you see about this tearing apart nationally, when you look at the international scene, other countries like Russia view the United States as weak, and you know power always steps into a vacuum. So you see the United States and ostensibly the West is seen as weak, so Russia is doing what it’s doing, China is doing what it’s doing because they believe that the West won’t stand up. My hope is that whoever is the next president is a unifier. My hope is that somebody wins 60-40 because the country’s got to unify and we have to figure it out.
So I know that’s not sunshine and rainbows, but you asked what I’ve seen. That’s what I see.
Q: Well that that’s fine. And for this press event, at least, we’ll try not to tear anybody apart. Let’s move on, then, to your priorities vis a vis the membership and the industry. What do you see as the biggest issues and challenges that the industry is facing and that you’ll have to help out with?
A: Well there’s a few. Right now, attraction of talent is a major issue for particularly community banks in New Jersey. New York City has great allure, even if you’re working from home, there is the allure of Wall Street over working in a community bank. So we’re going to have to figure out a way to make community banking attractive to people that are considering Wall Street. … There are the overarching concerns of what’s going on in Europe getting dragged into banking. We have this cybersecurity issue and we don’t know what can happen, whether it’s by rogue actors or by a nation state.
And then, obviously, the general economic issues. The return to work from the pandemic, whether there’s going to be another spike are things that we really can’t control. But in my opinion, the cybersecurity question as well as the workforce question are really, right now, at the forefront.
Q: Then let’s turn to your wheelhouse — the relationship with the government. And let’s start on the state level with Trenton, the Legislature and the agencies. What regulatory or legal issues do you see as the main issues that you’ll be facing?
A: Well, I think the legalization of cannabis and how [that] rolls out. As of right now, it seems like it’s finally, gaining steam, as far as the regulatory rollout. We really need some federal relief to effectively bank cannabis-related businesses. We’re very hopeful that that will happen in the future.
The general business climate is always an underlying question in New Jersey. Polling data always shows us at the bottom quintile, if not worse. So that’s always a concern. I would ask anybody if you have a family or any type of ties to New Jersey, would you open and start a business in New Jersey? Generally the answer’s no. Obviously for banks to lend money to businesses … if that’s the track it becomes problematic.
Q: Now you mentioned a couple things that I wanted to get a little more in-depth on. First of all, the legalization of cannabis — for our [readers] we’re speaking in the second week in April, it was announced that adult use sales will begin April 21. The issue there, of course, is that marijuana remains illegal on the federal level and it’s very difficult for proprietors of these businesses to access the kinds of financial services that any other business needs. And as you say, that has to come from the federal government. Do you have any sense that there’s going to be any movement on that? Have you spoken to anybody in the congressional delegation? Where does that stand and how likely is that to move at this point?
A: Well, we’re in a really interesting place here because New York is similarly situated, and you have the U.S. senator from New York as the majority leader — Chuck Schumer — as well as our U.S. senator — Cory Booker — really leaning hard on federal legalization. But it doesn’t seem like there are the votes for that. At the same time, the same senators are standing in the way of the Safe Banking Act, which would allow cannabis producers to gain access to banking services and insurance services that they need in the states that they represent. So I’m hoping that eventually the realization sets in that the votes are not there for legalization. If they are, then fine. Let’s call the vote and let’s get it legalized. If that’s not there, then do the Safe Act.
But I’m concerned that there’s this brinksmanship all the time at the federal level with all different issues and that this may be yet another issue of brinksmanship, that it’s taken to the end and the Democrats lose the Senate and they lose any opportunity to do anything. And we’re stuck in limbo in New Jersey and New York for an extended period of time.
Q: Right. And just to tie that up, the reason that there’s opposition to the Safe Act, as I understand it, is sort of the same dynamic in New Jersey between decriminalization and legalization. That the worry is that if the Safe act is enacted then that will essentially kill the effort for legalization because the problems will be solved.
A: I think that might be the issue, but I’m not exactly sure. I mean if you were to catalog all of the states that have some type of legal marijuana, whether it’s medicinal or otherwise, and a lot of those states, particularly the Republican states, those ballot initiatives passed. You could get a lot of Republican senators if they just followed the will of their voters. So I don’t know. And to Sen. Booker’s credit, I think he’s looking at those numbers and saying ‘well if we bring this thing to the edge, will some of these Republicans jump over?’ I don’t know the answer to that. It doesn’t seem like they will, but that’s solved at a higher level than mine.
Q: OK, so we’ll go back down to your level. You mentioned the business climate – I’ve spoken to a number of bank CEOs over the past few months and they said coming out of the pandemic was an interesting time, although not a terrible time. So I’m curious as to what you’re hearing from members about where they are. Lending seems to have held up pretty well. There was obviously a lot of lending with the federal government’s Small Business Administration loans and things like that. What are you hearing about how business is going these days?
A: As far as the business of banking goes, I spoke yesterday with some folks from the Federal Reserve and they had some really good data. Loan quality is good, capitalization of banks is excellent, so when you look at those two matrices … we’re doing quite well. When you look at the general business climate in New Jersey, I think there is certainly loan demand. But I also think that we’re going to start to witness a little bit of trepidation, as the question of does the Federal Reserve in breaking inflation create a mild recession. I think there is the beginning of talk about that.
Q: OK, and how deep is that concern? Because again I’m hearing a lot of concern about inflation, obviously. But there are also worries about a recession. That’s the tradeoff. If the Federal Reserve moves too aggressively on rates that could tip the economy into recession. Nobody wants that. Where do you see the equilibrium?
A: Well, you know it’s interesting. Everybody’s focused on the Fed. How about the fact that the United States government spends $1 and takes in 81 cents in tax revenue. So everybody’s concerned about monetary policy, but what about fiscal policy? I mean we’ve pumped a ton of money into the economy. And that’s not the answer to your question, but there are other levers there that can be pushed to try to moderate inflation and create the quote-unquote soft landing. I know there was talk this week about clouds on the horizon, and whether the clouds are going to come this way and produce rain. It still has yet to be known.
Look we’re in an economic cycle and there always is an economic cycle, so a recession is inevitable. So if you want me to say ‘hey there’s going to be recession sometime in the future’ I guarantee you I’m right. I promise you I’m better at predicting that than predicting who’s going to be the next governor. But the real question is, what is going to be the depth of the recession and how soon is it going to come? I’m really not sure, but we’re starting to hear about it and usually, when you start to hear about it’s because smarter people are actually thinking about it.
Q: Right and even a 50-basis point increase in the Fed funds rate is not going to do anything about the war in Ukraine or about COVID cases in China. So there are a lot of other factors that go into it.
A: Correct but, you know I also think you have to look at what the effect of inflation is on the general public. And I can tell you that it forces people to make choices … if you have to spend more money on food and gasoline it means you’re going to choose not to put a new deck on this summer or whatever modest capital improvement you were going to do on your house. Maybe the cost of lumber is still too high and you just decide to defer a project.
Q: Are your folks confident about the future — about say the next six to eight months? Are people really, really worried about a recession or do they see at least a period of continued growth at this point?
A: I think people are cautious. I don’t want to say confident — I only want to say cautiously optimistic, or just being cautious. Because you know, you identified things that are well beyond our control — coronavirus 2.0 or a continuing war in Europe that may have other effects. We can’t control that. Bankers and businesses like certainty and right now we have two places where there’s a lot of uncertainty. Forget about just the economy, I think businesses will continue to be cautious but try to move forward. So, banks will do the same.
