NJDOBI’s New Team
By Timothy E. Doherty
Editor’s Note: Gov. Jon S. Corzine has chosen two well-known figures in the state banking industry to call the plays on banking issues in his administration. Steven M. Goldman, a senior member of Sills Cummis Epstein & Gross P.C., was named commissioner of the Department of Banking and Insurance by the governor on Jan. 31 and subsequently confirmed by the Senate in March and sworn in by Gov. Corzine on March 24.
On May 8, Commissioner Goldman appointed Terry K. McEwen, senior vice president of retail banking at First Washington State Bank, to be director of banking. Director McEwen is awaiting Senate confirmation. Neither Goldman nor McEwen knew each other prior to joining DOBI.
New Jersey Banker had the opportunity to interview both gentlemen recently to learn about their backgrounds and plans for the department.
Please take a few moments and describe your background.
Goldman: I started my career after law school clerking for a Chancery Division judge in Superior Court in Passaic County, a fellow by the name of Peter Ciolino, after which I practiced as an associate attorney for about four years for a firm that’s now called Cole Schotz. I was then in private business for about four years running my family’s company and then I went from there to Sills Cummis where I stayed for the next 22 years. I did a lot of bank work as part of my practice at Sills Cummis.
It was mostly financings that I did with connection with transactions … I represented a number of banks in connection with loan closings of various kinds, from the more sophisticated types when they were lending in to transactions that were taking place, leveraged buyouts or things like that we would represent the bank. Oftentimes we were representing the company that was making the acquisition and we would be arranging the financing for the deal and we’d switch chairs and obviously another lawyer would be representing the lenders. I also did a lot of work on the lending side in conjunction with private placements, where we would be doing an equity raise and then a piece of financing in conjunction with it in order to make an acquisition.
McEwen: I’m originally from Princeton. I graduated from the University of Pittsburgh in 1980. Fresh out of school I went into banking with then Fidelity Union located in Newark and entered their management training program. It was a one-year training program which gave me six weeks in every department of the bank so I really got a well-rounded background in banking.
I went into commercial lending and spent most of my 26-year career in commercial lending. I did spend a few years in government banking and the last four years I spent running the retail side of a bank, the consumer loan department, the mortgage originators and some of the compliance issues as they relate to CRA. And actually did the CRA public file for the bank.
You also have a football background starting with your days at the Hun School.
McEwen: In my junior year, 1975, I actually gained over 1,000 yards in eight games. A thousand yards is a nice milestone to accomplish, and to do it in eight games was quite an accomplishment.
In 1976 I had the fortune of playing on a national championship team with Tony Dorsett at the University of Pittsburgh. We actually went undefeated that year and beat Georgia in the Sugar Bowl. Dan Marino came in the next year and I had the fortune of playing with Dan Marino as well. There are a number of pro athletes that came out of the University of Pittsburgh while I was there.
Did you consider turning pro?
McEwen: I did consider furthering my football career; however, in my junior year in college, I had to make a conscious decision as to where to focus my attention. One fact that most people do not realize is that at the Division 1 level, football is practiced all year round, and as a student you have to block out five or six hours of your schedule every day. I grew up in Princeton, where education is an integral part of one’s upbringing, so I decided to focus on academia and graduating with my bachelor of science degree from the University of Pittsburgh.
How did each of you become interested in the banking industry?
McEwen: I had a teacher in high school in the 11th grade in the Hun School named George Warren [who] was very instrumental in guiding me not only to the University of Pittsburgh but into a banking career. He thought it would be one of the industries I’d be very strong in.
Goldman: I was always interested in the financial aspects of different kinds of businesses. That was something that I always found interesting. It [became] part and parcel actually of what I was actually doing as a practicing lawyer. I had been familiar with financial institutions and banking from my business career prior to that interim period between my initial career as a lawyer and my subsequent career as a lawyer after I had been in business for a while. And certainly when I was in business, finance was pretty important.
How did each of you end up coming to work for the department?
Goldman: Well, in my case I had known the governor for a while and I was involved in his senate campaign and his gubernatorial campaign and the question just sort of arose, as the campaign neared its end, about whether or not I’d be interested in being part of the administration. I expressed an interest in being part of the administration and it sort of evolved from there.
McEwen: I went through the interview process, and apparently demonstrated my knowledge of the industries that the Department of Banking will be working with. Also, my managerial skill as it relates to overseeing a number of areas or units, and a large staff; and the integrity, professionalism and the enthusiasm that I bring to the workplace must have been a good fit.
Do you see your new roles as a next logical step in your careers?
Goldman: Yes, I do. I think it’s something I’ve always been interested in doing. Public service is something I’ve always had an interest in. I’ve always been interested in issues that affect the broader public and this was an opportunity to serve in an administration that I had a great deal of respect for and I felt that participating with the governor and the group of people that he was assembling would be a very interesting and challenging and rewarding experience. So for me I felt it was a great opportunity to do something that I had wanted to do for a very long time with people that I had a great deal of respect for.
McEwen: Similarly, I had goals and aspirations of also being a public servant and helping the greater public good. I’ve been on a number of different boards throughout my career, a lot of local community boards as well as on the board of trustees for Rider University and on the foundation board for Mercer County College. So when the opportunity came to be able to participate in what I believed was a very strong administration from the business perspective, I felt that this would be a great opportunity to get in and give something back to the community at large.
Are you looking hopefully to have a long-term impact on the industry because you have come in during the early stages of this administration?
Goldman: I think that we certainly hope that we can work with the industry in order to make it as competitive and as productive and as important a part of the economic base and continuing and growing an important part of the economic base of New Jersey as we can.
With all the background you each bring to the job, is there any one skill that you think really complements your new positions well?
Goldman: In my case, having done transactions for a long time. In order to successfully complete a transaction, you have to take the interests of the various competing players and find a way to resolve them so that you can complete successfully the transaction that’s on the table. I think that process of finding common ground, of negotiating and keeping the interest of your own client in mind but still coming to a place where everybody can say “OK, I can live with that” is an important part of doing this job, so I think that’s an important part of what my past skill set brings to this position.
McEwen: My skill set as well. I’ve been in banking for 26 years, off and on in different departments, different areas so I have a strong feel for what the industry may need to help strengthen it from the department of banking.
And very fresh, having just come out of the field.
McEwen: That’s correct. I also have a good feel for what mortgage bankers may need to help strengthen their side of the industry. So we’re looking to be pro-industry while also protecting the consumer.
Commissioner, what is the state of the state of New Jersey banking industry?
Goldman: The state-chartered banking industry is generally good. I think the banks themselves are in good financial condition. We have no indications of any problems with any of our institutions. I think they’re all in pretty good financial shape. I think what we’d like to see … is the opportunity for state-chartered institutions to be able to be more competitive, vis-a-vis their federal competitors, their federally chartered competitors, we’re looking at, on the preemption issue, ways to try to strengthen the state charters so that they are in a position to compete in a more seamless way, maybe across state lines, with federally chartered institutions.
What issues do you see that you’re going to be tackling or that you already have begun to tackle?
McEwen: There really are four key issues. One is strengthening state charter banks. The second is going to be federal preemption of state banking laws. Third will be predatory lending and consumer protection and then dedicated funding will be the fourth issue for the Department of Banking.
That leads us to the question of the current state of the economy, which also ties in to recent mergers and acquisitions. How do you think the recently enacted dedicated funding bill, which goes into effect July 1, will impact the department?
Goldman: Well, obviously to the extent that you have fewer players in the system then you’re going to be making assessments over fewer players. The good news is that in addition to the mergers and acquisitions, we have a continuing number of new entrants into the market. I think as those new entrants begin to take root and succeed – and there’s an ebb and flow and there’s always a certain level of merger activity – but I think that fortunately for us most of the new entrants have been seeking state charters and so we feel pretty good about the fact that system is pretty vigorous and will continue to be vigorous.
Is dedicated funding going to be a positive for the department?
McEwen: Absolutely. What we believe is that it’s going to make the department more efficient and more effective in how it’s funded. It’s going to be able to address industry needs a lot faster, a lot quicker and thus we’ll be able to streamline even internal application processes so that we can respond much better to the industry.
Goldman: Actually, if you look at the insurance self-funding process that has been in place for a while and look at how well that’s worked, I think we can anticipate that the same assessment and self-funding process will take place on the banking side and work equally as well.
How long has the insurance end been self-funded?
Goldman: I think at least four or five years, maybe more, I’m not certain.
And that’s worked?
Goldman: It’s worked quite well.
What’s driving the current de novo boom?
McEwen: Well, competition is healthy. As banks get larger, there’s a need for smaller community banks to come in to certain areas, certain pockets, and fulfill that need. We see that as banks get larger, the smaller customer’s needs may not be met the same way, so the de novo banks can come in and fill that niche.
Goldman: In part I think that the merger and acquisition activity that you mentioned actually is the precursor to what becomes the new charter activity because you have a lot of the banks that merge out of existence [leaving] the situation that Terry described – you have a lot of the communities that were used to dealing with people that were rooted in the community who now all of a sudden are dealing with people who are far away from the community and there’s a need to want to deal with someone closer to home.
So you see a strong link between M&A activity and de novo activity?
Goldman: Yes, absolutely. I mean it’s not hard [and fast], month by month, but I think that’s part of the ebb and flow in the process.
Do you see this current de novo boom continuing?
Goldman: That’s something that’s not within our control. It’s a function entirely of what the particular business people who decide whether or not they want to start a bank decide. Certainly, we think that those areas that still feel that they have a need for locally owned and operated banks … will do that. I think that there’s sufficient capital available in New Jersey today for there to be more of those banks so I don’t think capital is a constraint, but whether or not they’ll continue to come … when and where and how many – that’s something we really don’t know.
We’ve talked about reinforcing the value of the state charter. Would you like to elaborate on that?
McEwen: In looking at the state charter, we do have a number of new entrances. As we look at the new entrances, we want to have more frequent visitations with the start-ups. More frequent visitation will help us to address any early concerns or issues. In addition to that, we do want to streamline the process of opening up new branches. Right now, if someone comes in with a good audit review or examination review we can actually streamline the opening up a branch process to 30 days. The turnaround for them is, in the competitive nature for their bank, a lot better. So we want to be proactive in the industry, we want to make sure we’re strengthening those banks, that we’re dealing with issues early on and that we’re addressing any needs that they have as early as possible.
Talk about the issue of preemption, if you would.
Goldman: The Legislature in New Jersey can pass some pretty fair and consumer-protective laws a federally chartered institution, should they choose to, can come into the marketplace or be in the marketplace and choose to ignore altogether and there’s not very much you can do about it. Most federal institutions don’t do that, but there are problems with interest rates and certain types of loan products which from a federally chartered institution is beyond our ability to control and that creates an unlevel playing field which we don’t think is necessarily the fairest paradigm for state institutions to have to compete in.
We are going to take a look at ways to try to deal with the preemption issue and try to level that playing field a little more. I think we’re going to need a lot of help from the state legislators, we’re going to need a lot of help from the industry if that’s going to have an opportunity to succeed and it’s not a New Jersey-only issue. Obviously it’s a state and federal issue. A lot of our states are going to have to participate in expressing their dissatisfaction with the way the present state of the relative relationship is state-chartered versus federally chartered institutions. So that’s something I think we’d like to work on. And I think also trying to find ways to strengthen the state charter by allowing state-chartered institutions to grow their businesses across state lines in a way that will allow them to, rather than be regulated by multiple players every time they go into a nearby state, try to find a way to cut down on that level of regulation and allow them to grow with less interference.
We have a good current example of that with Unity Bank expanding over into the Lehigh Valley. What do they currently face as part of that process versus how you’d like to see it streamlined?
Goldman: Right now when they go into Pennsylvania they’re going to be regulated by the banking regulator in Pennsylvania as well as the banking regulator here in New Jersey. What we’d like to see is to try to find a way to have them subject only to the regulation in their home state and still be able to do business in another state. How we’re going to do that is still an open question, but we’d like to see the result if we can get there.
Federal institutions are regulated federally out of Washington and can do business in the 50 states. Now there still is some auditing by various state regulators of federally chartered institutions doing business in the state for compliance with, for example, some of the predatory lending statutes, but it’s nowhere near the level of regulation you have state to state.
So you see the department taking a more proactive role in standing up, as it were, for state-chartered institutions in the issue of parity?
Goldman: We are going to do that, but it’s not our task alone. I think the industry itself is going to have to participate strongly in saying they would like to see changes made and the changes frankly will have to come, not only, not even principally, on the state level necessarily but on the federal level, and so it may be necessary for the industry to become much more active in speaking to their congressional delegation about trying to change some of the regulatory patterns that have taken place in the last five or seven or 10 years.
Given the tensions that may exist on the parity issue between state and federal institutions, is there still good value to having a dual banking system?
McEwen: There’s tremendous value in having a dual banking system; competition is healthy. State-chartered and federally chartered banks create various different levels of competition for each other and that’s healthy for the state.
Goldman: It’s healthy for the country too.
It seems like our forefathers had a pretty good idea of what they were doing.
Goldman: They did. The dual system actually is interesting. If you go back in history, the first federally chartered bank was what Hamilton wanted. A number of his successors didn’t think so. Andrew Jackson certainly didn’t think so. The state-chartered institutions sort of filled the void for a very long time because there were no federally chartered institutions because the federal government was not in favor of having federally chartered institutions. So although it grew up that way, it worked out quite well.
Director McEwen, you had mentioned predatory lending as another area of concern on your agenda.
McEwen: One of the big things that we want to make sure that we are is not only friendly to the industry but that we’re looking to protect and safeguard the consumer against any of the predators out there that may try to violate predatory lending laws. So we want to make sure they’re enforced and we look at how they may be able to be made more fair to the institutions of New Jersey so they compete better on a national level.
We’ve had a predatory lending law for about two years now. Do you feel it’s worked to some extent or to a major extent?
McEwen: It has worked, but we want to make sure the playing field is level with federally chartered banks and that our banks can actually compete with them while protecting the consumer. We always want to keep in mind that the consumer needs to be protected and we have to make sure that our institutions in New Jersey are mindful of that.
What would you like to see four years from now that you can be really proud of having accomplished?
McEwen: Good question. The commissioner and I have had some discussions on some initiatives we’d like to see implemented. Keep in mind I’ve only been here a little over a week. One of the initiatives that we’ve talked about is education, so we’d like to partner with the industry and other state agencies to really put together a nice educational package to take out to the consumer.