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 Seven
213 1 2 A F T E R N O O N S E S S I O N 3 1:00 p.m. 4 MR. LONEY: I'd like to call the 5 meeting back to order. We're only a few 6 minutes late from what I originally planned. 7 We are going to start this afternoon's 8 proceedings with panel 7, John Shemo, Peter 9 Libassi, Kathleen Gordon, Ceasar Claro, Paul 10 Christie, and Carol Aranjo: 11 We'll start with Mr. Shemo. 12 MR. SHEMO: Good afternoon. My name 13 is John Shemo and I am here on behalf of 14 Connecticut Capital Region Growth Council which 15 is the leading economic development 16 organization for the 29 town Metro-Hartford 17 region. 18 I serve as the agency's executive 19 vice-president. I'm pleased to have this 20 opportunity to testify before you in favor of 21 Travelers Group proposal to acquire Citicorp. 22 There are two reasons that we as a Growth 23 Council support this merger. The first is job 24 preservation and growth. The second is 25 Travelers' long history of for being a good . 214 1 2 corporate citizen in your community. The 3 mission of the Growth Council is to boost the 4 local economy by fostering job growth in 5 Metro-Hartford. 6 It is our opinion that the Travelers 7 Citicorp merger would not only preserve the 8 thousands of jobs each company currently 9 provides in Metro-Hartford but also would 10 expand the local employment basis of the two 11 companies. Travelers has always been a key 12 employer of Metro-Hartford. 13 Before the companies earlier merger 14 with Primerica, about six thousand Travelers 15 jobs were lost and thousands more were at 16 serious risk. Since that merger, the company 17 has reversed its situation, returned to 18 profitability, and begun to grow its work force 19 again. Travelers Group now employs roughly 20 seven thousand people in Hartford, plus another 21 two thousand jobs were saved by Travelers 22 selling its health benefits operation to 23 another insurer. In effect, Travelers 24 practices of strategic acquisition and 25 restructuring has preserved nine thousand jobs . 215 1 2 for Metro-Hartford residents. 3 Separately, the Growth Council 4 recently completed successful negotiations to 5 bring the Citicorp in-bound call center to 6 Metro-Hartford. This customer service er 7 center will employ between 550 to 600 people. 8 We believe that the merger will have a positive 9 impact on this operation as well, as the two 10 companies began cross-selling their products 11 through telemarketing efforts. 12 The second reason that the Growth 13 Council supports this merger is as I said 14 because of Travelers strong track record in our 15 community. We believe that as a larger company 16 its ability to promote the region's economic 17 development will be enhanced. 18 Travelers was an original 19 incorporator of and investor in the Growth 20 Council, again, funding our efforts this year. 21 There are several other efforts of 22 Travelers community support. Travelers 23 currently provides the use of its education 24 center to the University of Connecticut as a 25 downtown campus. We view this as the first . 216 1 2 step in creating even a larger downtown 3 Hartford higher education center, involving 4 courses offered to many of the local 5 universities. 6 The higher education center is high 7 on our list of projects that would both draw 8 more people downtown and benefit the city's 9 current employers and workers. Riverfront 10 Recapture, which has revitalized recreational 11 activities on the Connecticut River also has 12 been a recipient of Travelers'generosity. To 13 date, the company has invested point one 14 million dollars in Riverfront programs, which 15 give new life to the region and attract both 16 residents and visitors to Hartford, East 17 Hartford and other towns along the river. 18 It is our opinion that the Travelers 19 Citicorp merger would serve the best interest 20 of the Metro-Hartford region. We urge you to 21 consider it favorably. Thank you. 22 MR. LONEY: Thank you, Mr. Shemo. 23 Maybe I should repeat what I said this morning 24 about the time sequence, because some of you 25 may not have been here and some of the next few . 217 1 2 panels may not have been here. The lady in the 3 middle in the front row here is going to be 4 holding up signs to tell you when you're down 5 to two minutes remaining, and then when time 6 has expired. 7 I will say that the folks this 8 morning blazed a trail that will be hard for 9 this afternoon's group to emulate. They stayed 10 very close to on time and I appreciate that, 11 and it helps us get in everybody's testimony 12 and I'd like to try to repeat this morning's 13 success, and I'm taking up too much time saying 14 that. Mr. Libassi. 15 MR. LIBASSI: My name is F. Peter 16 Libassi. I'm a Travelers retiree and I'm also 17 a Travelers shareholder. 18 I'm here today in my capacity as 19 president of the Childrens Fund of Connecticut 20 which is a grant making foundation and my 21 statement will deal with the leadership role 22 that Travelers played in the establishment of 23 that foundation, and the public benefits which 24 have flowed from it. 25 In 1992 the Newington Children's . 218 1 2 Hospital in Newington, Connecticut which was an 3 orthopedic hospital decided that due to a 4 reduction in patient load it would close and 5 reopen as a specialized childrens' hospital in 6 the City of Hartford. 7 In reviewing the health needs of the 8 children of Hartford, the Travelers thought 9 that perhaps they were very serious issues 10 related to childrens health, but they dealt 11 more with primary and preventive care. They 12 dealt with such issues as immunization, well 13 baby checkups, teen age pregnancy, prenatal 14 care, issues which were quite different than 15 those served by a high tech specialty hospital. 16 As a result, the Travelers in fact 17 questioned the wisdom of whether a high tech 18 hospital as proposed actually addressed the 19 health needs of children in Hartford. With 20 that question as its focus the Travelers 21 decided to initiate a study. The independent 22 study as to what were in fact the health needs 23 of children, and at first other corporations 24 were curious about the study, and eventually 25 actually joined with Travelers in sponsoring . 219 1 2 that study, which was done by Lewin/ICF. That 3 study concluded that there was in fact a need 4 for a childrens' hospital, but a much smaller 5 hospital than had been originally proposed, but 6 the study also concluded, as the Travelers had 7 argued, that the health needs of the children 8 of Hartford would only be served if a serious 9 campaign was launched that would focus on 10 primary and preventive care. 11 Now, as a result of that the 12 Childrens' Fund of Connecticut was established 13 with a leadership grant of one million dollars 14 from the Travelers foundation. 15 With that gift as a leadership gift 16 other corporations and other hospitals in the 17 area also contributed and the foundation was 18 established of $17 million to serve the under 19 served children in the City of Hartford and in 20 other you are been areas in Connecticut dealing 21 primarily with preventive and primary care. 22 The board of that foundation after 23 exhaustive study of the needs of children 24 throughout the state, concluded that it ought 25 to focus on developmental delays and . 220 1 2 developmental deficiencies, and how they might 3 be prevented. 4 That led to the decision that what 5 was needed most in the state was training for 6 those people who provide care for children. We 7 were surprised to learn of the extent to which 8 pediatric nurses, social workers, child care 9 providers, day care center people really had 10 very limited knowledge of primary and 11 preventive strategy with respect to those 12 deficiencies, and with that the Childrens Fund 13 sponsored the first state-wide training program 14 for child care providers in the State of 15 Connecticut. 16 This foundation brought together four 17 state agencies and three private organizations 18 all of which contributed $600,000 to the 19 training and $200,000 from the Childrens Fund 20 of Connecticut. So at this time in Connecticut 21 1600 family child care providers are in the 22 first training program that has ever been 23 offered in the State of Connecticut. 24 The result is that ten thousand 25 children in September will reap the benefits of . 221 1 2 being under the care of providers who are 3 receiving the very finest in child care 4 training. There is no question that the extent 5 of training of child care providers in the 6 State of Connecticut would not now be under way 7 if it had not been for the leadership and for 8 the foresight of the Travelers Corporation. 9 Thank you. 10 11 MR. LONEY: Thank you, Mr. Libassi. 12 I have next Ms. Gordon. 13 MS. GORDON: Yes. I'm Kathleen Gordon 14 and I'm president founder and board member of 15 Working Capital Florida which is a nonprofit 16 community lending organization. We provide 17 uncollateralized small loans under $5,000 for 18 low income people to be self-employed. 19 I'm here at my own expense, and I'm 20 also here to attend the micro-credit summit 21 conference of practitioners which begins 22 tomorrow. There are more than a thousand 23 people that have paid their own way to come to 24 New York with the commitment of reaching one 25 hundred million families with credit around the . 222 1 2 world for self-employment. 3 City Corporation was the first funder 4 of the micro-credit summit which took place 5 last February in New York City. More than 6 three thousand people came to the summit and 7 committed to reach one hundred million 8 families. We are presenting our action plan 9 tomorrow to each one of the organizations on 10 how we're going to reach those families with 11 credit. 12 The average loan outside the United 13 States is around $100 for self-employment and 14 we're targeting women. On the domestic side, I 15 will present tomorrow to the summit members on 16 how we in South Florida are going to expand and 17 reach ten thousand low income people in South 18 Florida with loans under $5,000 for 19 self-employment. 20 The chair of our board of directors 21 is Barbara Manning who is the vice-president of 22 Citibank in our community. She has provided 23 invaluable support and assistance, and also 24 helped with our loan portfolio for the work 25 that we're doing in our local community. We . 223 1 2 have started four hundred businesses in Dade 3 County in the last two and a half years. We 4 provide loans, technical assistance and 5 business training in 16 of the poorest 6 neighborhoods in Dade County. 65 percent of 7 our loans go to people of African descent. We 8 have an overall 96 percent repayment rate on 9 those loans. 10 Once we borrowed the money from a 11 consortium of ten banks of which Citibank is, 12 and Citicorp are one of the funders of our loan 13 portfolio. They have also provided operational 14 support for our organization to expand our 15 outreach into these low-income communities, and 16 the business training that we do provide. 17 They've also provided us again with the 18 leadership at the local level in expanding the 19 program. 20 Dade County, as you know, is a city 21 of primarily immigrants, and we are now 22 considered one of the six poorest cities in 23 America. So this type of lending where we 24 provide self-employment, even for welfare 25 mothers, has been critical in our community, . 224 1 2 and I'll tell you the truth, we could not have 3 done it without the support of Citibank and 4 City Corporation. They were one of the leaders 5 in coming for providing this kind of 6 assistance. So they are providing leadership 7 at the international level, the global level 8 and also at the local level which is extremely 9 powerful. 10 I don't know about the merger. I am 11 impressed with the 115 billion dollar 12 commitment for community development in this 13 country, and I do feel as a regulatory board 14 that we can, that you have a responsibility for 15 oversight that that money really gets targeted 16 down to these low-income communities, because 17 we're growing the businesses, and once the 18 businesses get up to the $5,000 loan site with 19 us, the participating banks put in a matching 20 loan. 21 So we help people develop a credit 22 history. They get a Dun & Bradstreet number 23 with us. We also have access development 24 accounts. Each one of the businesses to get a 25 loan also has to have a savings account, a . 225 1 2 group savings account. So we are promoting 3 asset development and business loans. They get 4 a credit history, and then they move up to bank 5 loans. We have ten banks that are 6 participating with us, and Citibank is one of 7 those. 8 We are excited about micro lending. 9 We feel that it's a program that should be 10 expanded all across the United States. Working 11 Capital is now working in seven states. We 12 started more than three thousand businesses. 13 So our program is the largest nonprofit micro 14 lending program in America to date, and we hope 15 to expand it all across the country. Thank you 16 so much. 17 MR. LONEY: Thank you. Mr. Claro. 18 MR. CLARO: good afternoon. My name 19 is Ceasar Claro and I am a director of the 20 Staten Island Economic Development Corporation, 21 the borough-wide business development agency 22 for Staten Island. 23 I am submitting testimony today on 24 behalf of the board of directors of the Staten 25 Island DC in support of the proposed Citicorp . 226 1 2 Travelers Group merger. 3 For the past four years Citibank has 4 a major support of the SIDC contributing in 5 exceeds of over sixty thousand dollars to the 6 organization as well as providing free 7 technical marketing and legal assistance. They 8 have provided much needed counsel on small 9 business development issues, and on many 10 occasions have guided our staff in implementing 11 new programs. 12 In addition, Citibank frequently 13 offers free capacity building courses to 14 not-for-profit organizations throughout the 15 city. All in all, they have been a great 16 corporate citizen to the people in small 17 business community of Staten Island. 18 As one who has worked in urban 19 economic and community development for over 20 eight years, and in two New York City counties, 21 I can honestly say that Citibank has been at 22 the forefront of urban revitalization. They 23 have devoted countless manpower hours and 24 financial support to underserved neighborhoods 25 and vital community organizations. . 227 1 2 In the outer boroughs of New York 3 City Citibank's name has become synonymous with 4 community development. They have been one of 5 the leading small business banking institutions 6 developing model programs to assist start up 7 firms, and womens-minority-owned businesses. 8 Unlike recent bank mergers, the 9 proposed Citibank Travelers merger involves 10 only one current philanthropic community 11 development corporation, in this case, 12 Citibank, thus preventing a negative impact on 13 the financial support organizations currently 14 receive. 15 Once again SIDC wholeheartedly 16 supports the merger and hopes this board does 17 as well. 18 Thank you for your time. 19 MR. LONEY: Thank you. 20 Mr. Christie. 21 MR. CHRISTIE: Members of the Federal 22 Reserve Board panel, my name is Paul Christie. 23 I'm executive director of Center City Churches 24 Incorporated. 25 Center City Churches is a . 228 1 2 not-for-profit nonsectarian human services 3 agency in Hartford, Connecticut. 4 It started in 1967. We are now 5 comprised of 12 congregations representing ten 6 religious traditions. Our mission is to be a 7 partnership of congregations, institutions and 8 individuals which cares for the city by finding 9 innovative and effective ways to help 10 Hartford's neediest residents work towards 11 self-sufficiency. 12 Since our beginning we have relied on 13 active partnerships to fulfill our mission. 14 Today with the help of over four hundred 15 volunteers annually dozens of corporate 16 foundations, public and private commitments, we 17 operate six programs. Among them Peters 18 Retreat is the first and largest AIDS housing 19 program in Connecticut, Laurel Street, the only 20 state licensed group home for the chronically 21 mentally ill in Hartford, Center for Hope, 22 offspring of the first soup kitchen in the 23 city, and Center for Youth, the most 24 comprehensive school tutoring and enrichment 25 program in Hartford serving over four hundred . 229 1 2 children weekly. 3 The Travelers Group Incorporated 4 plays a pivotal role in helping us fulfill our 5 mission. Here are some of the ways Travelers 6 puts energy into being community partner with 7 Center City Churches. Travelers is providing a 8 three-year grant for the Center for Youth which 9 enables us to double the number of children we 10 serve by adding a second school to our program. 11 Travelers purchased a van so we can 12 transport our program participants safely. 13 Travelers donates staff time to find office 14 space for our agency and secures furnishings 15 for that space. It provides consultations to 16 revise our personnel policies, and upgrade our 17 pension plan, while excluding themselves from 18 being considered as a vendor. 19 Travelers recruits board members and 20 school tutors. This spring Travelers developed 21 an ongoing art gallery in their offices to 22 display our students work, and that of their 23 employees and other community groups, thus 24 building bridges between the neighborhoods and 25 the board room. . 230 1 2 Already Travelers personnel have 3 purchased some of the students' work and 4 underwritten an artist residency see in the 5 school. 6 My daughter's crew experience in 7 college illustrate what I'm trying to say about 8 college as a community partner. Every seat in 9 crew has a name and a task. The "stroke" is 10 the team member who sets the pace for the boat. 11 By example all the other rowers align 12 themselves with him or her. The stroke sets 13 the standard. 14 In Center City Church's experience 15 Travelers is the corporate stroke for community 16 involvement in Hartford. 17 MR. LONEY: Thank you very much. 18 Ms. Aranjo. 19 MS. ARANJO: Good afternoon. My name 20 is Carol Aranjo and I am chair of the board of 21 the National Federation of Community 22 Development Credit Unions. 23 The National Federation of Community 24 Development Credit Unions represents 170 credit 25 unions that specialize in serving low income . 231 1 2 and minority communities in forty states. 3 Our members are located both in urban 4 and rural areas. Many of our members' credit 5 unions have served their community for some 6 fifty years. Our credit unions serve people in 7 communities who have often been ignored or 8 neglected, or are unable to be served by banks. 9 For the most part the members of CDCU 10 have small needs and need small loans. 11 Sometimes they have credit histories that would 12 make them unacceptable to banks. Serving this 13 market is not very profitable, which is why 14 many banks have retreated from our communities. 15 Our communities' development of 16 credit unions have decades of experience in 17 trying to fill the banking gaps and bringing 18 services to the unserved. It's not an easy 19 job. It can take many years and enormous 20 sacrifices for community development credit 21 unions to achieve the level of assets and 22 capital they need to serve their members 23 adequately. 24 Often our credit unions need help 25 getting to those levels. Citibank has provided . 232 1 2 that kind of help to the CDC movement. It has 3 not always been easy to convince banks, and 4 especially in today's climate where there seem 5 to be some real adversarial relationship 6 between some banks and credit unions to help 7 institutions that some bankers may call 8 competitors. But Citibank looked beyond this 9 to the needs of low income communities. They 10 decided if their bank presence wasn't 11 sufficient in a community it would be important 12 for low-income people to have access to a 13 nonprofit finance institution owned by the 14 community itself. 15 Listening to all the testimony today, 16 as a person of color I would like to say that 17 too often people of color are brought up when 18 these type of issues come before you, and often 19 groups say what they are doing to serve the 20 people of color, and I'm talking about 21 intermediaries and advocates, but I would ask 22 the Federal Reserve to be very careful about 23 the rainbow effect which I call, a pot of gold 24 at the end, the banks on one end and the 25 financial institutions and the adversaries and . 233 1 2 intermediaries on the other. Both have the pot 3 of gold. 4 The community is under need watching 5 the funds go from one end to the other and 6 they're not getting it. Statistics prove that 7 communities of color are in worse shape today 8 than they were twenty years ago. Something is 9 wrong. 10 I would like to say that Citibank I 11 commend them for understanding what a 12 conglomerate can do and what it cannot. In not 13 being able to do it, they are willing to 14 support those who can do it. 15 The micro fund, the community 16 development credit unions, the loan funds, the 17 community CDC, they are in the community run by 18 the people of the community making the 19 decisions to lift themselves up. People have 20 been trying to do it for them for twenty years. 21 It has not worked. They need to be able to do 22 it for themselves. 23 When institutions such as Citibank 24 recognize this, and are willing to support 25 those organizations that are in the community . 234 1 2 working to empower themselves and lift 3 themselves up, then I support this type of 4 bank. 5 So I would say that from the CDCU 6 movement, and I would also like to say someone 7 mentioned identifying the CDCU received money 8 from Citibank. The Federation received a 9 million dollars from Citibank to deposit into 10 low income credit unions to help them have the 11 equity they needed to continue lending to poor 12 people in the communities throughout the United 13 States. And I would say to those groups who 14 said this, I would ask that they identify 15 themselves if they plan to be recipients of any 16 monetary requirement, that the Federal Reserve 17 would put on a merger of this type. Oft times 18 they are complaining about the people who have 19 already received the money, but they plan to be 20 on the recipient side if the monetary 21 requirement is necessary. 22 I would also ask that you approve the 23 merger, but that you also keep an eye on any 24 monetary requirements, that you make sure that 25 you follow the dollars to make sure that they . 235 1 2 actually get to the communities that are being 3 represented as being underrepresented and 4 needing your concern. 5 Thank you. 6 MR. LONEY: Thank you. 7 Are there any questions from the 8 panel? 9 MR. ALVAREZ: I don't have any 10 questions, but I have a comment that pertains 11 to what some of the other speakers on the panel 12 before have represented people who have done 13 incredible work in the community like 14 yourselves and we appreciate you all taking the 15 time to come and talk to us. So no matter what 16 happens in this merger, good luck in continuing 17 the work you're doing. 18 MR. LONEY: I've been remiss in not 19 worrying about this before. I guess I was 20 thinking that everybody has been here all day. 21 Maybe they have. 22 So let me just repeat, if you have 23 written materials that represent your remarks 24 we would like to have copies if we could get 25 one before you leave. Also, if any of you who . 236 1 2 testified wish to supplement your oral 3 testimony you may do so by close of business 5 4 p.m. on July 2, by sending in such supplemental 5 information care of Jennifer Johnson, secretary 6 of the Board of Governors of the Federal 7 Reserve in Washington, D.C. 20551. Also, you 8 can fax it to 202-452-3462. So if you have 9 supplemental information we'd like to have it 10 by the end of business July 7th. 11 Also, I'll let you know that there 12 will be transcripts available by June 30th of 13 today's part of the meeting, and by July 1st 14 for tomorrow's part of the meeting that can be 15 obtained through the Federal Reserve Bank of 16 New York, and the transcript will be available 17 by close of business June 29th for today's part 18 of the meeting and June 30th for tomorrow's 19 meeting. The board's public website www.frb. 20 fed.us. 21 (Laughter) 22 So I would be remiss in not saying 23 this to the afternoon session as well as to the 24 morning session. Thank you very much.
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