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 Two
66 20 MR. LONEY: Thank you. 21 Are there any questions for the 22 panel? Thank you very much. 23 Because some people who were 24 scheduled to testify on Panel One and Two 25 haven't arrived yet, I am going to ask that . 67 1 2 Panel Three, made up of Gloria Waldron, Chitra 3 Desai, Matthew Lee, Jose Torres, Narcisco Ortiz 4 and Gwendolyn Jacobs come up. 5 I understand that you are all ready. 6 Since this panel is made up of 7 representatives from two organizations in the 8 City Press and Community On The Move and ACORN, 9 the way we are going to proceed, if I 10 understand, Mr. Lee wants to make some 11 technical, legal objections first. We will 12 take a couple of minutes to do that. We will 13 then follow with ACORN dividing its time in 15 14 minutes between its members, however you wish. 15 And then the City Press can divide the 16 remainder of the time as you wish to make more 17 fulsome statements. 18 Mr. Lee. 19 MR. LEE: Thanks, Mr. Loney. 20 There has been sort of -- the initial 21 panels were somewhat surreal. On behalf of 22 Inner City Press, Community On The Move, and 23 the Delaware Reinvestment Action Council and 24 certain other groups opposed to the merger as 25 an illegal combination of banking and insurance . 68 1 2 underwriting by companies with negative records 3 in low- and moderate-income areas and to people 4 of color, we want to put in some actual 5 objections even to the proceeding going 6 forward. 7 We have asked that the Federal 8 Reserve Board dismiss the application, both on 9 the grounds that Travelers has presented no 10 plan to divest insurance underwriting -- 11 although, the Bank Holding Company Act makes 12 clear that it is to prohibit the combination of 13 the two, and we heard earlier today, if it 14 proves necessary to divest, essentially absent 15 a divestiture plan from Travelers the 16 application should be dismissed. 17 Second, we think it should be 18 dismissed based on improper communications that 19 have taken place between Travelers, Citicorp 20 and the Federal Reserve Board. 21 Prior to the deal even being 22 announced and the application being submitted, 23 not only did the two CEOs of the two 24 institutions meet with Chairman Greenspan, we 25 found that, in fact, there was very detailed . 69 1 2 preapproval sought for particular practices, 3 including cross-selling and the sharing of data 4 within the two-year divestiture period, which 5 totally contradicts the theory of selling it 6 off. We think it is tainted. 7 We also asked that Chairman Greenspan 8 and McDonough be recused from deliberation and 9 decision making on the application because they 10 have already indicated their support of and, in 11 fact, essentially preapproval of the proposal. 12 There is also -- a lot of information 13 still remains withheld from the public. Large 14 portions of the applications have been withheld 15 and haven't been released. As noted, Travelers 16 has not submitted any plan to divest and has no 17 intent to divest. And finally on that front, 18 the Fed continues to withhold documents about 19 the communications it had with the companies 20 before the proposal was even announced. So the 21 application should have been dismissed. 22 We think the common period has to 23 remain open for at least 20 business days after 24 all that information is released. 25 Thanks. . 70 1 2 MS. JACOBS: My name is Gwendolyn 3 Jacobs. I am the president of New York ACORN, 4 and I am testifying today for New York ACORN 5 and for Maude Hurd, ACORN's national president, 6 who is not able to be here. 7 In April ACORN did a study of 8 Citibank's record on single-family lending to 9 borrowers of different races and incomes in ten 10 cities; we also looked at their lending record 11 by neighborhood in six cities. Finally, we 12 compared Citibank's performance to the 13 performance of other institutions. 14 What we found is that if you are a 15 lower income person of any race, and especially 16 if you are African-American or Latino, you had 17 better not look to Citibank for loans. 18 Citibank is not looking for our business, and 19 if we go to them, we are much more likely to be 20 rejected. Citibank is not making loans in our 21 communities and not meeting its basic legal 22 obligation to serve all potential boroughs in 23 the service areas. 24 Before I go over some of the details 25 of Citibank's outrageously bad record, there . 71 1 2 are two important things to keep in mind. 3 First, don't dismiss the numbers on 4 Citibank's failure to serve low- and 5 moderate-income people with the thought we 6 can't afford to buy homes anyway. In cities 7 around the country, people with moderate 8 incomes, below 80 percent of the area median, 9 and people with low incomes, below 50 percent 10 of the area median, even those with incomes 11 below 30 percent of the area median, can and do 12 buy homes. We can and do buy homes, and we can 13 and do pay our mortgages when banks will lend 14 to us. 15 When banks like Citibank won't lend 16 to us, we pay someone else rent forever -- 17 often more rent than we would pay monthly for a 18 mortgage -- without ever building the equity of 19 owning a home. Or we are forced to pay 20 outrageous interest rates at mortgage 21 companies. Potential home buyers who would 22 contribute to community growth and stability 23 are forced to move in order to get a loan; 24 houses are left abandoned, and neighborhoods 25 deteriorate. . 72 1 2 In 1996, the most recent year for 3 which data was available, a Latino applicant 4 for a home loan at Citibank was 300 percent 5 more likely to be rejected than a white 6 applicant. An African-American applicant was 7 350 percent more likely to be rejected than a 8 white applicant. 9 How does this compare to other 10 institutions? 11 Citibank is much worse than your 12 average bank. Citibank's rejection ratios -- 13 the rate at which minority applicants are 14 turned away as compared to white applicants -- 15 are substantially worse than the average 16 rejection ratios of all lenders in the 15 major 17 cities that ACORN has studied. 18 On average, Latinos were rejected 1.7 19 times as often as whites in 1966 compared to 20 three times as often as Citibank; and 21 African-Americans on average were rejected 2.1 22 times as often as white applicants compared to 23 3.6 times as often as Citibank. 24 How does this compare to Citibank's 25 own performance? Citibank's own performance is . 73 1 2 getting worse, not better. Citibank's loans to 3 African-Americans and Latinos fell by more than 4 50 percent in 1995 and 1996. The share of 5 Citibank's single-family mortgages that went to 6 Latino and African-American families fell 7 dramatically from 36 percent in 1995 to 13 8 percent in 1996. 9 Even when we looked only at 10 relatively high-income applicant -- families 11 earning $50,000 and $60,000 a year and more -- 12 we found that African applicants were rejected 13 nearly three times as often as whites, and 14 Latino applicants were rejected more than four 15 times as often as whites. 16 One thing that is particularly 17 disturbing about Citibank's record is the fact 18 that not only do they reject minority 19 applicants at high and growing rates, but also 20 their practices -- rejection, location 21 decision, advertising, outreach, customer 22 service -- who knows what combination of 23 elements -- seem to be working increasingly to 24 discourage or prevent minority families from 25 even applying for loans. . 74 1 2 While the bank's total number of 3 applications per year is growing, both the 4 percent of their applications from minority 5 borrowers, and even the absolute number of such 6 applications shrank between 1996 and 1995 to 7 unacceptable levels. Total applications from 8 African-Americans and Latinos fell by 47 and 48 9 percent, respectively. 10 What if we look at a neighborhood, 11 not individual borrowers, or if we focus on 12 income alone, rather than race? 13 Citibank has systematically redlined 14 lower income neighborhoods of all races, as 15 well as minority neighborhoods. 16 For example, Citibank made 104 loans 17 in Baltimore area in 1996. Only 13 of these, 18 however, were made inside the city limits -- 19 where the Citibank branch itself is located. 20 Looking outside as well as inside the 21 city, nearly half of the Baltimore area 22 neighborhoods, 47 percent, are low and moderate 23 income -- that is, with average incomes below 24 80 percent of area medians -- but these 25 neighborhoods received only 17 percent of the . 75 1 2 loans from Citibank. Neighborhoods with 3 average income below 50 percent of the area 4 median are 16 percent of the metro area, but 5 received only 2 percent of Citibank's 6 mortgages. Neighborhoods with more than 90 7 percent minority residents make up 1.54 percent 8 of the Baltimore metro area, but received only 9 one mortgage loan. One mortgage loan. 10 In Miami, where nearly half -- so you 11 can see from the practices that have taken 12 place Citibank does not have a good lending 13 record where blacks and Latinos are concerned, 14 and merging with Travelers is going to give 15 them more, make them bigger, but bigger does 16 not necessarily mean better. 17 MR. LONEY: Gloria Waldron. 18 MS. WALDRON: My name is Gloria 19 Waldron. I am a member of the New York ACORN. 20 I am testifying in part for Ted Thomas, who is 21 the president of Chicago ACORN, and was not 22 able to be here. 23 I want to say first for Ted and 24 others in Chicago and around the country how 25 disappointed and angry we are that the Federal . 76 1 2 Reserve is holding hearings on a merger of this 3 magnitude here in New York. A huge merger is 4 being proposed between two giant companies with 5 bad records, and it is a merger that we and 6 many of us believe is illegal under current 7 banking law. 8 Tens of thousands of consumers across 9 the country will be affected by this merger, in 10 Chicago and in Oakland, Miami, and everywhere. 11 They are being denied the opportunity to 12 comment on it in person and leave their 13 messages to the regulators about what is at 14 stake here. 15 In Chicago in particular I know that 16 not only ACORN but also the Chicago Community 17 Reinvestment Coalition and the Woodstock 18 institute and others, groups with a long, 19 active, and successful history of fighting for 20 fair access to credit have asked for hearings. 21 When the Federal Reserve Board refused, the 22 Woodstock institute proposed a video hearing, 23 but the Board said that that was too 24 complicated, too. When we see that the Federal 25 Reserve Board cannot even be bothered to take . 77 1 2 the trouble to be thorough in hearing from the 3 public about a merger this important, we are 4 pretty upset. 5 Now I want to talk about three 6 things. First, the Travelers record of 7 ignoring inner city and minority neighborhoods; 8 second, the total inadequacy of Citibank's 9 announced CRA commitment; and, third, the legal 10 and dangerous nature of this proposed merger. 11 Travelers Insurance is not serving 12 lower income, urban and minority neighborhoods. 13 We don't have as many numbers on Travelers as 14 we do on Citibank, because they do not have to 15 make their numbers public. That is part of the 16 problem. What we do know isn't good though. 17 Insurance industry studies have 18 pointed out that most insurance agent's 19 business comes from within three miles of the 20 office location, and office location was a key 21 element in the Justice Department's Fair 22 Housing Suit against the American Family 23 company in 1995. So, in order to back up what 24 we know from the experience about Travelers' 25 performance, ACORN has taken a look at their . 78 1 2 office locations and also the advertising 3 practices. 4 What we have found is that in the ten 5 large racially mixed cities and their 6 surrounding metro areas that we looked at, 7 three out of four Travelers agents are located 8 in zip codes where whites make up more than 85 9 percent of the population. 10 The Travelers' agents are located 11 mostly in suburban areas, especially wealthier 12 and whiter ones. Fewer than one-third of the 13 agents overall were located within the city 14 limits, and this ratio was especially bad in 15 certain cities. In D.C., only 13 percent are 16 within the city limits; in Bridgeport, only 8 17 percent are within the city limits; and listen 18 to this, in Philadelphia, only 2 percent of 19 Travelers' agents are located -- we have the 20 maps here to show you the locations. We have 21 the maps here. You can peruse it afterwards. 22 The Travelers' agents are located 3 23 miles away from the low- and moderate-income 24 and minority neighborhoods. 93 percent of 25 Travelers' insurance agents in the cities we . 79 1 2 looked at were further than 3 miles from ACORN 3 neighborhoods, while, as I said, industry 4 studies show that most of an agent's business 5 comes from within 3 miles of the office. In 6 Philadelphia Travelers' agents are on an 7 average more than 20 miles from central North 8 Philly. In New York, the average distance of 9 Travelers' agents from downtown Brooklyn is 24 10 miles. 11 These maps let you see where 12 Travelers' offices are and aren't in New York 13 and Philly. 14 Limited information about Travelers 15 is available for average consumers, especially 16 in large cities. The company doesn't list many 17 agents in the phone book, and when it does list 18 it is most often in suburban books. Unlike its 19 competitors. Travelers does not advertise in 20 city telephone books. 21 In contrast, the company's Internet 22 home page -- which is much less accessible to 23 low- and moderate-income people, as well as 24 minorities who are below rate of Internet 25 access than the population as a whole -- list . 80 1 2 many more agents than do the phone book. 3 MS. DESAI: My name is Chitra Desai 4 and I am a proud member of ACORN. I will 5 continue. Gwen Jacobs, the president, has 6 spoken before. 7 Citibank has now announced a 8 so-called commitment to low-income areas to go 9 with its merger proposal. We think it is much 10 too little and much too vague. 11 Citibank has promised $115 billion 12 over ten years, which is only 2 percent of its 13 assets annually. That is 2 percent of its 14 assets for African-Americans and low- and 15 moderate-income people. I call it insulting, 16 and so do we at ACORN. 17 Other banks involved in recent 18 mergers have promised much more -- 6 percent 19 for Nationsbank; 5.5 percent for Bank of 20 America, etc. 21 Even within the 115 billion, most of 22 what Citibank has promised is consumer lending, 23 like credit cards and auto loans. This will 24 not do anything to deal with their basic 25 problem with making home loans or small . 81 1 2 business loans in our neighborhoods. 3 Finally, not only do Travelers and 4 Citibank each have records of shutting the door 5 to credit, home ownership and insurance in the 6 faces of low- and moderate-income and minority 7 people -- I repeat, in the faces of low- and 8 moderate-income and minority people -- but the 9 giant combination they are proposing breaks 10 banking laws designed to protect the public 11 from too close relationships between banks and 12 other kinds of companies, and make sure that 13 banks and other kinds of companies are 14 regulated as they need to be. 15 These laws were passed by Congress -- 16 elected by the American people -- and they have 17 not yet been changed by Congress. We do not 18 think that the Federal Reserve Board on its own 19 should be deciding to change them or to allow 20 special exceptions. 21 Citibank and Travelers alone already 22 have the power to block people in my 23 neighborhood and in neighborhoods like mine 24 around New York and around the country from 25 getting the financial resources we need to have . 82 1 2 a fair chance in this economy. They are doing 3 it already. 4 I am honestly angry and scared at the 5 thought of their getting together, getting 6 bigger, getting even less interested in dealing 7 with anyone who is not already part of their 8 world. I am angry personally, and the voices 9 of the people will be heard. 10 (Demonstration) 11 MR. LONEY: We need some order, 12 please. 13 MR. HODGETTS: Mrs. Jacobs, before 14 you leave, you mentioned a study you did on 15 lending. If you haven't submitted that, will 16 you submit it, please? 17 MS. JACOBS: Certainly. You will get 18 it tomorrow. 19 MR. LONEY: Mr. Lee, you want to go 20 first? 21 MR. LEE: Sure. In terms of surreal, 22 obviously we had one panel saying how great 23 Citibank is in Stamford, Connecticut, or in 24 Co-op City in the Bronx. Our organization is 25 headquartered in South Bronx, although we now . 83 1 2 do work elsewhere. 3 Despite what Ms. Flaherty said on the 4 Citibank panel, in the last two years Citibank 5 has closed seven branches in the Bronx. They 6 haven't really replaced it with any kind of 7 meaningful technology. Elderly people, at the 8 same time -- I guess there was other testimony 9 about that -- have had to travel a mile and a 10 half or two miles to go to another Citibank 11 facility. Citibank had first offered to run a 12 van and then stopped running the van after 13 about a month. 14 So what we have decided to focus 15 on -- because we are aware of the Fed record -- 16 the Federal Reserve Board, despite holding 17 these hearings, in the case of Chemical and in 18 the case of First Union Costars, in the case of 19 Wells Fargo, First Interstate, since 1977 the 20 Fed has denied about four mergers on CRA 21 grounds. So in a way I don't want to say -- I 22 think that maybe there is a new mood afoot, but 23 in this merger it is not -- I think to turn the 24 public median into a referendum on their pledge 25 is only serving the bank. . 84 1 2 The pledge is bogus. That is our 3 position. More than half of it is credit 4 cards, which no other bank is included in a 5 pledge. The thing about it is, also, it is not 6 even -- the pledge is not binding in any way. 7 It is essentially a press release. But the 8 thing is, to even get into that, we are going 9 to hear, I guess, later today from some 10 witnesses saying with the pledge they feel that 11 the support will still come through. I have 12 seen letters of support from symphonies in Boca 13 Raton, Florida, things like that. These are 14 fine. We are all for the symphony. 15 I think the simplest ground we want 16 to focus on is that this merger is illegal 17 under current law, that for the Fed to even be 18 considering approving it is being totally 19 remiss in its duty. The Fed doesn't write the 20 law. Congress writes the law. Congress wrote 21 a law that says no company should own banks and 22 insurance underwriting operations at the same 23 time. It is totally clear. 24 At the time it was written, companies 25 were given two years to sell off nonpermissible . 85 1 2 things. The purpose of the two years was to 3 separate the things. We have gone back and 4 looked at legislative history. Law was passed. 5 To bring up TransAmerica, which used to own 6 banks and insurance companies, and Oxidental 7 Life, which used to own the same. 8 Mr. Prince, earlier today -- just for 9 the record, we sort of tracked Mr. Prince 10 around the eastern seaboard for the last few 11 months, in the sense that we did 12 cross-examination of Mr. Prince at the Delaware 13 Insurance Department in early June. 14 Under oath Mr. Prince said, 15 essentially said, they have absolutely no 16 financial projections of what would happen if 17 they sold off the insurance and essentially no 18 plan to sell the insurance. I guess they 19 honestly believe that the Fed -- based on 20 having checked with the Fed before announcing 21 the deal -- likes the deal and would give 22 extensions even beyond the two years. 23 Here is something, because I can't -- 24 to shift into saying, well, no credit cards, 25 let's say Citibank tomorrow said, OK, no more . 86 1 2 credit cards. It is the "emperor has no 3 clothes." In other words, it is illegal. This 4 is actually one where for the Fed it is pretty 5 straightforward in terms of not -- the Fed is 6 lobbying for a financial modernization bill, 7 but that is not the law. And I think the Fed, 8 by lobbying for it, it is clear that it is not 9 the law. 10 There are some sort of key things we 11 want to put in and then we will go back to the 12 same analysis that ACORN did very well. 13 The Fed's own -- hang on a second. 14 This is important, because this is a 15 regulation. It is the Fed's own regulation. 16 The Fed's own regulation says any 17 time -- Travelers claims to have two years. 18 They would have a two-year waiver. The Fed's 19 own regulation, regulation-wide Section 20 225.138, says, "when a time period has been 21 fixed for divestiture, the effected company 22 should endeavor and should be encouraged to 23 complete the divestiture as early as possible 24 in this specific time period." 25 It goes on to say, "the company . 87 1 2 effected should be asked to submit a 3 divestiture plan promptly and it should be as 4 specific as possible, and no extension should 5 be granted unless the company has established 6 that it has made a good faith effort to 7 accomplish the divestiture." 8 For Travelers to even be saying maybe 9 they could get extensions is a joke. If they 10 wanted to sell their insurance operations, they 11 could sell it tomorrow. To claim in two years 12 to haven't sold it yet, there is obviously no 13 good faith effort. 14 There is another key point. They 15 claim the two years is automatic. We think 16 that the whole proposal here is directed at 17 evading the Bank Holding Company Act. It is 18 clear that it is. 19 There is a Fed precedent right on 20 this point, where an insurance company called 21 Fortis -- it is a foreign insurance company -- 22 it bought a Belgian bank with a branch in the 23 United States. Fed says you have to sell the 24 bank in two years, and during the two years no 25 steps shall be taken to identify the insurance . 88 1 2 products as being related to the banking 3 products; there shall be no cross-marketing of 4 the bank's banking products and insurance 5 products; Fortis and bank shall not share 6 customer lists or otherwise share information 7 relating to the customers of either; and the 8 bank may not expand beyond the size at the time 9 of the combination. 10 We think these are -- the reason that 11 Travelers and Citibank checked with Chairman 12 Greenspan and the general counsel of the Fed 13 before announcing the deal is because they 14 couldn't live with these conditions. With 15 these conditions, they wouldn't announce the 16 deal. So they checked with the Fed to say, 17 this is a little different; that is Fortis, but 18 we are Travelers and Citibank. 19 As ACORN said, the power -- this is 20 not a small bank. These are among the most 21 powerful people in the country. They go down 22 to Washington, and people are running for 23 Congress; everyone will listen to them. 24 For the Fed to have indicated in 25 advance that its own prior decisions on other . 89 1 2 banks' applications mean nothing and that 3 because the Fed likes this idea, the idea of 4 this deal, it will go forward and it will sort 5 of pretend to hear about consumer issues. 6 A main consumer issue here -- one of 7 the reasons the law is the law, but if you 8 wanted to know why the law is the law -- you 9 give information to your health insurer that 10 you don't want to give to your bank. Your 11 health insurer knows if you're sick, might know 12 if you're dying. I guess that is their job. 13 Your bank doesn't know that; don't want your 14 bank to know that. If a bank knows that, they 15 may not extend credit to you. They may call in 16 the loans that you have. In a way, I don't 17 even feel this is the forum to have to sort of 18 make the argument of why insurance and banking 19 should be separate. 20 The law is the law, and that's the 21 current law. They have applied under the 22 current law. It is clearly invasive. The Fed 23 should never have given any preindication that 24 it might try, and it should be dismissed and 25 denied. . 90 1 2 I am going to turn over to Narcisco 3 to talk about the community record of Citibank. 4 MR. ORTIZ: Good morning. My name is 5 Narcisco Ortiz. I live in New Jersey, where 6 Citibank made 108 loans to whites while only 7 making five to African-Americans and two to 8 Hispanic Americans. 9 Last week, a week ago today, to be 10 exact, we went down to Trenton, to the New 11 Jersey Insurance Department, to oppose 12 Travelers' application to acquire a Citicorp 13 subsidiary in New Jersey. We're concerned 14 about Travelers redlining, including by its 15 property counsel -- to insure First Trenton 16 Indemnity. Travelers, last week, hired the 17 ex-Attorney General of New Jersey to argue that 18 the public should not be able to even 19 participate in the required public hearing. 20 We did participate, and we asked the 21 court to take a look at Travelers' arguments. 22 But the other community groups here today 23 should know that if Travelers buys Citicorp, 24 this is the kind of abusive power attitude you 25 will be facing. . 91 1 2 Inner City Press, Community On The 3 Move, has put in filings with the Fed that 4 argue not only that this merger will be 5 illegal, but that Citicorp and its bank have 6 weak and disparate lending practices. I am 7 going to review some of the analysis for the 8 record. 9 Entity-wide in 1996, the most recent 10 year for which industry data is publicly 11 available, Citibank New York State denied 52 12 percent of mortgage loan applications from 13 African-Americans, while denying only 20 14 percent of applications from whites. Citibank 15 New York State's rate disparity between 16 African-Americans and whites of 2.6 to 1 is 17 significantly higher than the rest of the 18 industry. 19 In the past two years, Citibank has 20 closed or downgraded seven of its already too 21 few branches in the Bronx. Citibank, the 22 second largest bank in New York City and in the 23 United States, has only one bank branch in the 24 entire south Bronx where half a million people 25 live. Overall, in the New York City . 92 1 2 metropolitan area in 1996, Citibank made 3,999 3 loans. 4 Citibank's market share of loans to 5 whites, 12.5 percent, was double its market 6 share of loans to African-Americans, 2.2 7 percent, and lowered its market share of loans 8 2.2 percent. The same holds true for the 600 9 loans made by Citibank Mortgage in this MSA 10 1996. Nevertheless, Citibank mortgage in this 11 MAS denied 35 percent of applications of 12 African-Americans and only 15 percent of 13 applications from whites, a disparity of 2.33, 14 higher than the industry average in the MSA. 15 Citicorp in Connecticut in 1996. 16 Citicorp, while systematically closing and 17 downgrading its branches in low- and 18 moderate-income and minority inner city 19 neighborhoods, have opened branches in more 20 affluent areas, including in Connecticut. 21 (Continued on next page) 22 23 24 25 . 93 1 2 Citicorp through Citibank SSD now has 3 seven branches in Connecticut and affluent 4 suburbs. In Stanford-Norwalk 1996 Citibank F&C 5 made 573 loans. It made 401 of these loans to 6 whites and only five African-Americans and one 7 toward Hispanic household. In this MSA 1996 8 Citibank mortgage made thirty loans to whites, 9 only one to Hispanic and no loans at all to 10 African-American. 11 This exemplifies its discriminatory 12 pricing, separate and unequal structure of 13 proposed Citigroup would have. As Matthew said 14 in 1997 denied only four branch on CRA grounds. 15 If this merger is not warranted now, I don't 16 know what does. Not only is it illegal by 17 violating the Bank Holding Company Act, but it 18 would expand the serious power on Citibank a 19 lender, denying and excluding other minority 20 customers while PrimeAmerica Commercial Credit 21 lending at higher rate and overpriced product. 22 The proposal to be denied. Thank you. 23 MR. TORRES: Good morning. My name 24 is Jose Torres. 25 I'm going to use Matthew to translate . 94 1 2 my English because my English not good, I'm 3 sorry. 4 (Through translator) 5 Good day. My name is Jose Torres. I 6 am a member of South Bronx Inner City Small 7 Business Association. 8 Our experience as residents of small 9 business people in South Bronx have been that 10 Citibank has abandoned our community. We found 11 that Citibank has closed its branches, has been 12 unwilling to lend, especially to small 13 businesses. Now they say they'll leaned $115 14 billion dollars over ten years. It's too late. 15 Fundamentally this proposed merger of 16 an insurance company and a bank is illegal. 17 Congress has said that no company should be an 18 owner of a bank and of an insurance company. 19 That should be sufficient for the Federal 20 Reserve to deny this merger. 21 Here are one or two examples why 22 banks should not be able to merge with 23 insurance companies. A consumer gives 24 information to its insurance company that he or 25 she doesn't have to or doesn't need to give to . 95 1 2 the bank. If, for example, the insurance 3 company knows that you are sick or dying and 4 gives this information to a bank, the bank 5 could say that you have to repay all of your 6 loans or may not extend more credit. That is 7 only one example. 8 I'm in search of both credit and 9 insurance and I would be injured if the Federal 10 Reserve approved this application. Our 11 organization has asked for a more formal 12 proceeding on the application in which we will 13 be able to ask questions of the officials at 14 Citibank, and of the Travelers Group. In this 15 proceeding or in that proceeding or later in 16 court I will provide more information that I 17 cannot provide today because of shortness of 18 time. 19 Citibank has abused the process 20 forcing various groups, community groups to 21 come today and to say that Citibank is good, 22 but that has nothing to do with the fundamental 23 question on the application. This proposed 24 merger is illegal. The Federal Reserve should 25 deny the application and the proposed merger. . 96 1 2 Thank you for your attention. 3 MR. LONEY: Thank you. 4 I have one question. Mr. Ortiz, did 5 I understand you to say that there is one 6 branch of Citibank in the South Bronx? Did I 7 get that right? 8 MR. ORTIZ: Yes, that's correct. 9 MR. LEE: They also have one 10 basically serving only the Hunts Point market. 11 Below the whole residential area there is one 12 on 149th and Cortland Avenue, that's it. 13 MR. LONEY: Thank you. Any other 14 questions of this panel? 15 MR. ALVAREZ: I have a question, 16 Mr. Lee, you mentioned that you think, in fact 17 all the panelists have mentioned they believe 18 this merger is illegal because it combines 19 insurance activities and banking activities. 20 In the proposal, if Travelers group does divest 21 its insurance activities within the two year 22 period provided in the Bank Holding Company Act 23 do you continue to believe that the transaction 24 is illegal? 25 MR. LEE: Yes, we do, under for . 97 1 2 example the board's own Citibank South Dakota 3 decision in 1985 it says right in it that the 4 board is directed by Congress to enforce the 5 purposes of the Bank Company Holding Act. See 6 the difference is it's if two big companies 7 merge and there is one small piece that's 8 nonpermissible to give them two years to sell 9 seems reasonable. That was the purpose of the 10 act. 11 Here the very proposal is directed at 12 evading the act. The applicant has no 13 intention to divest. They said, I've gone to 14 the Delaware and New Jersey insurance 15 departments and heard them say, we'd be very 16 surprised if we have to divest. Today 17 Mr. Prince said, well, if divestiture turns out 18 to be necessary. The point is I'll say this, I 19 think given that the size of the business 20 they're trying to keep as nonpermissible and 21 given the open goal of changing the law, their 22 goal of two-year waiver is to change the law. 23 It's not to looking to divest in that case the 24 commitment, and there is another, in our 25 written submission there is a citation to a '92 . 98 1 2 Bank of America decision where they bought a 3 savings bank where the board required 4 divestiture prior to consummation. I honestly 5 believe the problem is even getting into that, 6 the communications that took place before they 7 announced the deal were absolutely improper. 8 So it's sort of late in this process to say 9 well, maybe the way you clean the taint is to 10 say, I say that then we get into this area, if 11 they were to commit up front to divest all 12 nonpermissible things prior to consummating the 13 merger, no two-year waiver I guess that's the 14 purpose and then you get as a fall back 15 position there is two years they are assuming 16 that they can cross sell and share data in the 17 two years and it's our understanding from the 18 letters we received under FOIA that the Fed's 19 general counsel says that's fine, that's what 20 really bothers us. 21 It's contrary to what the Fed has 22 done in the past. It's horrible to the people. 23 It's contemptuous of the legislative process, 24 so we're against it. 25 We're asking to dismiss, and if you . 99 1 2 refuse to dismiss, to deny and to leave the 3 period open. I'm sorry for the long answer. 4 MR. ALVAREZ: Thank you. 5 MR. LONEY: Ms. McCall, any 6 questions? 7 MS. MC CALL: No. Thank you very 8 much for your contribution this morning.
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