Home > Banking Information & Regulation > Public Meeting Transcripts > PMT - Agendas June 25-26, 1998
Public Meeting Transcripts
Public Meeting Regarding Citicorp and Travelers Group
Thursday, June 25, 1998
Transcript of Panel Eleven
321 25 Panel Eleven is Claudino Otenez, . 322 1 2 Michelle Neugebauer, Cesiah Mullane, Jennifer 3 Lee, Iris Itzkowitz and Michael Green. 4 Ms. Neugebauer, am I killing that 5 name? 6 MS. NEUGEBAUER: Cesiah is going to 7 testify first. 8 MR. LONEY: I'm sorry? 9 MS. NEUGEBAUER: Cesiah is going to 10 testify first. 11 MR. LONEY: I am sorry. 12 Ms. Mullane. 13 MS. MULLANE: Good afternoon members 14 of the Federal Reserve Bank. My name is Cesiah 15 Mullane and I am a member of the Reinvestment 16 Committee of Cypress Hills and City Line. 17 I have lived in Cypress Hills since 18 1957 and I have spent a large part of those 41 19 years contributing to my community in every way 20 I can, working on issues such as education, 21 affordable housing, the prosperity of our 22 business community and the quality of life 23 issues, all of which impact the stability of my 24 neighborhood. 25 I volunteer at the Cypress Hills LDC, . 323 1 2 our local Twelve Towns YMCA, and my church. I 3 am involved with our very young New Visions 4 School, our Child Care Corporation, and the 5 Cypress Hills Community Coalition, which 6 succeeded in securing a zoning amendment to 7 protect our blocks. 8 I advocated for a new intermediate 9 school for 20 years, and a new elementary 10 school is being built right now to relieve the 11 awful overcrowding. And once a year on our We 12 Love Cypress Hills Day, we hold a parade and 13 street festival to celebrate our wealth of 14 cultural and ethnic diversity and our 15 successes, big and small. 16 I am passionate about my 17 neighborhood -- that is where I live, and 18 improving it is my lifelong work. 19 The Reinvestment Committee of Cypress 20 Hills and City Line was organized in May 1992 21 after Cypress Hills Local Development 22 Corporation and the City Line Coalition 23 published a joint housing plan for our 24 communities that showed a deplorable lack of 25 lending by our banks. . 324 1 2 For the past seven years, we have 3 collected and analyzed HMDA data for the seven 4 local lending institutions in our area, and met 5 with representatives of these banks, including 6 Citibank, to share our analyses and work 7 cooperatively to increase lending. 8 Cypress Hills and City Line are 9 sister communities. Their housing stock, 10 populations and economic status are quite 11 similar. 12 According to the 1996 census, Cypress 13 Hills and City Line are predominantly Hispanic 14 communities, 63 percent and 53 percent 15 respectively. The residents of these two 16 communities earn low to moderate incomes. In 17 1990, households earned median incomes of. 18 $23,138 and $25,318 respectively compared to 19 $29,832 for New York City as a whole. Hence, 20 Cypress Hills and City Line households have 21 incomes that are 78 percent and 85 percent of 22 the city's median. 23 The Reinvestment Committee's 24 membership consists of resident activists of 25 Cypress Hills and City Line and staff and board . 325 1 2 members of the Cypress Hills LDC. For the past 3 seven years we have analyzed HMDA data for our 4 census tracts, brought together the seven local 5 lending institutions that serve Cypress Hills 6 and City Line to discuss their performance and 7 ways they should increase lending, and worked 8 cooperatively with our banks to meet the credit 9 needs of area residents and businesses. 10 We have convened five community 11 forums on bank lending activity in their 12 communities where Home Mortgage Disclosure Act 13 data was reviewed and the committee's concerns 14 were discussed. Our concerns included a lack 15 of affordable mortgage products offered by the 16 local banks, a laissez-faire attitude towards 17 marketing and outreach, and a lack of 18 educational home buyer counseling services to 19 support first time home buyers. 20 We requested that the smaller banks 21 reinvest 1 percent of their deposits and that 22 larger multinational lending institutions, e.g. 23 Chemical pre1997, Chase and Citibank reinvest 5 24 percent of the local deposit base in mortgage, 25 refinancing and home improvement loans. . 326 1 2 We also demanded expanded home 3 ownership counseling services, marketing of and 4 participation in affordable housing programs, 5 increased outreach in our area of support of 6 the Cypress Hills LDC mortgage foreclosure 7 prevention efforts. 8 The Reinvestment Committee has slowly 9 turned around the red lining of our 10 communities. Do I have more, or is my time up 11 or do I have the minutes? 12 MR. LONEY: If you can briefly. 13 MS. MULLANE: Let me find my closing. 14 Citibank in 1996 approved no home purchase 15 loans, had 72 percent denial for home 16 improvement and refinancing applications. 1997 17 saw the least yet, eight loans for a total of 18 $235,000. 19 I call your attention to a chart just 20 showing exactly what the activities in City 21 Line and Cypress Hills have been. '94 was a 22 wonderful year that passed even our committee 23 lending target, but after '94 it has not been. 24 The red lining has been dismal, 25 although Citibank has pledged to work on this . 327 1 2 through their lending commitment by their own 3 admission this translates into an 8 to 10 4 percent increase in lending for the New York 5 City area. In my community, this is less than 6 one home mortgage loan. In my community, you 7 have to do better than that. 8 Thank you. 9 MR. LONEY: Let me again state my 10 considerable ignorance, and ask you where 11 exactly is Cypress Hills? 12 MS. MULLANE: It's in the 13 northeastern side of Brooklyn. It's right next 14 to Queens. We're surrounded by 18, 20 15 cemeteries. Our next door neighbor is 16 Woodhaven, Queens. 17 MR. LONEY: Okay, I have a sense of 18 that. Okay, thank you very much. 19 We can take your statement and if you 20 make sure that the folks out at the 21 registration table get a copy of what you have 22 there, the entire thing will go into the 23 record. 24 MS. MULLANE: I gave them a copy. 25 MR. LONEY: Thank you. . 328 1 2 Ms. Neugebauer. 3 MS. NEUGEBAUER: Good afternoon. My 4 name is Michelle Neugebauer, and I'm the 5 executive director of the Cypress Hills Local 6 Development Corporation. My not-for-profit 7 community development organization was founded 8 in May, 1983, with wonderful dedicated 9 community residents like Cesiah Mullane. 10 My organization runs approximately 11 twenty different programs that are focused in 12 the areas of housing preservation, economic 13 development, and youth services, which are the 14 three greatest needs of our community. 15 We developed over 125 units of 16 affordable housing, renovated 130 storefronts 17 in our commercial strip, secured over a million 18 dollars in home improvement loans for Cypress 19 Hills small home owners, started a New Visions 20 public elementary school and launched a very 21 successful child care initiative that has 22 created sixty jobs in our neighborhood, and now 23 provides fair for 245 children. 24 Seven years ago, as Cesiah has 25 described, we came together with our sister . 329 1 2 community, City Line in Brooklyn, to form the 3 Reinvestment Committee of Cypress Hills and 4 City Line. My testimony really relates to the 5 Cypress Hills LDC's relationship with Citibank 6 and some of our concerns about the merger. 7 In general, Cypress Hills LDC has had 8 a very positive relationship with Citibank. 9 They've actively participated in the 10 reinvestment effort in terms of sending 11 representatives to our annual banking forums, 12 trying to work out solutions to a rising 13 mortgage foreclosure problem in our 14 neighborhood, helping to establish a mortgage 15 foreclosure action program, training our staff 16 in underwriting and financial packaging and 17 providing summer intern help to our 18 organization. 19 They collaborated very closely with a 20 program that some of the other people have 21 testified about Partners in Progress. Citibank 22 is giving us a $50,000 grant to build a 23 minimall on our commercial strip in a very 24 desolate section of Fulton Street where we hope 25 to bring much needed retail activity and jobs . 330 1 2 to our neighborhood. 3 Having said all that, we're still 4 very deeply concerned about some of the current 5 Citibank performance in terms of lending in our 6 neighborhood, and the banking practices. 7 We feel that, you know, Citibank 8 could make a specific commitment to lending 9 targets in our area, some of the targets that 10 Cesiah has discussed, trying to reinvest at 11 least 5 percent of the local deposits in 12 mortgages, refinancing and home improvement 13 loans. We want Citibank to maintain their full 14 service branch in City Line. 15 That City Line branch is essential to 16 the livelihood of the Liberty Avenue commercial 17 strip. That full-service branch services the 18 entire populations of Cypress Hills and City 19 Line, which is 48,000 people. These 20 communities, the communities in which I work, 21 Cypress Hills, and City Line are both 22 communities predominantly made up of immigrants 23 and have substantial elderly population. 24 We don't have a computer on every 25 desk or in every home in our neighborhood. We . 331 1 2 don't have access to technology, and many 3 people don't feel comfortable with it. As one 4 person on our reinvestment committee recently 5 said: People in our neighborhood work so hard 6 for their money, they want to feel it, they 7 want to touch it, they want to talk to a human 8 being when they do transactions related to 9 their money. 10 In 1995 Citibank closed a branch very 11 close to our neighborhood in Starret City and 12 that changeover was fought unsuccessfully by a 13 local community board. In anticipation of 14 Citibank automating our branch, we got out 15 there on the streets in the dead of winter and 16 we collected a petition with over 300 17 signatures asking Citibank not to automate our 18 branch, and they listened to us and they didn't 19 automate the branch, and we hope they continue 20 to listen to us. 21 The Reinvestment Committee believes 22 that the fees and the minimum deposits required 23 by Citibank really don't meet the credit needs 24 of our low and moderate income communities. 25 And we've attached to my testimony a comparison . 332 1 2 of the minimum deposits and fees required by 3 the seven local lending institutions in Cypress 4 Hills and City Line and Citibank really has the 5 highest requirement. 6 Our organization worked with people 7 that are in danger of losing their homes to 8 foreclosure. Citibank has an on the ground 9 team in New York City that assigns people to 10 work with delinquent borrowers to try to, you 11 know, work out forbearance agreements and other 12 things that could prevent foreclosures. 13 In summary, we feel that that on the 14 ground team really needs to be empowered a 15 little more. They have to go through St. 16 Louis, Missouri to get anything approved. 17 People have to wait very long periods of time 18 in order to get those work-out agreements and 19 those are things we asked to be considered in 20 this mega transaction that's going to be 21 happening between Citibank and Travelers. 22 We thank you for listening to our 23 concerns. 24 MR. LONEY: Thank you. Who did you 25 say had to go to St. Louis? I missed that. . 333 1 2 MS. NEUGEBAUER: The people at 3 Citibank that work with delinquent borrowers on 4 forbearance agreements and other workouts. 5 MR. LONEY: Thank you. Ms. Lee. 6 MS. LEE: Good afternoon. My name is 7 Jennifer Lee, and I work for the Cypress Hills 8 Local Development Corporation. In my role 9 there I work with the Reinvestment Committee of 10 Cypress Hills and City Line. I worked with 11 this committee for three years. The 12 Reinvestment Committee has joined with other 13 individuals and groups throughout the city to 14 form the Citibank Travelers Watch. 15 As my colleagues have said, Cypress 16 Hills Local Development Corporation and the 17 City Line Coalition joined forces in 1992 to 18 form the Reinvestment Committee of Cypress 19 Hills and City Line to promote reinvestment in 20 East New York, Brooklyn communities of Cypress 21 Hills and City Line. 22 I would like to take this opportunity 23 to reiterate many of the concerns my colleagues 24 have covered as well as some additional 25 concerns. . 334 1 2 My professional training is in social 3 work administration. I'm not a lawyer. 4 However, from the understanding I have of the 5 Glass-Steagall and Bank Holding Company Act the 6 application is not legal. Glass-Steagall 7 forbids a Federal Reserve member bank from 8 affiliating with another company that deals in 9 securities. Travelers deals in securities, so 10 does Salomon Smith Barney which now has plans 11 to expand this activity by purchasing overseas 12 investment company. 13 The Bank Holding Company Act 14 explicitly forbids the bank holding company, 15 which is what Travelers is applying to become, 16 of dealing in insurance activities. Travelers 17 is primarily an insurance company. 18 If the law allows for two years to 19 divest of these activities, where is the 20 divestiture plan? They seem to be in expansion 21 rather than contraction mode. If there is no 22 plan, I cannot understand how they plan to 23 divest such a large amount of business activity 24 in such a short period of time. 25 It seems they are banking on the law . 335 1 2 changing within the next two years. I call on 3 you as regulators to uphold the existing laws 4 you were given jurisdiction over. 5 In the event that my understanding of 6 the law is flawed and you find the intent to be 7 legal, I request that you consider the impact 8 this may have. I speak about Cypress Hills and 9 City Line where I have worked for the past four 10 years. 11 Between 1995 and 1997, Citibank only 12 originated 20 loans in Cypress Hills and City 13 Line for a total of $1,509,000. This is less 14 than one third the amount lent in 1994. In 15 1996 no home purchase loans were approved for 16 the 22 census tracts for Cypress Hills and City 17 Line and 72 percent of the applicants for home 18 improvement and refinancing loans were 19 rejected. 20 As Cesiah spoke of, the Reinvestment 21 Committee has asked for the last several years 22 that all major commercial banks in our 23 communities reinvest 5 percent of their local 24 deposits in affordable housing credit products. 25 For Citibank this is equivalent of 5 . 336 1 2 percent of 30 million dollars annually. 3 Citibank has fallen short of its goal every 4 year since 1995. 5 Remarkably, the beginning of this 6 decline in lending corresponds with Citibank's 7 rash of downgrading the ATM centers and branch 8 closings. Given Citibank's penchant for 9 closing branches and converting full service 10 branches to technology centers, the 11 Reinvestment Committee of Cypress Hills and 12 City Line is wary of Citibank's assurances of 13 maintaining services that will adequately meet 14 the credit needs of our community. 15 Many seniors, new immigrants and 16 merchants use the branch located in City Line. 17 These consumers are not familiar with, nor are 18 they comfortable using technology with no human 19 contact. Neighborhoods are unique and have 20 different credit needs which cannot be 21 addressed by a machine, or by someone in 22 another state halfway across the country. 23 As Michelle stated, full service 24 banking is really needed in low income 25 communities such as ours. . 337 1 2 Citibank has the highest minimum 3 balance of any bank with branches in or close 4 to Cypress Hills. The minimum balance to avoid 5 paying a monthly fee is twice as high as any 6 other bank with the requirement of six thousand 7 dollars. As Cypress Hills and City Line are 8 low to moderate income communities this 9 precludes many from being able to use their 10 banking services. 11 As Michelle was mentioning, 12 Citibank's on the ground team helps homeowners 13 or tries to help homeowners work out when they 14 are facing any financial crisis. If Citibank 15 increases its lending, it has to increase its 16 own infrastructure by creatively working. The 17 local on the ground team must have the 18 authority to do this type of work. Again, I 19 call on you regulators to uphold the existing 20 laws, and thank you for this. 21 THE COURT: Mr. Green. 22 MR. GREEN: My name is Michael Green 23 Inner City Prospective Homeowners Association. 24 I speak in Spanish. The guy 25 translate for all you. . 338 1 2 (Translated by Mr. Ortiz) 3 The practice, this discriminatory 4 practice of Citibank are in part the fault of 5 the bank for not sufficiently enforcing the 6 Community Investment Act. 7 I am looking for credit and insuring 8 offered by Travelers Group, but it's not given 9 equally. I will be hurt if the Federal Reserve 10 Bank approves this application, especially 11 since it's an illegal merger. 12 We would like to thank the Federal 13 Reserve Board for this public hearing, but we 14 also think that the decision of the Federal 15 Reserve Board has been made, even though it is 16 an illegal merger. 17 In 1995 I came here to testify 18 against the Chase Chemical merger. I spoke and 19 you told me thank you, and I heard groups speak 20 on behalf of Chase and Chemical, and about the 21 good of the merger, and it hasn't been a good 22 merger. 23 We spoke at the Federal Reserve 24 Board. The Federal Reserve Board approved the 25 merger in short, and said that our group had no . 339 1 2 right to take our decision to the courts. 3 In the last couple of years Chase had 4 sold about a hundred branches in New York, and 5 it's very difficult for us now to get credit. 6 We have been able to obtain five branches from 7 other banks while Citibank and Chase have been 8 continuing to close branches. 9 The proposed merger of Citibank and 10 Travelers is very different from the merger of 11 Chase and Chemical. The merger of Citibank and 12 Travelers is illegal. For a bank and insurance 13 company to merge that would be like changing 14 the law. If the Federal Reserve Board thinks 15 that the law is important, then you should deny 16 the application and the merger. 17 Our organization has asked for a more 18 formal procedure for the application where we 19 would ask questions to Citibank and Travelers 20 officials. In that procedure we will be able 21 to amass more information considering that it 22 has been short of time. 23 Thank you. 24 MR. LONEY: Thank you, Mr. Green. 25 Mr. Otenez. . 340 1 2 (Translated from Spanish by Mr. 3 Ortiz) 4 MR. OTENEZ: Good afternoon, my name 5 is Claudino Otenez. I am a member of the Inner 6 City Press Community on the Move and part of 7 the Homesteader's Association. 8 My experience with the Citibank has 9 been negative or more accurately nonexistent. 10 Citibank currently has one branch 11 open in the South Bronx. I'm a person looking 12 for credit, insurance and I will be hurt if the 13 Federal Reserve Board approves this 14 application. 15 I would like to thank the Federal 16 Reserve Board for this public hearing, but we 17 think that the decision of the Federal Reserve 18 Board has already been made, even though it's 19 and illegal merger. 20 In 1995 we came here to protest the 21 merger of Chase and Chemical Bank. We spoke 22 and we heard many groups that they talk about 23 how good the Chemical and Chase merger would 24 be. The Federal Reserve Board approved the 25 merger. The Federal Reserve Board approved the . 341 1 2 merger and told us that we did not have a right 3 to have a judge check the decision. 4 In the last couple of years Chase has 5 closed about one hundred branches in New York. 6 It is very hard to obtain credit now. We have 7 been able to obtain five new branches 8 throughout other banks, while Chase and 9 Citibank continues to close theirs. 10 The proposed merger of Citibank and 11 Travelers is very different than the Chase and 12 Chemical mergers. The merger of Citibank and 13 Travelers is and illegal merger. The merging 14 of an insurance company and a bank would be 15 changing the law. If the Federal Reserve is 16 serious about the law, they would deny the 17 application of the merger of Travelers and 18 Citibank. Thank you. 19 MR. LONEY: Thank you. Any questions 20 of this panel? If not, I will thank the panel 21 very much for coming.
Last update: December 3, 2010