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 Four
123 1 2 MR. LONEY: The next panel will be 3 comprised of Bill Traylor, Jacqueline O'Garrow, 4 Michael Lappin, Edward Reed, Suzanne Israel 5 Tufts. We will start with Mr. Traylor from 6 LISC. 7 MR. TRAYLOR: Before I begin I want 8 to thank you for the opportunity to speak 9 today. My name is Bill Traylor. I am the Sr. 10 program director for the Local Initiative 11 Support Corporation. I run our New York 12 program office, and I am also the managing 13 director of our New York equity fund which 14 invests in affordable housing projects 15 developed through the federal low income 16 housing and tax credit program. 17 I'd like to give you a little bit of 18 background on LISC before I move too far into 19 my discussions of our relationship with the 20 Travelers Group and Citibank. 21 LISC is the national organization. 22 We have forty offices in major urban centers 23 across the country. We also work in 63 rural 24 counties. We are an intermediary, a financial 25 and technical assistance intermediary. We are, . 124 1 2 we'd like to see ourselves as a bridge between, 3 if I can for downtown and midtown sources of 4 capital and uptown community grass roots 5 organizations. 6 We operate community development 7 corporations which are grass roots indigenous 8 locally directed or neighborhood directed 9 organizations that have a comprehensive plan to 10 revitalize poor and distressed communities. 11 They are poor and distressed communities both 12 through or through a variety of different 13 mechanisms, first and foremost through the 14 redevelopment and development of housing stock 15 within their neighborhoods through economic 16 revitalization activities, including the 17 generation of new small businesses as well as 18 the construction or rehabilitation of 19 commercial space. 20 We've over the last 18 years have 21 enjoyed a tremendous amount of success through 22 this vehicle and being a conduit for capital to 23 the communities more than three billion dollars 24 has been invested in the nation's poorest 25 communities resulting in more than 75,000 . 125 1 2 affordable homes being constructed and more 3 than 3 million square feet of commercial space 4 and numerous new jobs being created. 5 Important to what we do obviously is 6 partnerships with corporations like Travelers 7 and Citibank for they are the ones who provide 8 the capital that we can funnel into local 9 communities, and they are the entities that 10 fund our technical assistance operations as 11 well. 12 Our relationship with Citibank and 13 the Travelers Group has been substantial over 14 the last 18 years. Travelers Group Salomon 15 Brothers has invested more than forty million 16 dollars with us to develop affordable homes 17 that I spoke about before, that forty million 18 dollars all for the City of New York. 19 Our relationship with Citibank has 20 been more complicated and more diverse and 21 becoming broader over the course of time. 22 Citibank has been a consistent lender to us on 23 the bridge, to bridge our equity investments 24 which generally come in over time from 25 corporations so that we can begin immediately . 126 1 2 to construct or finance the contribution and 3 rehabilitation of the affordable homes that I 4 spoke about. 5 Citibank, and this is I think because 6 Citibank joined us very early on in the bridge 7 financing, when our product was new, when the 8 community groups with whom we were working were 9 untested and untried, and when the 10 neighborhoods we were working in were much more 11 distressed than they are today that Citibank's 12 involvement with us early on involvement is 13 very significant, and I think fairly 14 substantial indicating their ability and 15 willingness to take risks. 16 While it has taken sometime for 17 Citibank to fund our endeavors other than 18 through bridge lending and to achieve a level 19 of involvement in our work commensurate with 20 their asset side, Citibank is where it should 21 be today when benchmarked against other 22 financial institutions that are based in New 23 York City. 24 Beginning in 1995, Citibank became 25 one of our larger investors with a 25 million . 127 1 2 dollar commitment to affordable housing to be 3 funded through our New York equity fund and has 4 recently made another commitment to fund $30 5 million for the development of that housing. 6 Citibank has also provided extensive 7 philanthropic support to us. Just one more 8 word before I conclude, that philanthropic 9 support all passes through us to community 10 based organizations. 11 They recently gave us $340 million to 12 support our neighborhood homes program which 13 will construct and renovate affordable homes 14 for first-time home buyers and that type of 15 philanthropic support is extremely important 16 and extremely hard to find. Given this level 17 of substantial support both by Travelers and by 18 Citibank, we support the proposed merger of the 19 organization. 20 MR. LONEY: Thank you, Mr. Traylor. 21 Ms. O'Garrow. 22 MS. O'GARROW: Good morning. My name 23 is Jacqueline O'Garrow and I am deputy director 24 of the New York partnership office of 25 FannieMae. As many of you are undoubtedly . 128 1 2 aware FannieMae is America's largest supplier 3 of conventional home mortgage funds, since its 4 creation by Congress in 1939, and its evolution 5 into a shareholder-owned accompanied in 1968 6 FannieMae's mission has been to provide 7 financial products and services that increase 8 the availability and the affordability of 9 housing for low, moderate and middle income 10 Americans. FannieMae has established 31 11 partnership offices throughout the United 12 States. One such office is the New York 13 partnership office. 14 We work closely with city government 15 officials, community based organizations and 16 members of the professional real estate 17 community to structure a series of creative and 18 flexible products that are necessary to meet 19 the home financing needs of New York's low to 20 moderate income home buyers. 21 The products and programs also 22 warrant the support of strong lenders committed 23 to affordable housing on the premise that 24 everyone is entitled to decent affordable 25 housing both rental as well as home ownership. . 129 1 2 Citicorp is one of several major New 3 York lenders that have demonstrated a 4 commitment to partnering with us to assure that 5 these principles are achieved, and that 6 products meet their intended concern. 7 FannieMae's valued relationship with 8 Citicorp of course predates the establishment 9 of the partnership office. However, it is also 10 quite clear that the introduction of our 11 programs could only be enhanced with the 12 support of a lending source like Citicorp in 13 New York City and Long Island. 14 With respect to affordable housing 15 Citicorp's participation in our city homes 16 financing program is one such program that 17 brings us closer to achieving our overall 18 objective. This program was developed to 19 support the city's efforts to transform vacant, 20 abandoned and neglected in rem once poor family 21 housing stock into rehabilitated housing, low 22 to moderate income first time home buyers. 23 Citicorp is also a lender partner in 24 the New York City housing partnership new homes 25 program. Another program for which FannieMae . 130 1 2 has negotiated flexible underwriting guidelines 3 which serves to facilitate the opportunity for 4 home owners of the thousands of New York City 5 low to moderate income first time home buyers. 6 Further, their overall performance in 7 the origination and delivery of co-op housing 8 units utilizing our co-op pilot has added 9 considerable options to the co-op market. In 10 1997 Citicorp was one of three lenders who 11 worked closely with us to structure a secondary 12 market program that would compliment federal, 13 state and local agencies in supporting the 14 ground breaking City Lights at Queens Landing 15 development. The successes of these programs 16 requires the experience of a skilled 17 organization staff, sensitive to underwriting 18 affordable housing loans. 19 Citicorp has been a willing partner 20 in taking the lead to facilitate partnerships 21 among nonprofits and for profit developers to 22 seek solutions to some of New York City's 23 housing issues. The spirit of working 24 collaboratively with FannieMae's New York 25 housing and neighboring housing service very . 131 1 2 low down payment, gut rehabilitation, 3 convention financing program commonly known as 4 the neighborhood pilot has been noted in our 5 company as a model for other parts of the 6 company to date. 7 Until Citicorp's involvement this 8 initiative sat dormant for five years waiting 9 for a willing partner to bring a leveling of 10 commitment necessary to have us realize the 11 success in an urban setting. The features of 12 the program reach to the very issues home 13 buyers face when purchasing or repurchasing one 14 of New York's aged housing stock. 15 With the added complexity and the 16 issues of affordability this product offers a 17 very low down payment feature with an 18 aggressive form of rental underwriting to help 19 low and moderate income families qualify. 20 By working very closely with 21 FannieMae to structure secondary market product 22 that could be replicated in other cities when 23 neighborhoods organizations operate Citicorp 24 has contributed significantly to this product a 25 availability and accessibility. Their . 132 1 2 commitment to New York City is further 3 demonstrated through a partnership with LISC, 4 HPD and FannieMae to provide a financing 5 structure to address the needs of existing one 6 to four in rem occupied housing through the 7 neighborhood homes program. 8 Unlike other City of New York 9 reconstruction efforts of in rem housing this 10 program brings new challenges since existing 11 rental families occupy all of these units. 12 Citicorp has stepped to the plate to explore 13 with FannieMae a financing structure that will 14 allow low to moderate income families to 15 purchase these occupied rehabilitated one to 16 four unit properties. 17 They have also been a significant 18 partner of FannieMae as a source for 19 identifying home ownership and the creation and 20 development of products and programs and 21 financial literacy tools to assist minorities 22 and immigrants simulation to our social 23 structure and achieve what most American 24 strives for, home ownership. 25 Citicorp recently participated as a . 133 1 2 partner in a community needs round table. This 3 round table assembled in Chicago on June 1 and 4 was comprised of significant community lending 5 and government partners from five major cities. 6 The purpose of the round table was to 7 bring the partners together to share 8 experiences, best practices and identify 9 solutions which will guide FannieMae to 10 structure lots and experimental programs that 11 will assist minority and immigrant communities 12 gain greater access to affordable housing. 13 From the perspective of the New York 14 partnership office Citicorp is a major player 15 in the New York City housing market. Their 16 commitment to housing issues and providing 17 access to our flexible and affordable housing 18 programs are all directed to addressing the 19 complex housing needs of New York City. We 20 continue to work with Citicorp as we strive to 21 reach our mutual objective which is to provide 22 affordable financing access to low and moderate 23 minority and immigrant community in New York 24 City. 25 MR. LONEY: Those of you who didn't . 134 1 2 get to finish all they had to say, you can 3 leave a copy with the folks at the registration 4 table. The entire thing will be put into the 5 record. 6 MS. ISRAEL TUFTS: Thank you. My 7 name is Suzanne Israel Tufts and I am president 8 and CEO of the American Women's Economic 9 Development Corporation, the nations oldest 10 not-for-profit organization providing in-depth 11 counseling training and supportive services for 12 womens business owners. 13 I want to thank the Federal Reserve 14 and the State Banking Commission for the 15 opportunity to testify today, and to speak to 16 community that while not defined by the 17 traditional neighborhood and geographic bounds 18 or racial bounds in the regulatory framework 19 nevertheless represents the growing single 20 largest customer base of the two companies at 21 issue here, Citibank and Travelers. 22 In our twenty-year history and over 23 twenty year collaboration with Citibank and 24 Travelers has worked with over one hundred 25 thousand entrepreneurial women and we have . 135 1 2 spearheaded the creation and development of 3 similar organizations throughout the country. 4 We serve women from all income 5 levels, all neighborhoods, all demographic 6 background and all industries. When we first 7 started and Citibank first came to our help, 8 women were just entering the small business 9 market and were a negligible factor in that. 10 Today women-own businesses account 11 for over one third of all businesses in the 12 United States, and it is estimated by the year 13 2000, half of all small businesses will be 14 owned by women. Today they employ one out of 15 every four US workers which is approximately 16 18.5 million people. They generate close to 17 2.3 trillion dollars in sales and even in this 18 bull market their growth outpaces overall 19 business growth by nearly two to one. 20 At the same time the largest 21 demographic group of growth in the country is 22 55 and older group. In that group women make 23 up the largest portion of that group. So as 24 women's credit needs are growing both 25 professionally and personally their insurance . 136 1 2 needs and their retirement needs are growing. 3 Whether from the standpoint of a business owner 4 or from the standpoint of looking at their life 5 and their financial planning as one uniform 6 process, it is our belief that merger will 7 represent for women efficiency, effectiveness 8 and improvement of the services that they can 9 render. 10 WEDC and Citibank have as I've said 11 in over twenty year history of strong creative 12 collaboration on behalf of women business 13 owners. The burst in their growth is due to 14 many market and social factors, but it is due 15 to very much increased educational opportunity 16 open to women, and this education simply would 17 not have been available or affordable if it 18 were not for Citibank's commitment to WEDC a 19 commitment evidenced by financial support and 20 also and most importantly by extraordinary time 21 expertise and in depth involvement. 22 Many employees in this organization, 23 in particular Pamela Flaherty's familiarity and 24 her team. 25 Based on their work, Citibank has . 137 1 2 helped us, as I say, start and grow our 3 organization at a time when people do not have 4 faith that women could do it. They helped 5 reach out, have educated Congress, Small 6 Business Administration, and women throughout 7 the country to open similar offices which now 8 exists all over the country. 9 They have provided general operating 10 support, the life blood of any organization. 11 They have provided health in times of deficit 12 and help wean us away from federal government 13 funding to be predominantly private sector 14 supported. 15 They have helped in funding access to 16 capital programs at a time when now women 17 business owners are coming in to their own and 18 Citibank is the one of the first to recognize 19 the need for education that has to provide a 20 good credit application, a good credit standing 21 and a vibrant and growing business. 22 Travelers has been involved with us 23 focusing on women as insurance agents and 24 people who are at this point under insured and 25 need more education and protection towards . 138 1 2 their old age insurance product. 3 What we have found is that time is 4 womens most precious commodity and trust their 5 most important asset, and when they can deal 6 with one organization, with one person, be it 7 their broker or their insurance broker or when 8 they form trust in that person, they will put 9 the repository of their trust there. They will 10 want the efficiency of one stop shopping. 11 They do not have the time in their 12 life to be dealing with older arcane systems of 13 corporate structure. 14 Today, for example, our organization 15 is hosting an on-line marketing, on-line 16 banking seminar with a group called Web World 17 and we have over a hundred of the latest 18 growing firms in the high tech community. 19 These women represent the future and what they 20 want is efficiency, speed and one stop 21 shopping. 22 They and we are grateful for the 23 support Citibank and Travelers have shown as 24 they were getting there and now that they are 25 becoming successful again across all . 139 1 2 boundaries, no matter how that's defined, it is 3 our belief that that merger will only help them 4 continue, thank you. 5 MR. LONEY: Thank you. That was well 6 timed. Mr. Reed. 7 MR. REED: Good morning. My name is 8 Edwin Reed. I am here as chairman of the board 9 of the Jamaica Business Resource Center. 10 I'd like to thank the Federal Reserve 11 Bank and the State banking of New York for 12 giving me this opportunity to come before you 13 today on what I think is a very critical 14 development in the banking industry. 15 The Jamaica Business Resource Center 16 was established over three years ago to serve 17 as the national power for President Clinton one 18 stop capital shop initiative. 19 This program which is administered by 20 the US Small Business Administration has been 21 replicated in 16 major urban cities across the 22 United States. Since its inception, JBRC has 23 assisted approximately 748 businesses in 24 creating or retaining over one thousand four 25 hundred fifty nine jobs, has secured over 15 . 140 1 2 million dollars in financing for small 3 businesses resulting in over six hundred 4 additional jobs, has provided high quality 5 in-depth training to over five hundred 6 entrepreneurs, has provided training to two one 7 stop capital shops in Harlem and Detroit and 8 provided orientation and in over one hundred 9 LDCRs, CDCs, EDCs, bank and other public 10 private sector organizations on the JBR team 11 model and have initiated internal welfare to 12 work and minority college intern programs. 13 Citibank has played a pivotal and 14 important role in the development in 15 establishing JBRC. Fairly early on three years 16 ago it was a major sponsor, and in fact, lended 17 its resources and expertise to meetings which 18 helped develop the model for JBRC. 19 Citibank has also provided grants of 20 $25,000 per year to help support the programs 21 and operations of JBRC. In addition, Citibank 22 has been a leader in establishing a new forum 23 by which nonprofit organizations, specifically 24 religious institutions, were trained in 25 computer development. This resulted in a . 141 1 2 partnership with Citibank, JBRC, Southeast 3 Queens Clergy, York College and others, so that 4 we could take advantage of the many 5 opportunities that exist. 6 In regard to this merger it is 7 important to note that we are looking at an 8 opportunity to make a significant and historic 9 change in the way we do banking and financial 10 services. The people at JBRC welcome this 11 opportunity because we have had a relationship 12 with Citibank for the last three years and we 13 believe that they have the innovative 14 management technique and style to fully take 15 advantage of this new horizon. 16 The key element to success in this 17 arena, we believe are going to be an effective 18 response to the market by the combined company, 19 the management, and its focus on the 20 opportunities presented for community 21 development and historically underserved 22 community, and a role for the regulators which 23 is oversight. That oversight must be 24 coordinated, consistent, and contain effective 25 rule making so that the market is able to . 142 1 2 function efficiently. 3 As we look at Citibank and the 4 potential for this merger we believe that we 5 have an example of where the development of the 6 financial markets will go. It is an 7 opportunity for Citibank and Travelers to 8 expand into markets that have been underserved 9 before, but also represent the opportunity for 10 future growth here in the domestic arena. 11 We believe that Citibank is up to the 12 challenge, and we as JBRC would like to join in 13 that partnership so that we can successfully 14 rebuild urban communities by entrepreneur and 15 small business development. Thank you very 16 much. 17 MR. LONEY: Thank you. Mr. Lappin. 18 MR. LAPPIN: Good morning, and thank 19 you for this opportunity to speak. My name is 20 Michael Lappin. I'm the president of the 21 Community Preservation Corporation known as 22 CPC. 23 We are an affordable housing lending 24 consortium that operates throughout New York 25 State and will shortly open an office to serve . 143 1 2 New Jersey. Our mission is to provide 3 financing, to help preserve low and moderate 4 income communities throughout these areas. 5 (Continued on next page) 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 . 144 1 2 MR. LAPPIN: We are one of the 3 largest affordable housing lenders in the 4 country, having to date invested over $1.8 5 billion for the rehabilitation, development and 6 preservation of almost 62,000 housing units. 7 We have had a long history with 8 Citibank. Citibank was one of our founding 9 members back in 1974. Citibank has been 10 unwavering in its commitment to CPC. It has 11 had a senior level executive serve on our 12 board, as well on our investment committee. 13 Currently, Pam Flaherty serves on our board, 14 our audit committee, and our strategic planning 15 committee, and Bernice Giscombe serves on our 16 mortgage committee. Both are highly valued 17 participants in CPC and give freely of their 18 time and experience in guiding our company and 19 our investments. 20 Citibank's standing financial 21 commitments to our company total over $26 22 million, and these revolve. Additionally, they 23 have made investments and grants in the many 24 projects the CPC is involved with. 25 The representative from Fannie Mae . 145 1 2 spoke of the City Home program, which we are 3 very heavily involved in, and most recently 4 Citibank has made a commitment with us in the 5 Nehemiah housing projects, where they have made 6 a sizable no-interest loan to help rebuild this 7 blighted community with 600 new homes. 8 Citibank has always been among the 9 first institutions to sign up for new 10 initiatives, which we have sponsored and have 11 encouraged others to do the same. They have 12 truly been a leader in helping to serve the 13 affordable housing market. They will be a 14 founding participant with us in our expansion 15 into New Jersey. 16 Citibank is also providing support 17 for our efforts to revitalize the 12,000-unit 18 housing complex in Parkchester in the Bronx. 19 They have signed an expression of interest to 20 provide $20 million of financing -- that is 21 over and above the commitments I already spoke 22 to -- to renovate this property that is now 23 experiencing a certain amount of decline. They 24 are also working with us closely to provide end 25 loans to condominium loaners and to refinance . 146 1 2 existing end loans that they have at the same 3 complex. 4 The bank has provided through its 5 directors long-standing support for our public 6 initiatives in the legislative arena on a 7 variety of issues concerning affordable housing 8 and have attended and been very much involved 9 in these efforts, both on the city, state and 10 federal level. 11 In closing, Citibank's 24 years of 12 support for CPC have been a crucial 13 underpinning to our success in helping the 14 affordable housing needs and helping us serve 15 the affordable needs of the low- and 16 moderate-income neighborhoods where we lend. 17 Thank you very much. 18 MR. LONEY: Thank you, Mr. Lappin. 19 Are there any questions from the 20 panel? 21 MR. ALVAREZ: I have one question. 22 Ms. Tufts and Mr. Reed, you both 23 represent small business areas, and we have 24 heard a lot of concern this morning that 25 one-stop shopping from the individual side . 147 1 2 could cause some difficulties because of 3 sharing of customer information. A lot of 4 folks were concerned that sharing customer 5 information might actually lead to a cutback of 6 services. 7 That one-stop shopping, you think, is 8 very helpful to the small business community. 9 Do you think with your experience with small 10 businesses that they would be concerned about 11 sharing of information, calling an insurance 12 company and a bank in the effort to provide 13 one-stop shopping? 14 MS. TUFTS: Based on the businesses 15 that we deal with, we see that they have really 16 two concerns. One is a general social privacy 17 concern, and that is going to exist no matter 18 what kind of corporate structures exist. So as 19 long as there are environments where they have 20 knowledge of what is going on, that would just 21 be a general concern, not specific to this 22 issue. 23 What we see as a greater concern is 24 really -- I didn't mean to trivialize it -- is 25 very truly one of time and one of trust. When . 148 1 2 I say "trust," it is very hard for a small 3 business person to approach a bank and bring 4 their credit concerns to them. Once they have, 5 particularly in terms of the women's market and 6 the way women work with their bankers or with 7 their service providers, once they have formed 8 that repository of trust, that is the person 9 and that is the place where they want to 10 discuss things in, frankly, a more holistic 11 fashion. I realize these are not banking terms 12 necessarily, but those are how our customers, 13 how the small businesses, look at that. 14 Their business plan is not that 15 different from their life plan and their 16 concerns they have to bring together in their 17 desire to approach things in a more integrated 18 fashion, but, yes, with protecting dignity and 19 privacy. Nothing that we see would be 20 precluded. The two are not precluded. 21 MR. REED: My experience has been 22 that, as it relates to privacy concerns and 23 one-stop-capital shopping, I agree with 24 Ms. Tufts that the most overriding issue for 25 small businesses is the ability to get it done . 149 1 2 effectively and efficiently all at one time. 3 As it relates to the issue of 4 privacy, I think the regulators are the ones 5 who are going to be very important in that. 6 From a small business and from an individual 7 standpoint, one of the most important things 8 that one has is your credit report, which is a 9 very public document, and if we have safeguards 10 to be sure that the information that is being 11 shared is accurate, reliable, if questioned can 12 it be corrected, those are the things that will 13 make sharing of information a viable 14 opportunity. 15 The other side of that issue is 16 simply one of sharing information, not for 17 making business decisions, but sharing it for 18 marketing purposes. And on that issue, the 19 individual must have the right to understand 20 how that information is being used and whether 21 or not they should be the final one to 22 determine whether or not they want that 23 information in the overall marketplace, and 24 guidelines must be set up in order for that 25 process to work, in our opinion. . 150 1 2 MR. LONEY: Thank you. 3 Any other questions? If not, I will 4 thank the panel. 5 MR. REED: Thank you.
Last update: December 3, 2010