Public Meeting Regarding Citicorp and Travelers Group
Transcript of Thursday, June 25, 1998
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Public Meeting Regarding Citicorp and Travelers Group
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PUBLIC MEETING REGARDING CITICORP AND TRAVELERS
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11 THURSDAY, JUNE 25, 1998
12 NEW YORK CITY
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3 MR. MC DONOUGH: Good morning, ladies
4 and gentlemen. I'm Bill McDonough, president
5 of the Federal Reserve Bank of New York.
6 Welcome to this very important meeting
7 regarding the proposed merger between Travelers
8 and Citicorp.
9 We are very interested in hearing
10 public views on this subject, and we are going
11 to have a very long day today, and very likely
12 a very long day tomorrow. The proceeding is
13 being chaired not by the Federal Reserve Bank
14 of New York, we are your hosts, but rather by
15 Glenn Loney of the staff of the Board of
16 Governors of the Federal Reserve system from
17 Washington, and I will turn the floor over to
18 Glenn.
19 MR. LONEY: Thank you, Mr. McDonough.
20 Let me also welcome you to this important
21 public meeting on the application of Travelers
22 to acquire Citicorp.
23 First, let me introduce myself. I am
24 Glenn Loney, deputy director of the division of
25 consumer and community affairs, Federal Reserve
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2 Board in Washington and I'm presiding officer
3 for this public meeting.
4 The other panelists here are Scott
5 Alvarez to my immediate left who is associate
6 general counsel from the board's legal
7 division. Jim Hodgetts Sr. Vice-President from
8 the Federal Reserve Bank of New York, and
9 Elizabeth McCall Acting Superintendent of Banks
10 of the State of New York Banking Department and
11 we're pleased to have the State of New York
12 with us today.
13 We're here today because Travelers
14 Group of New York applied for approval to
15 acquire Citicorp also of New York, New York.
16 When the federal reserve system considers one
17 of these applications we look at a number of
18 factors under the Bank Holding Company Act.
19 These include financial issues, managerial
20 issues, competitive issues and the convenience
21 and needs issues of the communities affected.
22 In doing so we will particularly look
23 at the record of the performance of the parties
24 under the Community Reinvestment Act. The
25 Community Reinvestment Act requires the board
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2 to take an institution's record of meeting the
3 present needs of its entire community into
4 account. In addition, the transaction also
5 involves the proposed acquisition or retention
6 of nonbanking companies engaged in activities
7 permissible for bank holding companies as well
8 as the proposal to divest or otherwise conform
9 a number of other activities that are not
10 permissible for bank holding companies under
11 current law.
12 With respect to the proposal to
13 conduct permissible nonbanking activities, the
14 board also must determine whether conducting
15 the proposed nonbanking activities can
16 reasonably be expected to produce benefits to
17 the public that outweigh possible adverse
18 effects, such as undue concentration of
19 resources, decreased unfair competition,
20 conflicts of interest or unsound banking
21 practice.
22 The purpose of today's meeting is to
23 receive information regarding these factors.
24 We will be seeking to elicit this information
25 and declare issues relating to the application.
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2 We're very pleased that so many have been
3 willing to come and testify in your public
4 meeting. We will have over 120 groups and
5 individuals represented during this two-day
6 meeting:
7 Let me make a few remarks about the
8 procedures. This is what is called an informal
9 public meeting. Members of the panel may ask
10 those who are testifying about their testimony.
11 This is not a formal administrative hearing, so
12 we are not bound by rulings regarding evidence,
13 cross-examination and some of the formal
14 transaction of that kind of a proceeding. We
15 will be here for a full day and a half.
16 As you can see from the agenda we
17 need to stick to that schedule very carefully
18 in order to give everyone a chance to say what
19 they would like to say. We're going to ask the
20 witnesses today to help us stay on schedule.
21 The panel will be expected to keep within their
22 allotted time, so please be mindful of the
23 needs of others.
24 We have, what I've been told, is a
25 very dramatic signal system with regard to
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2 timing. The time keeper is sitting here with
3 the signs that she's holding up right here in
4 the middle of the front row. The time keeper
5 will give you a signal when you have two
6 minutes left to speak, and another signal when
7 your time is up.
8 There may have been some individuals
9 who simply haven't had the chance to sign up in
10 advance. To the extent possible we want to
11 give them a chance to speak as well. At the
12 end of the meeting, both tonight and again at
13 the meeting tomorrow, we will throw the
14 microphone open to anybody who would like to
15 make a presentation, time permitting.
16 Witnesses may submit a written
17 supplement to your oral testimony by July 2,
18 and then the record will be closed. Any
19 written supplements must be received by the
20 close of business 5 p.m. on July 2, and
21 directed to Jennifer J. Johnson secretary of
22 the board, Board of Governors of the Federal
23 Reserve System Washington, D.C. 20551. You may
24 fax your submission to 202-455-3462.
25 Also, if you haven't turned in copies
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2 of your written testimony, or if you have any
3 other written statements to put into the record
4 please leave them with the Federal Reserve
5 staff at the registration table outside.
6 It is important that we get this
7 material for the record. A transcript of the
8 meeting will be available by June 30th for the
9 June 25th meeting, and by July 1st for the June
10 26th portion of the meeting at the Federal
11 Reserve Bank of New York.
12 In addition, the official transcript
13 will be available by close of business on June
14 29 for the June 25th meeting, and by the close
15 of business by June 30 for the June 26 meeting
16 on the board's public website on www.bog.frf.
17 fed.us.
18 (Laughter)
19 I love talking like that.
20 With that, I would like to turn the
21 mic over to Elizabeth McCall for a few remarks
22 before we hear from our first panelist.
23 Ms. McCall.
24 MS. MC CALL: Thank you. It is a
25 pleasure for me to be here today and to have
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2 this opportunity to speak briefly with all of
3 you. It seems as if almost everyday we hear
4 about another proposed merger between banking.
5 However, the proposed merger between Citicorp
6 and Travelers Group Inc., is unique in that it
7 will be a merger between a bank holding company
8 and a holding company that is a parent of firms
9 that underwrite insurance as well as provide
10 numerous securities and other financial
11 services.
12 The New York State Banking Department
13 regulates ten entities that are involved in
14 this application, including Citibank, New York
15 State, Smith Barney Private Trust Company,
16 Commercial Credit Company, and Primerica and
17 encompasses two banks, two mortgage bankers,
18 two money transmitters, two sales finance
19 companies, and one mortgage broker.
20 The Citicorp and Travelers activities
21 regulated by the New York City Banking
22 Department represent a broad array of services
23 that include local banking mortgage, consumer
24 credit, corporate trust activities and the
25 worldwide issuance of redemption of Travelers
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2 checks and money orders. The banking board of
3 the New York State Banking Department must
4 approve the application by Travelers to become
5 a bank holding company under New York State
6 banking law.
7 After the confirmation of this
8 application, Travelers will own three banks
9 that are headquarted in New York State. These
10 are Citibank, New York State, Smith Barney
11 Trust Company and Citibank N A.
12 In addition, as superintendent, I
13 must approve five different chains of control
14 applications pertaining to one of the mortgage
15 bankers, both sales finance companies, and both
16 money transmitters that are currently part of
17 the Citicorp holding company.
18 Today we are here to listen carefully
19 to each of you, to learn from you. The banking
20 board and I will seriously consider your
21 comments before deciding on the merits of any
22 of the applications that come before us.
23 We recognize the importance that
24 banks play in neighborhoods, both in terms of
25 maintaining the existing quality of
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2 neighborhoods, and in helping those
3 neighborhoods that require revitalization. In
4 this regard, we consider CRA and fair rent an
5 extremely important aspect of our supervision
6 of banks and other license centers that come
7 under the jurisdiction of the Banking
8 Department.
9 As such, one of our primary purposes
10 in being here today is to gain a thorough
11 understanding of how the proposed merger will
12 affect CRA, fair lending in communities.
13 I regret that I will not be able to
14 stay for the entire day as I am leaving for a
15 meeting with a bank CEO in Harlem in hopes of
16 encouraging the branch there. However, Barbara
17 Kent, the acting duty superintendent of
18 consumer affairs division will be here to
19 participate on behalf of the Banking
20 Department.
21 I'm looking forward to a very
22 productive day. Thank you.
23 (Applause)
24 MR. LONEY: Thank you, Ms. McCall.
25 With that we will begin with our first panel
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2 which is made up of representatives from the
3 corporations involved in this application.
4 We have John S. Reed the chairman and
5 chief executive officer of Citicorp, Pamela
6 Flaherty, the Sr. Vice-President of Citicorp,
7 and Charles O. Prince, executive
8 vice-president, general counsel and secretary
9 of Travelers Group.
10 Mr. Reed.
11 MR. REED: Thank you very much. Mr.
12 Loney, Ms. McCall, Mr. Hodgetts and
13 Mr. Alvarez.
14 I'd like on behalf of my colleagues
15 first of all, to thank you for the opportunity
16 to kick off these hearings and to participate
17 in what is going to be I'm sure an interesting
18 day and a half. I really would like to make
19 some comments first with regard to the merger
20 and second with regard to the community aspects
21 that you have highlighted in your own comments.
22 With regard to the proposed merger
23 itself I think, as has been correctly
24 characterized, this is an important merger
25 because it does bring together two very large
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2 and I think two very committed institutions.
3 It is, as you have pointed out, a different
4 merger, because there is not a consolidation of
5 like enterprises.
6 Quite to the contrary, this is a
7 merger that has at its core a commitment on
8 both of our parts to try to expand our
9 business. In that sense it is a merger about
10 growth, it is a merger about expansion, and it
11 is a merger really that focuses on the consumer
12 throughout the United States, and, more broadly
13 around the world, and our commitment to serve
14 the consumer better than the consumer today is
15 able to be served.
16 We believe that we can accomplish
17 this by putting together our two institutions
18 in such a way that expand the product line that
19 is available to consumers, but may be even more
20 importantly, greatly expands the channels of
21 distribution, and hopefully will allow us to
22 improve the offering of financial services to
23 the community, and reduce their costs, make
24 them more efficient and make them more
25 effective. There is a very competitive
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2 marketplace out there.
3 Our success is going to require that
4 this core concept underlying the merger be
5 successful, and the marketplace will make very
6 clear whether it is or it is not, because
7 consumers will of course continue to have the
8 choice of funding to the traditional suppliers
9 in a more traditional kind of arrangement. So
10 the first thing I'd like to say with regard to
11 this merger is it speaks to new opportunities.
12 It is not a merger that speaks to
13 consolidation or a restriction of
14 opportunities, but, instead, it speaks to
15 substantial growth and its success requires
16 that we get growth and we get growth of revenue
17 that can only come from serving consumers and
18 other customers better than we are today doing
19 it. I think this is very important in taking
20 into consideration in our application, because
21 I think it speaks at a very positive way to
22 improving the quality of service that will be
23 available throughout the market areas that we
24 hope to serve.
25 Secondly, with regard to the
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2 community, I wanted particularly to come
3 personally because I wanted to reiterate our
4 commitment to the community. I think, speaking
5 on behalf of Citicorp and Citibank, the
6 institutions that I have been associated with,
7 but prospectively on behalf of Citigroup we
8 understand full well the centrality of having
9 to serve the community.
10 We cannot be successful in our
11 business if we don't serve the community. It
12 is something that the law requires of us, but
13 frankly, beyond the law, I think common sense
14 and any sense of business makes very clear that
15 our success over time requires that we be good
16 citizens and that we run our business in ways
17 that are compatible with the values of the
18 community and I think that that commitment goes
19 well beyond the specification of the law, and
20 it speaks more wholesomely, if you will, to
21 what it takes to build a successful enterprise
22 to attract good people to work for you, to keep
23 your customers happy, and so I'm here
24 personally not only to reiterate the
25 commitments that we have made and the
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2 requirements of the law, but also to make
3 public record of the fact that we believe that
4 service to the community is central to our
5 business success. It has been for many years,
6 and it will continue to be going forward.
7 Let me detail a few of the ways that
8 we think that this is made real. We have made
9 a public commitment that says going forward in
10 this merger we will expand the resources that
11 are available to the community, particularly in
12 making available mortgages and community
13 development funds, and this commitment is real,
14 and if you tear the numbers apart and Pam
15 Flaherty, my colleague, is going to do this a
16 little bit. It really says this merger will
17 result in an expansion of our financial
18 commitment under these kind of numbers to the
19 community.
20 But I believe if you look at our
21 business that the first commitment and the
22 first contribution we make to the community is
23 jobs. We are a company that creates jobs.
24 They are good jobs. They are well-paying.
25 They have good fringe benefits, and these are
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2 jobs where people could come in at entry levels
3 and can have a whole career with the
4 organization. They can grow, they can be
5 trained. They are not dead end jobs.
6 In community and community across the
7 United States we are currently today and have
8 been over the years, big-time hirers of entry
9 level people, graduates from high school, first
10 entrance into jobs. More than 50 percent of
11 the 110,000 jobs with these two companies. We
12 have in the United States more than 50 percent
13 of those jobs involve employees who earn less
14 than $40,000 per year. So this is a company
15 whose job imprint, if you will, on the
16 community is strong and important. We are a
17 good employer. We create good jobs with good
18 fringe benefits that have good careers, and I
19 think that this is a very important aspect of
20 our impact on the community.
21 We are big taxpayers. We are
22 important taxpayers in communities across the
23 country. This will continue to be the case,
24 and I think it's an important contribution that
25 we make to this society, and it's one that you
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2 can count on, and, obviously, as we are more
3 successful, we will in fact pay more taxes.
4 We recognize full well that we have
5 to make the services that we provide available
6 broadly within the community. This merger has
7 as its core an expansion of distribution
8 capability well beyond the traditional branches
9 through which banks have typically operated.
10 The Travelers Group is a major
11 provider of services through direct face to
12 face selling, and the combination will allow us
13 to make services available not only through
14 branches, not only over electronic cash
15 machines, telephones, the Internet and so
16 forth, but significantly through the expansion
17 of direct face-to-face selling throughout the
18 community.
19 We understand full well that we have
20 to work hard to make sure that the services
21 that we provide are uniformly available and
22 freely available across the community. We have
23 a pretty good record on this. You can count on
24 us to continue to push it. I think it's
25 important.
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2 We are very conscious of the equal
3 opportunity requirements. I would tell you
4 from a personal point of view I've been
5 involved in Citibank's equal opportunity
6 activities. The policies that we have within
7 Citibank with regard to equal opportunities,
8 fair lending, I have personally written because
9 I was involved in some of the original work in
10 this area, and I felt that it was very
11 important that the company understand that our
12 fair lending policies were more than just
13 something that had been written by an
14 administrator, and so I think that we have a
15 clear record of commitment in this area, and a
16 recognition that it is a difficult area in
17 which to consistently perform well, but one
18 that we are committed to doing.
19 We believe seriously in transparency
20 with regard to the services we offer, privacy
21 for our customers. We have a privacy statement
22 that tries to make sure that as the world moves
23 towards an electronic world that our customers
24 can be sure that the business we do with it
25 will maintain the privacy that they would
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2 expect of a banking institution, and we believe
3 that is part of our commitment as well.
4 So I'm here really to reiterate what
5 has been a long standing commitment of Citibank
6 and Citicorp. It's something that we take very
7 seriously, and I can say that we anticipate
8 with regard to City Group that if this
9 application were to be approved, that we would
10 in fact maintain that commitment and that we
11 would in fact strengthen it because as a
12 combined group we will be in a position to
13 offer more complete services, more broadly
14 throughout the United States.
15 I would hope that these facts, plus
16 the testimony of the many other people that you
17 are going to hear from during this day and a
18 half session or this two-day session, would
19 make clear to you that these commitments are
20 real, and that they are something that you
21 could count on going forward.
22 Thank you very much.
23 MR. PRINCE: Thank you. My name is
24 Chuck Prince, I'm the executive president of
25 Travelers Group. In the short time we have
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2 today I'd like to make just a few you key
3 points. First, the combination of Travelers
4 and Citicorp is permissible under current law.
5 Under the express provisions of the Bank
6 Holding Company Act as it exists today
7 Travelers is permitted to combine with Citicorp
8 subject to approval by the Federal Reserve and
9 other banking authorities, and will have a
10 period of two years with the possibility of
11 three one-year extensions in which to come into
12 conformance with the terms of the bank audit
13 company act.
14 In that regard, I would note that
15 most of the current activities of Travelers
16 Group are today permissible activities for bank
17 holding companies. We are not, for example, in
18 any businesses commonly referred to as
19 commercial. Of those activities which are not
20 today permissible, most can be modified to
21 conform to the requirements of banking law. The
22 activity of insurance underwriting does not
23 today fit within these requirements, but
24 frankly, we are hopeful that the current law
25 will be modernized within the next two years
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2 I do want to emphasize, however, that we do not
3 seek and do not require any change in the law
4 in order to consummate this merger.
5 This merger will bring together two
6 well capitalized companies with strong
7 management teams and the new Citigroup of
8 banking securities and insurance subsidiaries
9 will be financially strong and independently
10 viable whether or not there is any change to
11 our banking laws.
12 The second point I would like to
13 emphasize is that cross-marketing activities
14 which are important to us in the context of
15 this transaction exist today. Banks all over
16 the United States cross market other financial
17 service products, including insurance products
18 today.
19 What is different here is that
20 instead of cross marketing the financial
21 service product of unaffiliated providers, we
22 will combine the ownership of multiple
23 companies under one umbrella, and I suggest to
24 you that there is nothing different about the
25 cross marketing of affiliated products compared
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2 to today's widespread cross marketing of
3 unaffiliated product.
4 The third point I would make is the
5 importance to us of customer privacy. As Mr.
6 Reed just indicated, both of our companies
7 recognize the high trust that our customers
8 place in us when they provide individual
9 financial data to us. Citibank has privacy
10 principles on its Internet web site and the
11 combined Citigroup will be publishing privacy
12 guidelines for the combined company in the near
13 future.
14 We will treat each individual's
15 information with the same high privacy
16 protection that each of us wants for our own
17 personal data, yours, and mine. Our policies
18 and procedures will be fully consistent with
19 the caution expressed by regulators including
20 most recently by Ms. Dewey Williams the acting
21 comptroller of the currency.
22 Lastly, I want to mention the
23 commitment Travelers Group has made to increase
24 the availability of home owners and other
25 insurance in low and moderate income
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2 neighborhoods in 1994 we began our urban
3 availability of insurance program to improve
4 the availability of insurance in these areas.
5 Under Travelers underwriting guidelines
6 coverage on residential properties in urban
7 areas is issued and renewed regardless of
8 location, regardless of value, and regardless
9 of the age of the property.
10 Recently Travelers property casualty
11 insurance voluntarily joined in Citigroup a
12 community commitment to expand the urban
13 availability of insurance. Our program will
14 provide special education, enhanced
15 availability and special pricing to Citibank's
16 low and moderate income customers. We will
17 over time expand this important program to
18 additional cities where we have a significant
19 presence.
20 Our program also includes aggressive
21 efforts to recruit and develop minority agents
22 who can represent our insurance company.
23 I want to emphasize that all of the
24 current banking subsidiaries of Citicorp and
25 Travelers Group will remain subject to the
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2 Community Reinvestment Act and other fair
3 lending and consumer protection laws and
4 regulations just as they are today. The
5 commitment of the banking subsidiaries to their
6 communities will remain strong.
7 More importantly, we believe that the
8 high level of community involvement that
9 already exists within our companies will
10 increase as a result of our merger. The reason
11 for this is simple.
12 The purpose of the merger is to bring
13 more and better product to a greater number of
14 people. The various businesses within the
15 newly created Citigroup are innovative
16 producers of these products as are banking and
17 nonbanking organization work together to bring
18 better products to more people. Citigroup as a
19 whole will better serve the needs of its entire
20 community, including low and moderate income
21 and minority individuals.
22 With that, I will thank you for the
23 opportunity to be here today and turn to my
24 colleague, Pam Flaherty.
25 MS. FLAHERTY: Thank you, Chuck. My
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2 name is Pam Flaherty, and I'm responsible for
3 Citibank's community involvement.
4 Add to Pamela Flaherty.
5 Thank you. My name is Pamela
6 Flaherty. As John Reed explained, I am
7 responsible for Citibank's community
8 involvement.
9 This merger breaks new ground in its
10 combination of insurance and banking services.
11 While many of our community partners are
12 excited by the opportunities this suggests,
13 some are concerned that this will somehow
14 diminish Citibank's community commitment.
15 Nothing could be further from the truth.
16 I want to make three points this
17 morning. 1. Our lending record is good and
18 improved dramatically in 1997, particularly in
19 terms of lending to low and moderate-income
20 consumers and to minorities.
21 2. We provide a broad range of
22 products and services and access to consumers
23 of all income levels, and, 3, we intend to do
24 even more in the future, as evidenced by our
25 community commitment.
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2 Let me first address lending. In the
3 eight areas around the country where we serve
4 the local retail banking market, we have a
5 strong record of lending to all segments of the
6 community. In 1997 in those markets we
7 provided $9 billion of credit to low and
8 moderate-income consumers, to small businesses
9 and to organizations engaged in community
10 economic development.
11 We are particularly proud of our
12 commitment to our local neighborhoods. Since
13 their emergence thirty years ago, we have
14 partnered with local community development
15 organizations, combining their knowledge of
16 local community needs with our human and
17 financial resources.
18 Today our program is significantly
19 expanded, and Citibank's community development
20 lending supports affordable and special needs
21 housing, small business and economic
22 development, health and human services, as well
23 as the educational and cultural activities in
24 LMI communities.
25 New community development lending
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2 originations in 1997 in all US Citibank markets
3 totaled $238 million versus $146 million the
4 year before, up 63 percent.
5 Of the 1997 lending, 42 percent was
6 in metropolitan New York, Citibank's largest US
7 marketplace. Here in New York our lending
8 commitments have doubled over the last two
9 years to $100 million in 1997.
10 We apply a comprehensive strategy
11 based on building strategic partnerships with
12 nonprofit, government and other financial
13 partners to respond to the specific needs of
14 local communities. In addition to lending,
15 Citibank employees a range of investment tools.
16 In 1997, our community investment
17 portfolio totaled $47 billion, while we made
18 $26 billion in grants to community and
19 educational programs. Citibank has also long
20 provided the financing that addresses small
21 business credit needs. In 1997, nationwide,
22 Citibank lent approximately $1.9 billion to
23 small businesses, a total of more than 13,000
24 loans. We are especially proud that 10,000 of
25 these loans were for less than $100,000, the
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2 loan size most often needed by small
3 businesses.
4 What's more, 29 percent of the
5 dollars lent were in LMI census tracts. In New
6 York we provided $768 million in credit to
7 small businesses. 35 percent of our loans were
8 for less than $25,000, and 30 percent of the
9 dollars lent were in LMI census tracts.
10 Communities are also stabilized
11 through home ownership. As early as 1978,
12 Citibank began to reach out to LMI families
13 eager to purchase homes through our stretch
14 mortgage piloted in Brooklyn, the first 10
15 percent down payment product in New York.
16 Until 1991, Citibank was a leader in
17 mortgage financing, but the economic downturn
18 in the early '90s and the collapse of the real
19 estate market forced us to restructure and cut
20 back on our lending. We regained momentum in
21 1996 and 1997.
22 In 1997, Citibank made a 3,000
23 HMDA-reportable loans for a total of $9.5
24 billion, almost a 50 percent increase from the
25 prior year. Our lending to LMI consumers and
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2 communities grew even faster, at $1.2
3 billion -- nearly doubling.
4 During 1997, Citibank also
5 dramatically increased its lending to
6 minorities with $1.5 billion in HMDA-reportable
7 lending. Lending to African-Americans doubled
8 as did lending to Hispanics.
9 Let me now turn to access to
10 financial services. Citibank has made a deep
11 commitment to the use of technology to increase
12 choice and convenience for all customers. We
13 introduced the first ATMs in 1977. Since then,
14 we have expanded the use of telephone access as
15 well as PC banking.
16 Our data on customer usage patterns
17 show that across all income levels, customers
18 increasingly perform their financial
19 transactions outside a branch, on the phone,
20 through a PC or at an ATM.
21 Customers who live in low and
22 moderate income census tracts do not differ
23 significantly in their usage from the rest of
24 our customers.
25 Our data show that these customers
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2 perform 76 percent of their transactions
3 outside a branch, versus 80 percent for all
4 customers, and 25 percent on the phone or the
5 PC, versus 30 percent for all customers.
6 Because consumers use the branch less
7 frequently, the quality has to be uniformly
8 great. Our branches have been recently
9 upgraded with better training for our people,
10 better and more user friendly technology and
11 longer hours.
12 Two years ago, in New York we closed
13 a number of branches and converted several to
14 Citicard Banking Centers, while renovating and
15 upgrading the remaining branches. When we
16 started this process, 16 percent of our
17 branches were located in LMI census tracts.
18 Today, 22 percent of our branches are located
19 in LMI tracts.
20 And we continue to open different
21 kind of specialized stores like our new manned
22 electronic banking facility on Burnside Avenue
23 in the Bronx, a loan store in Harlem, both of
24 which will open this summer, and a retirement
25 store in Oakland, California.
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2 Electronic benefits transfer is
3 another innovation which has opened a new
4 opportunity for us to serve low income people.
5 The most important benefit for EBT recipients
6 may well be the ability to participate in the
7 mainstream world of electronic banking and
8 payments systems.
9 We're encouraging customers to use
10 technology and alternative access points in two
11 ways, pricing and education. In New York we
12 eliminated fees for our ATMs, PC banking, and
13 telephone bill payment.
14 With regard to education, we have
15 multilingual hosts to assist us in branch
16 customers and a unit of full-time educators who
17 give seminars on banking, credit and
18 technology. Each year we conduct roughly four
19 hundred seminars on sight, with nonprofits and
20 at schools across New York.
21 We also support a number of nonprofit
22 organizations dedicated to improving education
23 and job skills training through technology in
24 our schools including Classroom, Inc., City
25 Tech, and Junior Achievement.
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2 Finally, let me talk about our ten
3 year $115 billion lending and investment
4 commitment. Our Citigroup commitment is a
5 national pledge that responds to our community
6 partners by focusing on lending and investing,
7 financial literacy and insurance.
8 We will execute the commitment by
9 working with our community partners. We will
10 also aggressively market these products
11 ourselves. We seek to increase this lending in
12 all our markets, being responsive to each of
13 them individually. We will report publicly on
14 how we're doing on an annual basis.
15 Citigroup built its pledge through
16 conversations with some 300 community
17 organizations across the country. They told us
18 they wanted to ensure that we would remain an
19 active partner through community development
20 lending and investing; increasing our small
21 business and mortgage lending; expanding our
22 work in financial literacy; and offering
23 greater access to insurance.
24 Our pledge was also designed as a
25 challenge to our business. To meet our
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1
2 targets, we must grow the areas our community
3 partners are particularly concerned about,
4 mortgages, small business and community
5 development lending, at an average annual rate
6 of eight to ten percent over the ten-year
7 period, and social investing must average over
8 12 percent growth per year. We believe this
9 pledge is a very aggressive commitment.
10 The commitment is more than numbers
11 and growth rates. It includes insurance for
12 the first time, as Chuck Prince described. It
13 also addresses financial literacy, a critical
14 need of consumers of all income levels.
15 Let me close by saying that we
16 believe we have done a great job of meeting the
17 credit and convenience needs of the communities
18 where we accept deposits, as required by CR A.
19 And beyond that, we also believe we have met
20 the test of being an excellent corporate
21 citizen in all the communities where we do
22 business.
23 But we intend to do more. We intend
24 to use the resources of the combined company to
25 improve the financial lives of all customers as
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1
2 well as the communities in which we operate.
3 We will do this primarily through our business,
4 offering quality banking services, loans,
5 insurance, and investments, and participating
6 in the financing of community improvements.
7 We will also continue to innovate to
8 expand access to financial services and
9 information so individuals and family of even
10 modest means can improve their economic well
11 being.
12 We have listened to our community
13 partners, those organizations which work
14 everyday in our communities. Many of them are
15 speaking at this meeting, and we thank them.
16 We intend to continue to listen to them and to
17 work with them.
18 Thank you for your time this morning.
19 MR. LONEY: Thank you. Do we have
20 questions from the panel?
21 MR. ALVAREZ: I have a couple of
22 questions. Mr. Prince, you mentioned in your
23 opening remark the requirement of the Bank
24 Holding Company Act that the organization
25 combined organizations conform the nonbanking
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1
2 activities to the limitations of the Act. In
3 particular you noted that insurance
4 underwriting is not a permissible activity at
5 this point.
6 If the current law is not changed,
7 can Travelers Group, combined Travelers Group
8 realistically meet the requirements of the Bank
9 Holding Company Act and how will the proposed
10 costs marketing services that you hope to do
11 affect the ability of the company to meet those
12 requirements?
13 MR. PRINCE: The companies within
14 Travelers Group and companies within the
15 combined Citigroup are operated at separate
16 independently viable company.
17 Each company is separately staffed,
18 separately organized, has its own board of
19 directors. The company in the insurance
20 business, Travelers Property Casualty, for
21 example, is not only separately organized, it
22 is already publicly held in part. It's already
23 listed on New York Stock Exchange, and the
24 companies will continue to be operated in that
25 fashion.
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2 The cross-marketing activities will
3 not involve any combination of the company
4 staff or organizations in a way which would
5 prevent the orderly restructuring of the
6 company in the event that were to become
7 necessary.
8 So the short answer to your question,
9 Mr. Alvarez, I believe is that, yes, we would
10 be able to comply with the requirement even if
11 the law did not change, and if it became
12 necessary at some point, for example, to spin
13 off the insurance companies they would be
14 strong independently viable companies, and our
15 company would continue to be strong and
16 independently viable, and there is nothing in
17 the cross-marketing that would change any much
18 that.
19 MR. ALVAREZ: I had another question.
20 A number of comments have been expressed
21 concerned that the wind Travelers Citigroup
22 would as far as loan marketing individuals and
23 communities be concerned perhaps be worse than
24 the sum of the parts of the two organizations
25 in part because the new organization might
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1
2 target low and moderate income and minority
3 individuals in communities from marketing
4 higher cost lending and higher cost insurance
5 products.
6 How is it that Citigroup if this
7 transaction is improved, would insure that all
8 individuals in all communities will have access
9 to the full range of products, including lower
10 cost products that might be available through
11 the organization?
12 MS. FLAHERTY: I guess I would first
13 say that the record shows with regard to
14 Citibank and with regard to Travelers that, and
15 I can certainly speak more specifically to
16 Citibank, that we already do today provide
17 extensive credits to low and moderate income
18 communities and we have made a pledge to
19 continue to do that going forward.
20 MR. ALVAREZ: Ms. Flaherty, you
21 mentioned that Citicorp has closed branches in
22 the past.
23 Are any branch closing proposed as
24 part of this transaction?
25 MS. FLAHERTY: No.
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2 MR. ALVAREZ: One final question from
3 me. Travelers Group made several commitments
4 and were subject to several conditions in an
5 order by the OCS when it applied to acquire its
6 thrift. What would be the status of those
7 commitments going forward if this transaction
8 is approved because Travelers Group would no
9 longer be subject to the OCS?
10 MS. FLAHERTY: We intend to continue
11 to meet those commitments.
12 MS. MC CALL: I have a question. We
13 would be very interested in the Department in
14 receiving a little more detail on the very
15 large commitment that you made, the breakdown
16 that is available.
17 MS. FLAHERTY: I'll be happy to do
18 that.
19 MR. LONEY: Any other questions from
20 the panel? If not, I will thank you very much.
21 MS. FLAHERTY: Thank you very much.
22 MR. REED: Thank you.
23 (Continued on next page)
24
25
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2 MR. LONEY: Because some of the
3 people on the panel scheduled to testify next
4 are not here, we are going to call people from
5 both Panel One and Panel Two at this time.
6 If David Nocenti, Robert Elliot,
7 Stephen Kaufman, Dannel Malloy and Nellie
8 Santiago-Fernandez could come up, I would
9 appreciate it.
10 I will follow the order that is in
11 the agenda that we sent out. In doing that, I
12 will ask Ms. Santiago-Fernandez, who is the
13 senator from New York State, to begin.
14 MS. SANTIAGO-FERNANDEZ: Good
15 morning. Thank you very much.
16 I am speaking today in favor of the
17 proposed conversion of Travelers Group into a
18 bank holding company, its acquisition of
19 Citicorp and the request for an exemption from
20 divestiture of assets under Section 1842 of the
21 Bank Holding Company Act.
22 I am speaking in both my capacity as
23 an elected official, representing a very poor
24 community in Brooklyn served by Citibank, as
25 well as a ranking member of the State Senate
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1
2 Banking Committee and as chair of the Senate
3 Democratic Task Force on Banking and Community
4 Reinvestment.
5 This is a merger of truly historic
6 significance. For years, as financial
7 modernization has been debated in Washington
8 and in the states, we have heard of these new
9 all-purpose, one-stop-shopping financial
10 services corporations which would be emerging.
11 Now for the first time we have seen one.
12 This question which must be asked is
13 if permitting the birth of this particular
14 prototype is in the best interest of financial
15 consumers. I strongly believe that the answer
16 to this question is yes.
17 In considering what this new entity
18 can do, I started by considering what Citibank
19 already has done.
20 Citibank maintains several branches
21 in my own senatorial district. Through these
22 branches, the bank not only provides a wide
23 range of basic financial services to my
24 constituents, but also a variety of educational
25 services to help consumers get the most out of
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1
2 their money. These include both training
3 courses on how to use the latest innovations in
4 computer-banking technology and small business
5 lending seminars targeted to the needs of
6 low-income neighborhoods.
7 It is through these same branches
8 which the new Citigroup will be able to offer
9 my constituents and people all over New York
10 City not fewer banking services, as some might
11 say, but an extended menu of insurance products
12 through their association with Travelers.
13 While some condemn Citibank for branch
14 closings, I have a positive story to tell.
15 Two years ago Citibank proposed the
16 closing of a branch in my own district. My
17 district, as I mentioned, is a low-income
18 neighborhood largely underserved by any other
19 financial institution. I and members of my
20 community appealed to the sensitivity of the
21 bank to preserve this branch, and I am proud to
22 say that the branch is open today.
23 Looking beyond Brooklyn to the larger
24 picture, Citibank has been a rising leader in
25 providing home mortgage loans to minorities.
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2 The Home Mortgage Disclosure Act data from 1990
3 to 1996 shows that the mortgage loan denial
4 rates for minorities nationwide has
5 consistently fallen, meaning more Hispanics and
6 African-Americans are having mortgage
7 applications approved at a greater rate than
8 ever before.
9 Citibank has also been a national
10 leader in providing support for building a
11 self-sustaining community development
12 infrastructure by providing grants and special
13 low interest loans for local organizations
14 specializing in economic development. Nearly
15 all of the CBOs in my district have benefitted
16 from this help, providing us with long-term
17 stability in the community.
18 Citibank even pioneered an extremely
19 innovative form of support for community
20 not-for-profit financial institutions with its
21 Equity Equivalent Program, which enables
22 community development financial institutions to
23 strengthen their balance sheet's very long term
24 and very substantiated debt.
25 It is through all of these activities
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2 that the New York City bank has maintained a
3 satisfactory overall CRA rating with an
4 outstanding rating in community development.
5 The new Citigroup gives every
6 indication that this high level of support will
7 continue but be greatly enhanced by this
8 merger.
9 Citigroup's community reinvestment
10 pledge of $150 billion represents an amount
11 twice the bank's current domestic deposits; a
12 considerable commitment. But it is not the
13 sheer quantity of money which should receive
14 the most attention.
15 Citigroup's proposed program on
16 financial and technological literacy is a very
17 forward-thinking initiative design to help
18 teach young people how to take the widest
19 advantage of the possibilities offered by
20 computer banking. The program will help
21 prepare consumers for the realities of banking
22 in the 21st century.
23 Another new program, one more
24 immediately beneficial to low-income
25 communities, is their Proposed Center for
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2 Community Development Enterprise. This
3 subsidiary will be making loans and providing
4 technical support to community development
5 organizations to provide them with the tools,
6 resources, and knowledge they need to build
7 their own economic development programs. This,
8 I believe, helps bring about true community
9 empowerment.
10 Finally, I have worked on the CRA
11 issue for many years now and I want to remind
12 everyone how historic the commitment made by
13 Citigroup is, especially from the Travelers
14 side.
15 Travelers has promised to make a wide
16 variety of insurance products available in
17 low-income communities utilizing the extensive
18 Citibank branch network. What this will mean
19 is more insurance products will be made
20 available to more people in low-income
21 communities. This is a very significant move.
22 The CRA requires Citibank to invest a
23 portion of its assets in the communities it
24 accepts deposits from, including poor
25 communities. However, there is no similar law
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1
2 which binds insurance companies.
3 While financial modernization
4 legislation may ultimately include such
5 provisions, Travelers has boldly decided to
6 voluntarily target insurance products to poor
7 neighborhoods, to poor communities, products
8 designed specifically to meet their needs. I
9 believe that this historic commitment has set a
10 standard by which future cost industry
11 financial mergers should be judged.
12 In closing, let me once again state
13 that I support this merger. It represents a
14 natural trend in the financial marketplace and
15 has a vast potential to benefit all financial
16 consumers, poor and otherwise.
17 Thank you very much.
18 MR. LONEY: Thank you.
19 Mr. Nocenti.
20 MR. NOCENTI: Good morning, Officer
21 Loney, Mr. Alvarez, Mr. Hodgetts,
22 Superintendent McCaul. My name is David
23 Nocenti, and I am the counsel from the Office
24 of Queens Borough President Clair Shulman. I
25 want to thank you for giving us the opportunity
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1
2 to provide our comments this morning.
3 The proposed merger of the Travelers
4 Group and Citicorp raises many complex legal,
5 financial, regulatory, and competitive issues,
6 and I know that you are going to be hearing
7 comments from both sides on many of these
8 issues today.
9 Our expertise does not lie in the
10 analysis of competition or the impact of
11 mergers on markets and so our testimony is
12 going to be limited to your request for
13 information regarding the impact of the merger
14 on the convenience and needs of the community.
15 Specifically, the Queens Borough
16 President's Office has worked very closely with
17 Citibank on numerous issues during the past ten
18 years, and we will provide some background on
19 Citibank's community activities in Queens.
20 Citibank has always been responsive
21 to the needs of our local residents, and this
22 history of cooperation and assistance should be
23 given strong consideration as you evaluate the
24 benefits of the merger.
25 Queens County geographically is the
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1
2 largest borough in the City of New York and is
3 also the second most populous with almost 2
4 million residents. If Queens County were a
5 separate city, we would be the fourth largest
6 city in the United States behind New York, Los
7 Angeles and Chicago.
8 Queens is also the most ethnically
9 and culturally diverse county in the world with
10 Kennedy Airport serving as the new Ellis Island
11 for the past 50 years. Queens County is the
12 first stopping point for immigrants all over
13 the globe. Over 35 percent of Queens residents
14 were born outside the United States and they
15 come from over 150 countries and speak over 120
16 languages.
17 Queens is primarily a working-class
18 borough. We do not have the conspicuous wealth
19 of Manhattan, and we have the specific needs,
20 economic needs, as in all areas of New York
21 City. There is a tremendous need for
22 affordable housing in Queens, and we also have
23 some of the most overcrowded schools in the
24 country.
25 The borough president is the highest
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1
2 elected official in Queens, and as a result our
3 office is involved in economic development,
4 housing, education and community projects
5 throughout the borough.
6 We work very closely with our
7 financial institutions and other private
8 businesses and, thus, are uniquely qualified to
9 evaluate the civic participation of these
10 private entities.
11 Citibank has been one of the most
12 active and effective businesses working towards
13 improvements in the borough of Queens. In the
14 area of economic development, Citibank has
15 provided important assistance to small
16 businesses throughout the borough. They have
17 worked closely with the Queens County Overall
18 Economic Development Corporation, the Greater
19 Jamaica Development Corporation, the Jamaica
20 Business Resource Center, the Rockaway
21 Development and Revitalization Corporation, and
22 many other local community development
23 entities.
24 Citibank has provided project grants,
25 has offered technical assistance and has led
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1
2 the way to helping these organizations and
3 other small businesses to develop and grow in
4 Queens County.
5 Citibank has also been a leader in
6 the area of housing development. As previously
7 noted, Queens County has a great need for more
8 affordable housing, and Citibank has provided
9 the financing necessary for many such projects.
10 Our office has undertaken major efforts to spur
11 the creation of more low-income and
12 moderate-income housing in Jamaica, the
13 Rockaways, and elsewhere in the borough, and
14 Citibank has provided invaluable financial and
15 technical assistance in this effort.
16 Although there are many one-family
17 and two-family homes in Queens, in other areas
18 of the borough the predominate housing stock is
19 apartment buildings. In the early 1980s, many
20 buildings converted from rental units to
21 cooperative ownership, and these co-ops became
22 the only available form of home ownership for
23 many residents in the area.
24 Unfortunately, the New York City real
25 estate market collapsed in the late 1980s. It
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1
2 left many of these co-ops with serious
3 financial problems. Virtually every bank had
4 lent funds based on overvaluations of the
5 properties, and most of these financial
6 institutions simply stopped lending any money
7 for these co-ops, leaving tens of thousands of
8 apartment owners stranded in apartments they
9 could not sell.
10 The Queens Borough President's Office
11 immediately formed a Co-op and Condo Task
12 Force, comprised of building owners, lending
13 institutions, apartment owners, government
14 agencies, and others, to address the problems.
15 Working with Fannie Mae and Freddie
16 Mac, we brought the necessary parties together
17 and achieved work-outs that allowed the co-ops
18 to avoid defaulting on their loans. Although
19 several financial institutions chose not to
20 participate in this collaborative effort,
21 Citibank was an integral player in the process
22 and helped us to save the homes of tens of
23 thousands of individuals.
24 In addition to its active role in
25 economic development housing, Citibank has also
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1
2 been a good corporate citizen working closely
3 with not-for-profit groups throughout Queens
4 County. Indeed, Citibank was instrumental in
5 saving several financially-troubled
6 organizations, included in the Jamaica Arts
7 Center and the Queens Symphony Orchestra.
8 Citibank provides technical and
9 financial assistance to many community groups
10 and cosponsors many events held in the borough.
11 In addition, for the past several years
12 Citibank has sponsored a bus tour for
13 foundations and other charitable organizations
14 which has helped our Queens group to access
15 additional funding sources that traditionally
16 have been providing grants only to
17 Manhattan-based organizations.
18 Citibank is also very active in
19 education issues. Citibank has formed
20 partnerships with several New York City
21 elementary schools. They work closely with the
22 City University of New York and St. John's, and
23 Citibank employees act as mentors to individual
24 students.
25 Moreover, a Citibank employee was
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1
2 recently named as the borough president's
3 appointee to the seven-member New York City
4 Board of Education, which is responsible for
5 overseeing the education of over 1 million
6 school children in New York City.
7 Finally, it is important to note that
8 Citibank is one of the largest employers in
9 Queens County with over 3,500 employees in the
10 borough. The construction of the Citibank
11 Tower, which opened in 1990, helped to initiate
12 a revitalization of the Court Square area, and
13 they have provided funding for amenities above
14 and beyond what were initially requested of
15 them.
16 In sum, the Borough President's
17 Office has had a close working relationship
18 with Citibank for many years, and we have found
19 them to be excellent corporate citizens. They
20 are very responsive to the needs of the
21 community. They have been eager to join in
22 public-private partnerships and have provided
23 tremendous financial and technical assistance
24 which has helped us to revitalize significant
25 areas of the borough.
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2 Thank you once again for providing
3 this opportunity to testify today, and we hope
4 that the Federal Reserve Board's evaluation of
5 the benefits of this merger will include
6 consideration of Citibank's long history of
7 working to assist and improve businesses,
8 housing, education and cultural institutions
9 throughout Queens County.
10 MR. LONEY: Thank you.
11 Mayor Malloy.
12 MR. MALLOY: I am Mayor Dannel
13 Malloy. I'd like to begin by thanking you for
14 the opportunity, as the Mayor of Stamford,
15 Connecticut, to testify on behalf of Citibank.
16 Stamford is the Connecticut
17 headquarters for Citibank. Since the bank
18 opened its first of seven branches only four
19 years ago, I have been impressed with the
20 bank's commitment to be a major community force
21 in Stamford and within the State of
22 Connecticut.
23 As the Mayor of the fourth largest
24 city in Connecticut, with the third largest
25 concentration of Fortune 500 corporate
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2 headquarters in the country, I know firsthand
3 that corporate partners like Citibank are vital
4 to continued urban growth.
5 If such Citibank current activities
6 are a reflection of broader available resources
7 that result from the Citicorp/Travelers Group
8 merger, then I can only look forward to
9 stronger partnerships with the proposed
10 Citigroup in Stamford and throughout the state.
11 To illustrate the depth of the bank's
12 commitment to the community, I would like to
13 highlight three key areas of creative
14 initiatives that Citibank has led.
15 First of all, I'd like to speak about
16 education. Citibank and the City of Stamford
17 share a personal commitment to the excellence
18 of public education for children of all ages.
19 Citibank has partnered to spearhead two
20 Stamford school readiness programs. These
21 programs promise that all Stamford children
22 will have an opportunity to be ready to learn
23 before entering school.
24 The initiatives are the Hillandale
25 Child Development Center. This will be the
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2 first program in the State of Connecticut to
3 fully integrate state-of-the-art learning
4 strategies with health, nutrition, and
5 parenting modules in a childcare environment
6 for preschool children. In fact, the City of
7 Stamford will guarantee all of its 4-year-olds
8 pre-K experience, that is, prior to the time
9 they would enter our kindergarten.
10 Secondly, Success By 6. Citibank is
11 a key member of the Leadership Council.
12 Success By 6 will ensure that all children
13 entering kindergarten do, in fact, enter with
14 the foundation needed to prepare them to
15 succeed in school.
16 In addition to the above educational
17 activities, Citibank has adopted the Hart
18 Magnet School Read-A-Loud program; received
19 major awards for junior achievement of
20 Southwestern Connecticut in connection with
21 their educational activities; funded Connect
22 '96, which established Internet access for both
23 of our high schools in Stamford; and developed
24 and implemented a summer associate program with
25 The Urban League of Southwestern Connecticut,
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1
2 which is based in Stamford.
3 The second key area is human and
4 social services. Citibank helped plan and fund
5 with the City of Stamford United Way and
6 Infoline, the Infoline Referral Center. The
7 center is a unique staffed storefront operation
8 offering community agency information, access
9 to caseworker services and job shopping through
10 a Department of Labor kiosk.
11 The referral center is the result of
12 the partners concern that people moving from
13 welfare to work needed a place to connect with
14 local, regional and statewide agencies that can
15 help them become self-sufficient.
16 Secondly, Cheryl Adkins Green,
17 Citibank F.S.B. president, will serve as the
18 chair of the United Way of Stamford, 1998-99
19 fund-raising campaign, which will raise over 2
20 million for local agencies. This is another
21 example of the personal commitment Citibank
22 senior management demonstrates in our community
23 every single day.
24 The third key area, access to credit
25 for low- and moderate-income areas and
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2 household. Citibank is an active lender in all
3 Stamford neighborhoods. The bank has made
4 substantial inroads in the enterprise zone with
5 small business loans to help retain jobs and
6 help businesses grow.
7 Additionally, the leadership of the
8 community development loan program is
9 well-recognized. The bank became a pacesetter
10 two years ago for new Connecticut banks, which
11 it committed $1 million to the Housing
12 Development Fund for affordable housing in the
13 city and directed more than $2 million in
14 community development investments to
15 Bridgeport, Norwalk, and Stamford.
16 Citibank loans have extended to
17 statewide initiatives, including a $2 million
18 loan for the Connecticut Preservation Loan Fund
19 and an approval to fund $3 million for a
20 childcare loan fund this month.
21 Citibank knows that money alone
22 cannot build neighborhoods. Therefore, in 1995
23 the bank helped establish the Fairfield County
24 Local Initiative Support Corporation office,
25 located in Bridgeport, and serving all of the
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1
2 state, in particular Fairfield County and the
3 City of Bridgeport, Norwalk and Stamford.
4 I would like to conclude my testimony
5 with the benefits of the proposed merger for
6 the community of Stamford and the State of
7 Connecticut.
8 Unlike the traditional in-market bank
9 merger that I have seen in Connecticut, where
10 physical locations overlap and savings are
11 achieved by consolidation, the formation of
12 Citigroup is different. The merger will not
13 eliminate available resources as other mergers
14 have; rather, the combination will greatly
15 increase the value and convenience for
16 customers through offering access to a broader
17 range of high-quality financial services and
18 products, all from one convenient location in
19 Stamford and other Connecticut locations.
20 Additionally, the wide range of
21 products and services offered by the combined
22 company will add breath and depth to the career
23 opportunities in Connecticut. The stronger
24 company will mean more jobs to my community.
25 As I stated at the beginning of my
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1
2 testimony, I believe that the merger of
3 Citicorp and Travelers Group will only enhance
4 the bank's deep commitment of human and
5 financial capital to the City of Stamford and
6 to the State of Connecticut.
7 Thank you.
8 MR. LONEY: Thank you.
9 Assemblyman Kaufman.
10 MR. KAUFMAN: Good morning. I am
11 Assemblyman Steve Kaufman. I represent the
12 82nd Assembly District in the Bronx, which
13 includes Co-op City, Throgs Neck, Westchester
14 Square and Eastchester Gardens.
15 I am here today to tell you that
16 Citibank has demonstrated again and again its
17 commitment to the social and economic
18 well-being of the Bronx, and as the borough
19 undergoes a renaissance in many of its
20 neighborhoods, Citibank has been there to play
21 a major role.
22 Citibank has focused its resources,
23 technical assistance, leadership, and grants to
24 foster the business development, home
25 ownership, comprehensive economic development
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2 and educational programs to school children,
3 high school students, and college students, as
4 well as welfare-to-work participants.
5 Citibank fervently seeks to ensure
6 that the unique needs of senior citizens are
7 not only met, but also exceeded through
8 superior service and customer satisfaction. In
9 fact, Citibank's work with legislators like
10 myself and community leaders have led to
11 innovative and creative initiatives that have
12 resulted in safer, more convenient alternatives
13 to accomplish their banking.
14 For example, while responding to the
15 need for greater education around direct
16 deposit and familiarity with using the phone
17 for banking, Citibank also discovered and
18 responded to the need for transportation
19 services and protection against con games.
20 In response to concerns expressed by
21 seniors in the Pelham Manor/Co-op City area,
22 Citibank offered to present its consumer
23 education series to seniors on a range of
24 issues from how to use ATMs and PC Banking; how
25 to access basic checking; how to call into its
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2 phone service and speak with a representative;
3 and how to protect themselves from con games.
4 Citibank consumer educators worked
5 one-on-one with seniors to teach them what to
6 watch for and how to protect themselves.
7 Through the consumer education
8 program, Citibank has also worked one-on-one
9 with senior citizens who travel to Puerto Rico
10 and Florida.
11 Many seniors were not aware that
12 Citibank offers free bill payment service
13 through its 1-800 service line. In one
14 instance, a senior was able to avoid surcharges
15 on her rent when she was in Puerto Rico by
16 having Citibank pay her bills.
17 Overall, Citibank consumer educators
18 have conducted over 600 seminars in English and
19 Spanish, 20 percent of which were conducted in
20 the Bronx in senior citizen centers, schools,
21 hospital and locals businesses.
22 Beyond the bricks and mortar of its
23 branches, however, Citibank uses the strength
24 of its human resources to invest time,
25 leadership, and technical assistance to
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2 community groups and residents.
3 In my own district, Citibank's staff
4 has volunteered for the 45th precinct Night Out
5 Against Crime, and other health fairs in Co-op
6 City and Throgs Neck, assisting the creation of
7 KidCare ID cards for hundreds of area school
8 children. Citibank has also cosponsored with
9 me a wonderful bus trip for senior citizens who
10 are brought to an all-day picnic and barbecue
11 in Sunken Meadow Park.
12 As another example of Citibank's
13 responsiveness, the staff at the Castle Hill
14 Avenue branch found out that I was sponsoring
15 the city teddy bear drive for physically and
16 emotionally abused children who were brought
17 into Montefiore Child Protection Center and
18 immediately took up my cause and collected over
19 200 teddy bears for these children. These are
20 the kind of wonderful people that are the
21 backbone of this institution.
22 Citibank has worked hand-in-hand with
23 many community associations in my district on
24 numerous different issues. Citibank has also
25 participated in Read Aloud programs in schools
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2 in my district and has also taken part in a
3 clothing drive for people making the transition
4 from welfare to work. In my community,
5 Citibank has surely made a difference.
6 In the Bronx last year, through its
7 Partnership In Progress program, Citibank
8 committed 150,000 to the three creative and
9 innovative community development corporations
10 for the creation of affordable housing,
11 commercial stores and community revitalization.
12 In conclusion, for 25 years Citibank
13 has had a long-standing commitment to improving
14 the quality of life in the communities it
15 serves. It is clear from these activities in
16 my assembly district and also those throughout
17 the Bronx that Citibank demonstrates its pledge
18 to CRA by providing access to the highest
19 quality financial services and products, making
20 them available to everyone regardless of where
21 they live and how much they earn.
22 I look forward to continuing my
23 office's participation with Citibank to effect
24 positive change in the Bronx.
25 MR. LONEY: Thank you.
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2 Mayor Robert Elliot.
3 MR. ELLIOT: I would like to briefly
4 add my comments with respect to Citibank's
5 community development activities.
6 I am Bob Elliot and Mayor of
7 Croton-on-Hudson; until a few weeks ago,
8 president of New York Conference on Mayors. I
9 am here as the chairman of an eleven-community
10 organization known as Historic River Town.
11 Historic River Town is a
12 representable eleven communities, extending
13 from the New York City border northward nearly
14 50 miles, from the City of Yonkers to the City
15 of Peekskill, representing a population of
16 nearly a quarter of a million people.
17 A number of years ago, these
18 communities came together in the midst of a
19 severe recession to address economic problems.
20 We couldn't wait for the state or the federal
21 government to help us wrestle with these
22 problems, particularly with the limited
23 resources that we had. We were wrestling with
24 a recession unlike no other that we had
25 encountered in the past. We had both blue
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2 collar workers and white collar workers out of
3 work, facilities such as GM closing, and IBM
4 downsizing, affecting our community. We needed
5 to build on what we had, address our downtown
6 and mainstream problems, and our focus became
7 tourism.
8 Beneath this was the broader economic
9 development and the regional planning, and we
10 formed Interest Municipal Agreement, a
11 nonprofit organization, and a number of
12 public-private partnerships which have now
13 become models for other areas throughout the
14 State of New York.
15 From the very beginning, Citibank's
16 community development division understood what
17 we were doing. They grasped the concept when
18 no others did. They understood the
19 complexities and the interdependencies of our
20 economy, with such issues as transportation and
21 housing as relates to the environment and
22 relates to our community.
23 Citibank's assistance extended way
24 beyond the grants for a number of programs,
25 programs which involved a number of the area
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2 branches, programs which involved community
3 planning, community meetings and several
4 planning conferences which, for example, last
5 week ended up at a planning conference using a
6 bottom-up process where we laid out nearly 50
7 miles of waterfront development plans along the
8 Hudson River coastline, Westchester County.
9 More important was the expertise and technical
10 assistance that Citibank gave us and,
11 particularly, the high standard to which they
12 have held us, a standard to which we are still
13 trying to reach.
14 Citibank's community development
15 efforts made a tremendous difference in our
16 eleven communities and a significant difference
17 in the Hudson Valley.
18 I thank you for the opportunity to
19 testify this morning.
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
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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
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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
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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.
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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
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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.
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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
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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.
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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.
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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
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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
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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
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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
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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
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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.
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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.
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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
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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
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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
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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
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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.
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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
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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
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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
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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.
9 Could I ask. Some of the folks who
10 missed testifying on panel two and are here,
11 could I call Glenn VanNostritch, Walter
12 McCaffrey, Peter Rivera and Dennis Walcott.
13 Why don't we start from left to
14 right, Mr. VanNostritch.
15 MR. VAN NOSTRITCH: Thank you. My
16 name is Glenn Van Nostritch and I'm research
17 director for public advocate Mark Green. He
18 was supposed to be on the 9:35 panel. As you
19 know there were a few delays and he had another
20 meeting he had to get to.
21 If you approve the Travelers Group
22 application you will be giving a green light to
23 the structuring of the bulk of the nations
24 financial services industry into a handful of
25 massive financial services conglomerates. I
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2 urge you to reject this application because
3 such restructuring would occur in the absence
4 of crucial laws to protect consumers and expose
5 taxpayers to substantial liability.
6 First, I'd like to talk about the
7 cross-marketing and de facto product tie-in
8 concern.
9 Although Citicorp and Travelers had
10 stated that the chief motivation is to
11 cross-market their wide array of financial
12 services and products, they haven't provided
13 you with any actual cross-marketing plan. They
14 said that these plans will quote unquote
15 develop over time. But since cross-marketing
16 presents serious consumer pitfalls it is
17 important to know now, not after you've reached
18 your decision, how Citigroup is going to
19 cross-market among its affiliates.
20 One of these pitfalls is product
21 tying -- the de facto requirement for a
22 customer buying one financial product to
23 purchase another at the same time. Consider
24 the position of someone applying for a car loan
25 from one Citigroup affiliate who is handed a
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2 credit insurance application to another
3 Citigroup affiliate.
4 It would be very understandable if
5 she believed that not completing the insurance
6 application would hurt her chances for a loan
7 approval, even if no one directly told her that
8 there was a quid pro quo.
9 The same holds true for the hopeful
10 home owner waiting word on a mortgage
11 application to get the call from Citigroup
12 insurance affiliate about applying for a
13 homeowners insurance. The resulting harm is
14 that the individuals might well have purchased
15 the insurance elsewhere at lower cost had they
16 not felt compelled to buy everything under the
17 Citigroup umbrella.
18 The applicant that says that as part
19 of it's cross-marketing will use quote unquote
20 relationship pricing in which discount is
21 granted if you buy a package of financial
22 products and that relationship pricing has
23 numerous consumer advantages such as
24 convenience and more personalized service.
25 Experience with Citibank's
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2 relationship pricing illustrates how it can
3 discourage comparison shopping and raise
4 consumer costs. According to the consumer bank
5 scorecard of 50 banks that is issued annually
6 by Mark Green, Citibank has consistently ranged
7 amongst the five most expensive banks in New
8 York City like services like checking accounts
9 and a six thousand dollar minimum balance of
10 free checking is far higher than it's major
11 competitors.
12 Recently Citibank had added mortgages
13 and other credit card products to this
14 relationship to reach a six thousand dollar
15 minimum. The down side of consumers is that
16 mostly Citibank's products including mortgage
17 and credit cards could be obtained somewhat
18 less expensive by shopping around and it's
19 deposit accounts pay less than most other
20 banks.
21 So even should a consumer get a
22 seemingly good deal on one Citibank product the
23 savings could easily be offset by high prices
24 for the other services. For instance, savings
25 from the free checking could be offset by the
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2 comparatively high annual finance charge in
3 most Citibank credit cards.
4 In short, cross-marketing as
5 encouraged by relationship bank pricing is
6 anti-competitive from shopping around for
7 better pricing.
8 Then there is the issue of product
9 tie-in. Last month Nations Bank paid a $7
10 million federal fine for misleading its
11 customers, many of them elderly people who have
12 been investing in federally insured CDs about
13 the risk of investing in mutual funds. This
14 case illustrates the dangers and temptations of
15 putting securities in banking businesses under
16 one roof. Yet common ownership every
17 securities and banking affiliates should only
18 increase the motivation to cross-market these
19 products.
20 Representative John Dingell has
21 proposed giving the SEC more power to regulate
22 brokerage activities in banks because current
23 protections are insufficient. The Travelers
24 Group acquisition of Citicorp would occur
25 without such necessary protection.
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2 Nationsbank is not an
3 isolated case. A May, 1996, study by the FDIC
4 found that more than one-fourth of the banks
5 surveyed failed to tell on-site customers that
6 products are not insured and 55 percent failed
7 to inform telephone customers.
8 Consumers regrettably are vulnerable
9 to misinformation and manipulation. A 1994
10 survey conducted for the American Association
11 of Retired Persons found that fewer than one in
12 five bank customers understood that products
13 such as mutual funds and annuities are
14 uninsured.
15 The board should not approve
16 Travelers application until new privacy
17 protections applying to financial services
18 conglomerates are enacted into law.
19 Primerica, Credit Corporation,
20 Citibank and Salomon Smith Barney possess
21 intimate, private information about tens of
22 millions Americans. Through loan applications
23 they know about the jobs many people hold, from
24 credit card records they know about recent
25 purchases, from mortgage applications they know
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2 the age and value of their residences, from
3 auto insurance files they know about driving
4 records, and from banking files they know if
5 there was recently a large deposit in an
6 account.
7 Travelers promised to adopt the quote
8 unquote opt-out system by which consumers
9 affirmatively indicate that they do not want
10 their personal information shared. Recently
11 one of serious problems the opt out method were
12 currently used such as the opt out disclosure
13 are buried in the middle or near the end of a
14 multi-page agreement.
15 A much better approach is to
16 affirmatively opt in to approve dissemination
17 of personal information among Citigroup
18 affiliates.
19 The rest of our testimony discusses
20 how taxpayers will be put on the line by such a
21 merger because of the dangers of under
22 regulation of insurance affiliates and the
23 inadequacy of the overall regulatory structure
24 for such a large multifaceted conglomerate.
25 Thank you.
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2 MR. LONEY: Thank you for your
3 consideration of our time restraints and we
4 will certainly put the rest of your testimony
5 in the record.
6 Before we go to Mr. McCaffrey I want
7 to introduce Barbara Kent from the New York
8 State Banking System.
9 MR. MC CAFFREY: Thank you very much.
10 I am counsel member Walter McCaffrey
11 representing the people of the 26th council
12 district in western Queens.
13 I come today with an experience in
14 dealing with Citibank borne not just during my
15 position as an elected official, but having
16 served as a chair of a community board in
17 western Queens and district chief of staff to a
18 member of the House of Representatives.
19 In 1985 Citibank originally came to
20 Long Island City with a proposal to build what
21 is now their fifty story headquarters in
22 Queens. The facility at that time was
23 obviously going to be something significantly
24 and dramatically different from that which is
25 in the community.
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2 Queens did not have such a skyline as
3 it has now. But Citibank came not to be in
4 Long Island City but rather to be part of Long
5 Island City. Through the process the bank
6 ended up agreeing readily to the request of the
7 community to participate in a whole host of
8 activities. For example, Citibank has set up
9 over the years an amenities package. The
10 amenities package that was agreed to by the
11 bank and developed in cooperation with the
12 community became in many ways quintessential
13 example of amenities packages not really in
14 this city but around the nation.
15 Programs for senior citizens,
16 programs for the youth in the community,
17 housing funds were all readily available and
18 there was a set period of time in which the
19 bank had a legal obligation to provide those
20 resources.
21 At the expiration of that period of
22 time, however, the bank could have walked away
23 and said wealth we have discharged our
24 responsibility but rather they chose to
25 continue that financial involvement with the
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2 community over the years without any sort of
3 obligation whatsoever.
4 The institution also as it was going
5 up was one of the first private construction
6 sites in the City of New York to aggressively
7 have an MBE, a minority business employee
8 enterprise component, and a WB, a woman
9 business enterprise component in the
10 construction phase, and that was something in
11 that period of time that was not seen really in
12 the private sector. It was something that had
13 been looked at and used in terms of development
14 of public projects.
15 So the bank over the years has had
16 that type of involvement. It is one of the two
17 institutions in the City of New York that has
18 really moved forward in the development in
19 terms of programs to deal with elder abuse.
20 Other banks in the city did not live
21 up to their obligation after it was pointed out
22 that the banking community generally had a poor
23 record. They stepped forward and aggressively
24 so. In terms of the ATM law in the City of New
25 York which is the toughest law in the United
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2 States, and having been the author of that, I
3 have to say that Citibank did not come into
4 that process dragging its heels but rather
5 aggressively moved, with only a few exceptions
6 of those members of the banking company. Sad
7 to save that the State of New York has tried to
8 gut that law. The fact of the matter is we
9 have seen that Citibank has been aggressive in
10 terms of customer safety and ATM.
11 I understand that we look at this in
12 a perspective of national context, but
13 certainly I want you to understand what the
14 context is in terms of the specific community.
15 We've heard testimony from people
16 today as to some policies but I wanted to give
17 you a specific example, and it would have been
18 very easy for that institution to come in to
19 use its power to be able to get approval and
20 not do anything for the community.
21 Matt Lee rightly points out that
22 there is uncertainty as to whether or not
23 federal law will change in terms of that which
24 has been considered a firewall for many years
25 in terms of financial institutions. But I
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2 think at the time in which it was passed we had
3 a much different type of financial institution
4 at hand.
5 Nearly 70 percent of the investment
6 and financial institutions at that time was in
7 banks. It is now down to under 30 percent. We
8 never saw the development of credit unions at
9 that time. We now see that and we see now
10 billions of dollars invested in the
11 metropolitan area in other institutions and
12 certainly on the national basis we see that the
13 credit union concept is something that has a
14 major impact now and as an alternative source.
15 I understand the position of our
16 distinguished public advocate in terms of
17 concerns, and there are legitimate concerns in
18 terms of privacy, but I think from the consumer
19 point of view we now see entities in the City
20 of New York who are banks that came from afar
21 for New York's customers who are now here. We
22 see that type of diversity, and, again we see
23 that type of competition and the competition is
24 out there.
25 Now, some consumers will choose not
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2 to be savvy and some will choose to be able to
3 watch very, very closely and to be able to make
4 competitive decisions. The fact of the matter
5 is I think with education out there that that
6 is something that can be addressed. So I would
7 suggest that this is a good proposal on
8 balance. It is not a perfect one, but it is
9 one which I think will benefit.
10 MR. LONEY: Thank you. Mr. Walcott.
11 MR. WALCOTT: Good morning to you. I
12 should say good afternoon probably to all of
13 you who are here since morning. You started
14 early.
15 I want to approach this both as
16 president of the New York Urban League as well
17 as a former member of the City of New York city
18 board of education and talk about the
19 opportunities that are presented before us
20 right now with this potential merger and I want
21 to focus on several items included in the
22 potential merger. One, taking a look at the
23 merged opportunities for investment in the
24 office of financial literacy, and creating the
25 advisers panel on financial literacy, also
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2 Citigroup initiative dealing with education
3 both at a student level and an elementary level
4 as well as middle and high school level.
5 Talk about the area of developing the
6 financial skills of young Americans and how the
7 Citigroup will be responsive in developing
8 that, and also talk about their public
9 awareness campaigns in trying to deal with both
10 the literacy and math initiatives within the
11 New York City public school system.
12 It is proposed that 25 million
13 dollars will be developed for the banking
14 education initiative making sure that children
15 regardless of their families' income become
16 computer literate. Also talk about the
17 development of the new technology that's being
18 proposed with the merger as well.
19 In addition to that, I want to talk
20 about the center for community development
21 enterprise that's being proposed with the
22 merger, and I think there are a lot of great
23 opportunities with the potential merger. One
24 of the other things that I think is extremely
25 important to talk about that I really have not
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2 heard dealt with at all this morning is the
3 corporate involvement on the part of the
4 leadership of both Travelers as well as
5 Citibank as well.
6 For example, Citibank vice-president
7 has become the newest member of the New York
8 City Board of Education on the Travelers side.
9 One of their members it's now on the New York
10 State board of regents. Former vice-president
11 of Citibank was a former president of the New
12 York City board of education who is now the
13 state comptroller of the State of New York.
14 So they have an active involvement as
15 far as making sure that they are involved as
16 corporate citizens as well, and I must be very
17 honest with you in that my own board treasurer
18 is a member of Travelers, as he has been I
19 think a very responsive Travelers person who
20 has been there for us.
21 We are one of those organizations
22 that do not receive monies from Citibank, not
23 because of Citibank. We just never approached
24 Citibank. So we are not there and here as a
25 result of Citibank as indicated earlier forcing
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2 nonprofits to be here. We're here because we
3 see a potential opportunity that will increase
4 the diversity in New York City as well as
5 opportunity for investment in the education of
6 New York City making our students brighter as
7 far as computer literacy and also getting into
8 the financial industry.
9 I thank you for this opportunity to
10 testify before you.
11 MR. LONEY: Thank you, Mr. Walcott.
12 Assemblyman Rivera.
13 MR. TRAYLOR: Good morning. My name
14 is Peter Rivera. I'm a member of the New York
15 State assembly. I represent the 76th assembly
16 district in the Bronx which is comprised of the
17 communities known as Parkchester, Castle Hill,
18 Fordham Road and westbound. The ethnic makeup
19 of my district is 35 percent Hispanic. 25
20 percent African American, 20 percent white.
21 My purpose here is to express my
22 opinion saying the Citibank my district in fact
23 was a district that was affected when Citibank
24 closed the branch that was the Parkchester
25 branch. However, the closure of that branch
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2 have very little adverse impact on my district
3 due in large part to the good work that
4 Citibank did in one, notifying the residents of
5 the district that they were closing the branch,
6 two, providing an ATM machine, three providing
7 alternative ways for the seniors in the
8 district to be able to get to the closest
9 available branch, and, four, the assistance
10 that Citibank gave to educate many residents of
11 my district to banking at home.
12 Citibank has always had a commitment
13 to the communities it serves, particularly to
14 the residents of the 76th assembly district.
15 It starts with the faces that greet you
16 whenever I visit one of their branches. As you
17 know the Hispanic community has become quite
18 sensitive as of late as a result of an episode
19 on Seinfeld and as a result of other articles
20 that have been written characterizing the way
21 that Hispanics are viewed on the media as
22 suspect rather than as potential purchasers.
23 However, the corporate responsibility
24 at Citibank has indicated that they really have
25 gone out and attempted to reach and attempted
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2 to hire people from every segment of the
3 communities that service New York City. It's
4 community development program have helped
5 tremendously in improving the quality of life
6 in the communities in which it has a strong
7 presence.
8 For example, the community
9 development program is a comprehensive strategy
10 that is built upon partnership with nonprofits,
11 government agencies and other strong financial
12 partners. In the 76th assembly district they
13 helped two major important programs that I want
14 to refer to.
15 One is NETS which works with senior
16 citizens and the other is the East Bronx Hunger
17 Program. The East Bronx Hunger Program is the
18 only food pantry in the east side of the Bronx
19 servicing approximately a half a million people
20 and sponsored basically by the churches in the
21 area. About two years ago they had a deficit
22 of $10,000 and if it wasn't for the assistance
23 of Citibank in trying to overcome that deficit
24 the East Bronx Hunger Program would have gone
25 out of business.
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2 Last year alone Citibank committed
3 one hundred fifty thousand dollars to community
4 development corporation for the creation of
5 affordable housing commercial stores and
6 community revitalization.
7 In the district that I represent this
8 type of commitment is truly important. The
9 76th assembly district is primarily populated
10 by low to moderate income families. These many
11 families deserve every opportunity to fulfill
12 dreams such as obtaining credit, owning a home
13 and starting their business.
14 Citibank has enabled many families in
15 my district to realize these goals. For
16 example, Citibank is the largest lender in
17 Parkchester here. My working close to
18 community groups after the Castle Hill branch
19 closed has been able to identify and meet the
20 needs of the community.
21 Just recently over one hundred
22 members of the Crossroads Congregation attended
23 Citibank seminars on budgets and home
24 ownership. The seminar was just one of the
25 many that Citibank offers on a regular basis.
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2 These have been offered in English and in
3 Spanish so as to meet the needs of every
4 consumer, Citibank has also consistently
5 created commitments to the community by paying
6 close attention to every detail that will make
7 it bond to the community stronger.
8 The staff at Castle Hill are deeply
9 committed to their community whether its
10 reading to third grade, through their read
11 aloud program or conducting clothing drives for
12 the less fortunate in our community.
13 Citibank has supported after school
14 programs. As a result I have contacted
15 Citibank right now because we hope to be able
16 to establish the first Internet cafe in
17 Parkchester due in large part through the
18 cooperation of Citibank. St. Helen's is a
19 small private group school that services for
20 the most part, parents have programs that allow
21 them to work with their assurance that their
22 children are taken care of in a safe and
23 nurturing environment.
24 Citibank has always positioned itself
25 as a leader in the area of technology with its
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2 plans for opening up a new state-of-the-art
3 electronic banking facility in the Bronx.
4 They will have the opportunity to
5 establish itself as an even stronger partner in
6 the community. Citibank uses its human
7 resources strength to invest time and
8 leadership to community groups and residents.
9 This past April I had an opportunity to
10 participate in a program called Christmas in
11 April, a project that Citibank has been a long
12 supporter. In the Christmas in April project
13 Citibank and I chose a house owned by a senior
14 citizen approximately 75 years of age who was
15 blind and who was living alone, and we cleaned
16 out the house. The cleaning up was done with
17 their employees. We cleaned out the house. We
18 took out all the garbage from the house. We
19 repainted the house. We put it in a new stove
20 and a new refrigerator.
21 You can see how it is from these
22 activities in my district and throughout the
23 entire Bronx that Citibank demonstrates its
24 pledge to provide access of the highest quality
25 and financial services and products and make
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2 these available to everyone regardless of where
3 they live or how much they make.
4 I look forward to continuing my
5 office's partnership with Citibank and I am
6 confident that we will be able to effecutate
7 positive changes in my district and throughout
8 the entire Bronx.
9 I thank you very much for your time
10 and attention and hope that the consideration
11 of all of this testimony that will be presented
12 here today will lead to the obviously
13 beneficial rewards that this merger will
14 provide.
15 MR. LONEY: Thank you. Any
16 questions?
17 MR. ALVAREZ: I have one question.
18 There has been a lot expressed by this panel
19 and earlier panels about protecting customer
20 information particularly. Are there any state
21 or local laws here that govern the sharing of
22 customer information and protect customer
23 information?
24 MR. MC CAFFREY: We in the City of
25 New York are precluded in terms of that. That
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2 is a function of the State and obviously you
3 would be able to have information readily
4 available as to the State.
5 If I can just indulge one other
6 thing, let me say that one of the assets that
7 Citibank did in a community that had no library
8 whatsoever built at the expense of two and a
9 half million dollars a library fully equipped,
10 turnkey, gave it over to the Queensborough
11 library system as part of the commitment to the
12 community. That was a fairly significant
13 contribution and I'd be derelict if I didn't
14 mention it.
15 MR. RIVERA: I'm not aware of any
16 specific section of state law that prevents,
17 I'm sure that it does, although I really can't
18 recite it.
19 MR. ALVAREZ: Mr. Van Nostritch.
20 MR. VAN NOSTRITCH: I believe one of
21 their motivations is to be able to share all
22 kinds of information among affiliates to
23 develop a large database on the customers so
24 certainly that is what they are planning to do
25 and apparently there is no law that can stop
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2 them from doing that.
3 MR. WALCOTT: If I can just make one
4 modification to my testimony, because normally
5 as a not-for-profit we always think of
6 receiving grants from corporations or
7 foundations. I do want to say with Citibank we
8 have recently established the New York Urban
9 League a cash reserve with Citibank and that
10 has been tremendously helpful to us.
11 I do want to modify my testimony to
12 say that while we never have pursued them for
13 any grants whatsoever or corporate support for
14 dinners, at the same time they have been very
15 helpful as far as the cash reserve, and that
16 will help us during emergency times if the city
17 council and the mayor are at odds at times and
18 holding up budgets for not-for-profit.
19 I do need to put that on the table.
20 That's been extremely helpful to an
21 organization like us.
22 MR. LONEY: Thank you. Any other
23 questions? We'll takes a ten minute break, and
24 reconvene at 10:30.
25 (Recess)
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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,
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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
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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
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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
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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
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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.
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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)
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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
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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
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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
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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
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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
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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.
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2 MR. LONEY: Thank you.
3 Any other questions? If not, I will
4 thank the panel.
5 MR. REED: Thank you.
6 MR. LONEY: At this point we will
7 move to Panel Five, Josh Zinner, Karen Thomas,
8 Shanna Smith, Mark Silverman, Sarah Ludwig and
9 Hilary Botein.
10 It appears to me that you folks have
11 just changed the order.
12 Ms. Thomas.
13 MS. THOMAS: Good morning. My name
14 is Karen Thomas, representing the Independent
15 Bankers Association of America. Thank you for
16 the opportunity to present our views.
17 The IBAA strongly opposes the
18 Travelers/Citicorp application. The proposed
19 merger carries serious adverse consequences for
20 consumers, community banks, and the entire
21 financial services industry.
22 The merger is the largest in American
23 business history and portends awesome
24 restructuring of the financial landscape.
25 There are a lot of problems with this union,
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2 but the gratuitous way it treats U.S. banking
3 law and regulation is, perhaps, the most
4 unsettling. It is an illegal merger, announced
5 with the express intent of pressuring Congress
6 into making it legal.
7 First, it violates the Bank Holding
8 Company Act by seeking to combine insurance
9 underwriting and banking, under the guise of a
10 conditional promise to divest the prohibited
11 insurance activities. Second, it violates the
12 Glass-Steagall Act by invading the barriers
13 between investment and commercial banking
14 established by Congress 65 years ago.
15 With a hubris not often exhibited to
16 the Federal Reserve Board, the merger parties
17 have admitted they are well aware that existing
18 law prohibits the insurance activities. They
19 ask the Board to allow the merger anyway, in
20 the hope that Congress will change the law.
21 Contrary to their belief, the
22 divestiture provisions of the Bank Holding
23 Company Act do not allow Citigroup up to five
24 years to warehouse its insurance activities.
25 The provisions are intended to allow orderly
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2 disposition of impermissible activities within
3 two years. It is not available to a bank
4 holding company with no bona fide intent or
5 plan to divest, and is vigorously lobbying to
6 change the law to avoid divestiture.
7 Despite thousands of pages filed with
8 the Fed, Citigroup fails to offer even the
9 beginnings of an approach to divestiture.
10 Nowhere do they say it will divest its
11 underwriting companies, precisely because it
12 has no such intention.
13 On April 6, Travelers CEO Sanford
14 Weill dismissed the need for divestiture
15 saying, "I don't think we have to spin anything
16 off to make this happen; maybe what we are
17 doing will cause the legislation to change."
18 Citicorp's CEO John Reed added he
19 "reasonably believes there will not be a legal
20 problem," but noted that pending legislation
21 would make this merger, in fact, quite legal.
22 They can't have it both ways.
23 The Federal Reserve's policy
24 statement on divestiture says an affected
25 company should "submit a divestiture plan
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2 promptly" and "complete divestiture as early as
3 possible during this specified two-year
4 period." Extensions are not to be granted
5 unless the company "has made substantial and
6 continuous good faith efforts to accomplish the
7 divestiture within the prescribed period."
8 Even if divestiture were available, Citigroup
9 has no intention of complying with this policy
10 because it has no honest intent to divest.
11 Equally unprecedented is the scope of
12 the merger's combination of banking and
13 securities activities in violation of Section
14 20 of the Glass-Steagall Act.
15 The new Citigroup's Section 20
16 subsidiaries would have combined capital of $23
17 billion, making it the second largest
18 securities firm in the nation behind Merrill
19 Lynch.
20 The unprecedented impact and size of
21 these securities activities render the Fed's
22 current 25-percent-of-revenues test ineffective
23 and an inappropriate measure of what
24 constitutes "engaged principally" in securities
25 underwriting. Indeed, back in 1988 when the
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2 Second Circuit reviewed the then
3 5-percent-of-revenues cap, the court said that
4 size alone could contravene Section 20. The
5 court specifically rejected one interpretation
6 of "engaged principally" because it would have
7 allowed a bank to be affiliated with one of the
8 nation's largest investment bankers, Merrill
9 Lynch, a result, the court said, is
10 inconsistent with congressional intent. If
11 Salomon Smith Barney and Robinson-Humphrey are
12 permitted to coalesce into commercial banking,
13 Section 20 of Glass-Steagall has no meaning at
14 all.
15 Finally, approval of the application
16 would violate the separation of powers doctrine
17 embodied in the Constitution. Approval would
18 improperly usurp the powers of Congress at the
19 very time Congress is considering
20 legislation -- supported by the Fed -- that
21 would amend both the Bank Holding Company and
22 Glass-Steagall Acts to permit the proposed
23 transaction.
24 This unique deal would create a new
25 bank holding company with $700 billion in
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2 assets, engaged at the outset in a number of
3 activities Congress has thus far prohibited for
4 bank holding companies. The transaction is
5 essentially too big to unravel. As such,
6 approval of the application would effectively
7 coerce Congress to amend a law to legitimize
8 the transaction.
9 The Board is being asked to tie
10 Citigroup to the railroad tracks and as the
11 time for divestiture approaches, Congress will
12 have little practical choice but to save the
13 day by amending the law.
14 The Federal Reserve has always
15 recognized the importance of the rule of law as
16 the law exists, not as some might wish it to
17 be. We urge the Board to resist the temptation
18 to advance a legislative agenda by preempting
19 Congress. The Board should deny the
20 application.
21 Thank you.
22 MR. LONEY: Thank you, Ms. Thomas.
23 Mr. Silverman.
24 MR. SILVERMAN: Hi. Good morning.
25 My name is Mark Silverman. I am speaking today
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2 on behalf of Citicorp-Travelers Watch.
3 Citicorp-Travelers Watch is a
4 coalition of advocates and community groups
5 concerned about the impact of the proposed
6 merger on communities and consumers. We formed
7 this coalition because we believe the proposed
8 merger is one of such unprecedented magnitude
9 and complexity that it warranted special
10 scrutiny.
11 Citicorp-Travelers Watch is opposed
12 to this proposed merger for several reasons.
13 First, the merger is illegal. The
14 affiliation between Citibank, as a member bank
15 of the Federal Reserve Board and Travelers'
16 subsidiaries that are engaged principally in
17 securities dealings is simply prohibited by the
18 Glass-Steagall Act. Further, the proposed
19 Citigroup would be in violation of the Bank
20 Holding Company Act by continuing to hold
21 Travelers' subsidiaries dealing in insurance.
22 As we discussed this morning,
23 Citicorp and Travelers are relying on the
24 two-year grace periods under the law to divest
25 themselves of their impermissible insurance
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2 holdings. I want to say a couple of things
3 about that.
4 First, that is of no help to the
5 securities holdings insofar as it does violate
6 Glass-Steagall. To the extent that the
7 reliance of the two-year provision has any
8 merit whatsoever, and it has none for all the
9 reasons discussed, it is of no help for the
10 securities holders. There is no grace period
11 in Glass-Steagall, and Mr. Prince this morning
12 failed to address that, and the application
13 nearly fails to address that.
14 Further, Citicorp and Travelers, with
15 respect to its insurance holdings, have so far
16 put forward no plan for divestitures. And as
17 they candidly admit in their application, their
18 willingness to use the grace period is to get
19 the law changed so they don't have to divest.
20 Indeed, they have already begun to lobby
21 Congress about it.
22 The Board should not allow Citicorp
23 and Travelers to follow the strategy for at
24 least three reasons:
25 First, this is not what the two-year
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2 provision was designed to do. It is supposed
3 to give newly-formed bank holding companies
4 time to conform to the law, not time to force
5 the law to conform to them.
6 Second, the law may well not change
7 within that time, and if not, the proposed
8 Citigroup hardly could simultaneously divest
9 from, and integrate into itself, the various
10 impermissible insurance holdings. It is more
11 likely that in the absence of a change in the
12 law Citigroup will be forced into an
13 ill-conceived, hurried divestiture that would
14 threaten the health not only of itself, but
15 given its would-be status of the world's
16 largest financial institution, the health of
17 the financial markets as well.
18 Third, in deciding whether to pass
19 financial modernization legislation, Congress
20 should be concerned only with legitimate policy
21 arguments regarding what is best for
22 communities and the economy. If the Board
23 approves this merger prior to any change in the
24 law, Congress, pressured by Citigroup and
25 concerned about the consequences of a forced
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2 divestiture, can enact one of the most
3 embarrassingly blatant pieces of
4 private-interest legislation in recent memory.
5 In short, by serving as an accomplice to
6 Citicorp's and Travelers' strategy of
7 manipulating the law to ends not originally
8 within its contemplation, the Board risks
9 undermining the legitimacy of itself and the
10 legislature, and robs the public of a
11 policy-focused debate of what is being called
12 financial modernization.
13 Further, as documented in
14 Citicorp-Travelers Watch's written comments to
15 be filed with this Board, Citicorp's extremely
16 poor service and lending record is in clear
17 violation of the Community Reinvestment Act
18 and, as such, on its own requires denial of
19 this merger application. In addition, the
20 proposed activities of Citigroup clearly fail
21 the public benefits test of the Bank Holding
22 Company Act, and thereby similarly require
23 denial of the application.
24 We are also concerned that our
25 repeated and reasonable requests for
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2 information from these companies have been
3 largely met with delay and denial. Travelers
4 has been particularly unresponsive, providing
5 us with almost none of the information
6 requested.
7 Citicorp, while responding somewhat
8 more to our request than Travelers, took until
9 just yesterday to do so, and still is
10 unresponsive to certain crucial elements of our
11 request from these companies. Of course, in
12 response to the Board's own request for
13 information, Citicorp and Travelers continue,
14 on their own authority, to deem certain
15 information confidential and simply to not turn
16 it over.
17 The public must be given the
18 opportunity to adequately analyze all aspects
19 of this merger by having full access to
20 information, and the Board should be cognizant
21 of its role in ensuring that access.
22 Finally, Citicorp-Travelers Watch
23 requests that the Board asks all parties
24 testifying before it at this meeting to
25 disclose any financial contributions they may
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2 have received from Citicorp or Travelers. We
3 believe that such disclosures are crucial to
4 preserving the legitimacy and propriety of this
5 public meeting.
6 In sum, the poor service records of
7 these companies, the clear legislative mandates
8 of Glass-Steagall and the Bank Holding Company
9 Act, and the cynical strategy of these
10 companies in manipulating the law, all require
11 denial of the application to merge as a matter
12 of both law and policy.
13 Thanks very much for your time.
14 MR. LONEY: Thank you, Mr. Silverman.
15 Ms. Botein.
16 MS. BOTEIN: Thank you.
17 My name is Hilary Botein, and I am
18 the associate director of the Neighborhood
19 Economic Development Advocacy Project or NEDAP.
20 But I'd just like to point out it is advocacy,
21 not advisory. I don't know why it appears that
22 way in this schedule. NEDAP is also a member
23 of the coalition Citicorp-Travelers Watch.
24 I'd like to thank the Federal Reserve
25 Board for holding this hearing because I think
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2 it is a very important one, one very important
3 step in soliciting broad public input on a
4 merger that is this big and this complex.
5 NEDAP is a resource center for groups
6 and advocates working on economic justice
7 issues in low-income neighborhoods and
8 communities of color all over New York City,
9 and thus we have a unique perspective on
10 community reinvestment issues as they affect
11 neighborhoods all over the city. Accordingly,
12 my testimony today is going to focus on the
13 impact of Citicorp and Travelers' practices on
14 local economies and residents and the
15 neighborhoods where NEDAP works.
16 It is worth noting that many
17 organizations testifying in support of the
18 merger are recipients of Citibank grants, and
19 we urge you to ask all testifiers if their
20 organizations receive funding from Citibank.
21 My comments here are limited by time,
22 but they are also limited by the complexity of
23 the merger. We simply haven't had enough time
24 to digest all of the material in the
25 application and elsewhere. And we have urged
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2 the Board, and urge you again, to extend the
3 comment period.
4 Furthermore, as my colleague stated,
5 Citicorp and Travelers have been barely
6 responsive to our request that they provide
7 basic information about their companies, and
8 that has hindered our ability to analyze the
9 impact of the merger.
10 Travelers, in particular, has been
11 unforthcoming, and that is one of the reasons
12 why my testimony today is going to focus
13 primarily on Citibank's record.
14 As a threshold matter, NEDAP's
15 position is that the proposed merger is
16 illegal, as it will create an affiliation
17 between a bank holding company and securities
18 and insurance companies that is prohibited by
19 the Glass-Steagall Act and the Bank Holding
20 Company Act. If the Board approves the merger
21 without developing standards to be applied to
22 such an unprecedented transaction, it will make
23 a mockery of the regulatory process, by
24 allowing Citicorp and Travelers to brazenly
25 violate existing law.
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2 In addition, and the focus of my
3 testimony, Citibank has violated the Community
4 Reinvestment Act by failing to meet the credit
5 needs of low-income communities. From the
6 neighborhood perspective, Citibank is an
7 elusive entity with scant presence in terms of
8 bank services, loans, or community reinvestment
9 personnel.
10 Citibank's retail banking services
11 utterly disregard the needs of low-income
12 communities and consumers. Only six of
13 Citibank's 200 New York City branches are
14 located in low-income neighborhoods.
15 In 1996, Citibank closed and
16 downgraded to ATM service a total of 55
17 branches, harming low-income neighborhoods
18 disproportionately. The bank is now
19 promoting -- we heard this morning about
20 them -- two new video branches in low-income
21 neighborhoods where customers will have no
22 opportunity to speak to a teller or loan
23 officer in person. This plan is an insult to
24 residents, who might wonder why this special
25 new technology is not appearing in upper-income
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2 neighborhoods.
3 By raising its minimum deposit amount
4 for free checking to $6,000 in linked accounts,
5 Citibank sent a further message it is not
6 interested in the business of low-income
7 people, as does its increased emphasis on
8 computer banking, despite the bank's absurd
9 claim in its application to the Board that
10 Citibank-sponsored research shows that a large
11 percentage of this population plans to buy a
12 computer in the near future. Meanwhile,
13 ironically, a Citicorp subsidiary, Citibank EBT
14 Services, will soon be profiting from
15 electronic delivery of public assistance
16 benefits and food stamps to New York State
17 recipients.
18 There has been a lot of talk,
19 actually, about this this morning and how it is
20 wonderful because it is going to bring
21 low-income people into the banking mainstream.
22 I just want to point out that EBT is not going
23 to give the public a real bank account. It is
24 more like a Metrocard or something that they
25 can put in the ATM machine to get their public
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2 assistance benefits out of that. So I don't
3 really see how that brings low-income people
4 into the banking mainstream.
5 Citibank's own reported Home Mortgage
6 Disclosure Act data demonstrate that the bank
7 targets its home mortgage lending to affluent
8 white borrowers and communities. For example,
9 in 1996, Citibank made only six loans to
10 low-income neighborhoods in the New York City
11 metropolitan area.
12 As ACORN stated, Citibank rejected
13 African-American and Latino applicants for
14 conventional home purchase mortgages
15 two-and-a-half times more frequently than white
16 applicants. And in Manhattan, predominantly
17 white neighborhoods received 75 percent of
18 Citibank's loans in 1996.
19 This redlining of low-income and
20 minority neighborhoods and communities of color
21 sets the stage for predatory lenders such as
22 Travelers' subsidiaries Primerica and
23 Commercial Credit, to target their high-rate
24 low products at low-income communities,
25 stepping into the credit void created by
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2 Citibank.
3 In 1996, Citibank made no permanent
4 direct loans for purchase of multifamily
5 housing in all of the New York City
6 metropolitan area, where most residents -- at
7 all income levels -- live in multifamily rental
8 housing. Instead, the bank has financed
9 multifamily housing only through large
10 intermediary organizations, many of which are
11 testifying here today.
12 Given Citibank's failure to provide
13 retail banking services or loans to low-income
14 neighborhoods, it is perhaps not surprising
15 that the bank's community reinvestment staff --
16 the people who are charged with ensuring that
17 Citibank meets the credit needs of all
18 communities that it serves -- display very
19 little familiarity with communities and their
20 needs. Groups have commented to us that
21 Citibank is reluctant to send high-level staff
22 to community meetings, and that staff, when
23 they do appear, are defensive and combative.
24 In closing, I'd just like to say, if
25 the Board approves this merger, it will be
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2 approving the unprecedented creation of a
3 financial services giant that subscribes to a
4 separate and unequal philosophy. Affluent
5 customers will continue to avail themselves of
6 Citibank's loans, private-banking services, and
7 electronic innovations. Low-income customers
8 will be served by Primerica, Consumer Credit,
9 and Citibank EBT Services.
10 NEDAP joins with the other nine
11 members of Citicorp-Travelers Watch in urging
12 the Board to deny the application.
13 MR. LONEY: Thank you.
14 Ms. Ludwig.
15 MS. LUDWIG: Thank you for the
16 opportunity to testify today to register our
17 absolute opposition to the proposed merger of
18 Travelers Group and Citicorp. I am testifying
19 in my capacity as coordinator of the New York
20 City Community Reinvestment Task Force.
21 The task force was established in
22 1995 to promote meaningful reinvestment in
23 affordable housing preservation and
24 development, microenterprise, and community
25 development institutions in New York City's
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2 low-income neighborhoods. Since then, the task
3 force has grown to more than 100 community and
4 citywide organizations throughout New York
5 City.
6 Through its Regulatory Working Group,
7 the task force has engaged in meetings over the
8 past eight months with each of the federal
9 banking agents, including representatives of
10 the Federal Reserve Bank of New York, to
11 discuss deficiencies community group and
12 advocates see in regulators' enforcement of the
13 Community Reinvestment Act.
14 It will be impossible to convey all
15 of the grave concerns we have concerning the
16 proposed Citicorp-Travelers merger in the five
17 minutes allotted. I will keep it simple and
18 refrain like every other panel.
19 The Federal Reserve Board must not
20 approval Travelers' application because the
21 proposed transaction is illegal.
22 To sign off on the merger will
23 constitute an affront to the public, and
24 underscore that large and powerful corporations
25 influence government decision making even to
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2 the point of obtaining approval on illegal
3 transactions.
4 Some would argue, and some have
5 argued this morning, that structural changes in
6 the financial services industry are well
7 underway, and that our laws are antiquated and
8 need to be revamped to reflect these changes.
9 The Glass-Steagall and Bank Holding Company
10 Acts are still on the books, however, and the
11 task force's firm position is that as long as
12 laws forbid this merger, the Fed would be
13 grossly overstepping its bounds to approve it.
14 Second, approving the application
15 would constitute hideously unsound policy on
16 the part of the Federal Reserve Board.
17 Travelers and Citicorp would have us
18 think that the proposed merger is simply a
19 routine application to create a bank holding
20 company and that no special scrutiny is
21 warranted. As we all know, the planned
22 Citigroup would be the first of its kind in
23 this country, a new and mammoth holding company
24 that engages in banking, securities, and
25 insurance business.
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2 The largest in the country's history,
3 the proposed merger has implications for people
4 and economies at local, regional, national and
5 global levels. It presents serious new
6 regulatory questions, contrary to what
7 Travelers and Citicorp purport, for which the
8 Federal Reserve has yet to develop a set of
9 standards.
10 It is not surprising that many regard
11 this proposed merger not only as a fait
12 accompli, but also as a brazen attempt by
13 powerful corporations to take advantage of
14 regulatory and legislative processes to create
15 a giant company organized to maximize profits,
16 at whatever expense the communities and
17 consumers.
18 Then there is Citibank and Travelers'
19 respective records. The task force in the last
20 three years has frequently heard reports
21 concerning Citibank's illusory presence in
22 low-income communities throughout New York
23 City, as well as a host of concerns over
24 Citibank's remarkably heavy investment and
25 intermediaries in lieu of or absence of more
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2 direct lending programs.
3 We first heard about Citibank's
4 practices in the sort of concerted way when the
5 bank engaged in aggressive bank branch closings
6 and conversion to ATM service only, a few years
7 ago. Most task force members see a direct
8 correlation between Citibank's presence in
9 low-income communities and the bank's failure
10 to engage in direct lending in low-income
11 neighborhoods.
12 You will hear today and tomorrow from
13 a long list of people representing
14 intermediaries and other organizations who will
15 testify on behalf of Citibank and the proposed
16 merger -- even though we have heard from some
17 directly and some indirectly that many of them
18 personally agree that the merger is legally
19 impermissible. Many are even keenly aware that
20 Citibank is notorious for its illusory presence
21 in the very neighborhoods their organizations
22 serve.
23 We understand that the proposed
24 merger -- and the bank's public relation
25 efforts surrounding it -- results in sometimes
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2 even unspoken pressure on groups to register
3 with regulators. The situation we find at this
4 public meeting is problematic and disturbing,
5 because -- correct me if I'm wrong -- every
6 single person and organization that testified
7 on behalf of the merger or the proposed merger
8 is a beneficiary of Citibank, and in a few
9 instances Travelers.
10 We also request that you ask each
11 panelist, as part of his or her testimony,
12 first, to disclose all benefits received from
13 Citibank and Travelers, and, second, to
14 indicate whether or not he or she was asked to
15 testify on behalf of the application or in
16 favor of the application.
17 Task force members have been
18 flabbergasted by Citicorp and Travelers' $115
19 billion commitment, which dedicates more than
20 half of the ten-year pledge to student loans,
21 credit cards and consumer finance, making the
22 commitment among many local groups a farce.
23 The task force has also been, since
24 its inception, greatly concerned about the
25 banking industry for communities and for the
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2 CRA. In the instance of the proposed
3 Citigroup, we see numerous contradictions.
4 Citigroup would constitute an enormous
5 concentration of economic and political power,
6 with both companies working to reduce their
7 on-the-street operations, and instead using
8 their networks to cross-market products. By
9 definition, the proposed entity is too big to
10 address local community needs. We have already
11 seen Citibank limiting its presence in
12 low-income communities.
13 One part of the -- well, these things
14 have been said and I hear the beeper.
15 We urge the Federal Reserve Board to
16 hold off on deciding this application as long
17 as the transaction is illegal. We also request
18 that you ensure that Citicorp and Travelers are
19 not improperly withholding information from the
20 public by improperly deeming material
21 confidential, and that the public is included
22 in all relevant communications.
23 We take for granted that Citicorp and
24 Travelers will push for all they can get. It
25 is up to the Federal Reserve Board to do what
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2 is right.
3 MR. LONEY: Thank you, Ms. Ludwig.
4 Mr. Zinner.
5 MR. ZINNER: I run the foreclosure
6 projection project for seniors at South
7 Brooklyn Legal Services. We represent
8 low-income seniors who have been ripped off by
9 high-rate finance companies, and in this
10 capacity I see daily the effects of redlining
11 and reverse redlining on low-income
12 communities.
13 I have come here this morning to
14 register my absolute opposition to the
15 Citicorp-Travelers merger. This opposition is
16 based on a number of reasons, but in the short
17 amount of time given this morning, I am going
18 to focus on one.
19 This would be the record of the two
20 companies in low-income communities. You have
21 heard a lot of testimony this morning about
22 Citicorp's record of -- Citibank's record of
23 lending and low-income communities. What I am
24 going to do is focus on the Travelers Group.
25 Now, it is hard to get information
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2 about Travelers' record of underwriting in
3 low-income communities because Travelers is not
4 forthcoming with that information, and there is
5 no legal requirement that they provide it.
6 There is a requirement in five states that
7 insurance companies provide zip code data of
8 their underwriting. In one of those states,
9 Massachusetts, there was a study done by the
10 Massachusetts Affordable Housing Alliance in
11 which Travelers was found "fair poorly in
12 anti-regulatory ranking." In fact, it had the
13 worst record of any of the insurance companies
14 in the state.
15 You heard testimony from ACORN this
16 morning about Travelers' agent location.
17 Again, 71 percent, just in New York, 71 percent
18 of the agent offices are located in communities
19 that are over 85 percent white, and of the 109
20 agent offices in the New York metropolitan
21 area, only 20 are in New York City; almost all
22 of those cluster around the two Manhattan
23 business districts.
24 There was recently two Fair Housing
25 complaints filed with HUD regarding Travelers'
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2 redlining practices. The complaints found that
3 Travelers maintains policies and practices that
4 serve to discriminate against low-income
5 communities and minority communities in the
6 provision of home owner's insurance, using such
7 policies as minimum policy values, again agent
8 location, disparate treatment of low income and
9 minority -- low income and minority people
10 seeking insurance, higher rates in low-income
11 communities, pricing their home owner's income
12 products out of low-income markets and the
13 markets in minority communities, limiting
14 replacement coverage on older homes, using
15 credit to determine eligibility, and the list
16 goes on.
17 In other words, these comprehensive
18 studies, using testers and research, found that
19 Travelers systematically had policies and
20 practices that served to discriminate against
21 low-income and minority communities.
22 Now I raise this issue in particular
23 because Citicorp and Travelers have been
24 touting consistently in the press, or
25 consistently, publicly, this one-stop shopping.
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2 Really what this one-stop shopping is is a
3 two-tier shopping system, in which affluent
4 white communities are privy to conventional
5 Citigroup products, potential Citigroup
6 products, in which low-income and minority
7 communities are, in effect, only given access
8 to inferior and higher cost products.
9 We haven't heard a lot of testimony
10 today about Primerica Financial Services. In
11 fact, Primerica Financial Services is the real
12 profit engine of the Travelers Group.
13 Primerica Financial Services has its roots in
14 the AO Williams Organization, which was a very
15 controversial evangelical-type pyramid scheme
16 in which lots of high-cost term insurance was
17 pawned off on low-income and middle-income
18 communities. Now the AO Williams Organization
19 has become Primerica, and now Primerica is part
20 of the Travelers Group.
21 What Primerica Financial Services
22 does is it uses this part-time army of very,
23 very loosely-regulated salespeople to push the
24 high-price term insurance, often replacing cash
25 value policies with high-price term insurance
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2 that is more expensive than most term insurance
3 that is in the market. They use exaggerations,
4 misrepresentations, to push these products,
5 particularly in low-income and minority
6 communities, in communities where there are a
7 lot of immigrants, in communities where there
8 are less-sophisticated consumers.
9 This is very important to note
10 because these are the same communities in which
11 Travelers, in their insurance practices, are
12 redlining. In other words, this is not
13 one-stop shopping.
14 What is happening is that Travelers
15 is offering conventional home owner's insurance
16 in affluent white communities and offering
17 high-priced -- in fact, aggressively marketing
18 through this sort of evangelical-pyramid
19 scheme -- high-priced term insurance in
20 low-income communities.
21 I am going to try and rush through,
22 but I want to mention one other important point
23 before I close.
24 Again, we haven't heard any testimony
25 today about Commercial Credit Corporation.
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2 That is an entity of the Travelers Group.
3 Commercial Credit Corporation primarily works
4 in what is called the BC&D, or subprime market,
5 providing low equity loans in a low-income
6 community. Home equity loans are extremely --
7 when compared to Citibank's conventional loans
8 are very high closing costs, very high rates
9 and, basically, only appeal to people who are
10 desperate for credit. In fact, companies that
11 provide high rate loans produce -- do so in
12 communities that have been redlined by
13 conventional banks.
14 It is a vicious cycle, because when
15 communities are redlined by conventional banks
16 they have to turn to high-rate lenders when
17 they need credit. Because they are turning to
18 high-rate lenders, the default rates are
19 higher, and then the conventional banks have an
20 excuse to redline them.
21 This type of high-rate lending that
22 Commercial Credit does can often lead to
23 foreclosure, if abusive, and, in fact, the
24 Primerica Financial Services is selling
25 Commercial Credit loans in the billions of
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2 dollars using this completely,
3 loosely-regulated sales force with the same
4 sort of AO Williams evangelical fervor.
5 Again the data shows, and this data
6 will be submitted with a comment that
7 Commercial Credit does high-rate lending in the
8 same communities that Citibank has been
9 redlining.
10 I will just sum up in saying there is
11 a great danger in this merger. Basically what
12 could happen is Citibank -- and this is borne
13 out by the record of the two companies --
14 Citibank would actually have a profit incentive
15 to redline low-income communities because this
16 would fuel the market for high-rate lending,
17 and this is particularly dangerous because the
18 engine for marketing Commercial Credit loans is
19 an unregulated pyramid scheme, that I have
20 discussed before.
21 Again, the two corporations have
22 given no indication that they won't take full
23 advantage of any profit opportunities that take
24 place even when they encompass taking advantage
25 of low-income communities.
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2 So, again, I'd like to register my
3 absolute opposition to this merger.
4 MR. LONEY: Thank you.
5 I have a couple of questions.
6 Ms. Botein, did I understand you to say that
7 Citicorp has made no loans, no mortgage loans,
8 in the New York City area?
9 MS. BOTEIN: No multifamily. I was
10 talking about permanent multifamily direct
11 loans, which is the kind of housing that most
12 people, as I said, of all income levels live in
13 in New York City. They have made those loans
14 through intermediaries by giving money to large
15 housing intermediaries.
16 MR. LONEY: I got that part. When
17 you say the New York City area, how far --
18 MS. BOTEIN: The MSA.
19 MR. LONEY: Mr. Silverman and, I
20 think, Ms. Botein raised concerns about getting
21 information from Citicorp and Travelers. What
22 kind of information have you asked for and not
23 gotten?
24 MS. BOTEIN: I am going to turn the
25 mike over to Mr. Silverman because he has kind
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2 of been designated the point person on that
3 issue.
4 MR. SILVERMAN: I regret to say that
5 I don't have the list with me of which things
6 we asked for. Some of it was, I believe,
7 deposit information that Citicorp didn't turn
8 over; all kinds of information from Travelers.
9 Really nothing that we asked for from Travelers
10 did we get back. To a certain degree of data,
11 we didn't get information on what loan services
12 are offered at individual banks from Citicorp.
13 Off the top of my head, I can't remember.
14 MS. BOTEIN: One of the things I want
15 to point out is we have copied the Fed on all
16 of our correspondence to Citicorp and
17 Travelers, so you should have our letters.
18 The way that -- we didn't hear any
19 response for a long time, and then we just kind
20 of were deluged with boxes and boxes of papers,
21 of which was completely, completely
22 unresponsive to our request. But then, you
23 know, we had all these boxes stacked up in our
24 offices and we had to spend time, of which we
25 don't have much, and research, of which we have
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2 even little, kind of sifting through. And the
3 letter said that some of the information you
4 requested is in here, find it.
5 So we were kind of put in the
6 position of sifting through this material to
7 try to find pieces of it that might be
8 responsive to our request.
9 MR. SILVERMAN: Then we wrote again,
10 and cc'd the Fed, and said this is what we
11 didn't receive. Almost everything from the
12 initial letter was duplicated in the second.
13 Just yesterday I got some partial
14 response from Citicorp, not to the rest of it,
15 and still almost nothing from Travelers. So we
16 were concerned about that.
17 MR. LONEY: Thank you.
18 Any other questions from the panel?
19 If not, it is very interesting. We thank you
20 for coming.
21 Our next panel is Panel Six. Howard
22 Sommer, George Schmitz, Eric Powell, John
23 Ferrandino, Mark Emmert and Howard Banker.
24 Mr. Sommer.
25 MR. SOMMER: Yes. Are you ready for
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2 my remarks? Fine.
3 I am Howard Sommer. I am president
4 and CEO of the New York Community Investment
5 Company. I am pleased to have this opportunity
6 to briefly share with you the activities of the
7 New York Community Investment Company, commonly
8 referred to as NYCIC, an investment and loan
9 fund located in Manhattan and servicing the
10 capital needs of small businesses throughout
11 the City of New York, as well as comment this
12 morning on the important role played by
13 Citibank in that effort.
14 MR. LONEY: Could we have quiet,
15 please.
16 MR. SOMMER: NYCIC was created in
17 1995 as a New York clearinghouse association
18 multibank effort to meet the lack of
19 institutional sources of equity capital and
20 subordinated debt to the small business
21 community. Traditional sources of such funding
22 venture capital funds, SBICs, and investment
23 banking firms, almost exclusively focus on
24 larger companies with relatively high-funding
25 requirements, and with potential to convert to
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2 public ownership within a few years.
3 The overwhelming share of small
4 businesses, privately owned, with sales of
5 $500,000 or, perhaps, $5 million, whose funding
6 need is $100,000 or even $1 million, with no
7 near-term IPO potential, but with potential for
8 revenue growth and employment gains, have no
9 choice but to rely on limited personal funds,
10 excessive debt levels or, as is often the case,
11 conclude that they are unable to pursue
12 expansion opportunities.
13 This problem is even more acute among
14 women and minority-owned businesses and those
15 located in and near the city's low- and
16 moderate-income areas, as these companies tend
17 to be smaller, newer, and more
18 undercapitalized.
19 A related goal of NYCIC is to provide
20 similar types of risk capital to nonbusiness
21 economic development efforts, including private
22 sector initiatives launched by not-for-profit
23 groups and other community-based activities
24 related to fostering entrepreneurial energies.
25 For the past two-and-one-half years,
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2 NYCIC has been identifying growing small
3 companies with a need for patient, risk capital
4 in the range of $50,000 to $1 million. We are
5 close to funding our twentieth deal, pushing
6 our investment level past the $5 million level.
7 Equally important is the fact that
8 NYCIC's moneys have leveraged an additional $8
9 million in coinvestor and bank support, thereby
10 causing over $13 million of investment funds to
11 support New York City's small businesses.
12 I should also add that close to 80
13 percent of closed deals were to companies
14 either women-owned, minority-owned, or located
15 in LMI census tracts.
16 Citibank's active role in this
17 success story has been most impressive.
18 Citibank's Mary Cosgrove played a pivotal and
19 leading part during the concept and planning
20 stages, as evidenced by Ms. Cosgrove's election
21 to the position of vice chairman. This
22 leadership role has been further enhanced by
23 Citibank's financial support where the bank
24 participated at the highest of levels of bank
25 investment at over $1 million.
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2 Citibank Community Development
3 continues in an ongoing basis to offer its
4 financial, creative and personnel resources to
5 advance NYCIC's mission. Examples include
6 referrals of small business clients and
7 prospects in need of long-term capital and
8 access to and funding of a variety of NYCIC
9 sales or marketing activities.
10 Equally important has been Citibank's
11 commitment to the spirit of NYCIC's mission.
12 My personal working experience with
13 Ms. Cosgrove and other Citibank personnel has
14 been clearly evidenced by a devotion to the
15 cause of community development, and in NYCIC's
16 particular case to the advancement of economic
17 development throughout the five boroughs of New
18 York City. I see I have just a few seconds
19 left. Let me consolidate my final comments.
20 Just coincidentally, more recently I
21 have had an opportunity to work on a same and
22 similar mission with the other partner in this
23 merger, Travelers.
24 New York State recently passed new
25 legislation for the creation of certified
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2 capital companies, where moneys raised from the
3 insurance industry is to be used to fund, in a
4 venture capital format, small businesses
5 throughout the State of New York.
6 Without hesitation I can tell you
7 that without the efforts of Travelers Insurance
8 Group and the Salomon Smith Barney Group we
9 would never have been successful raising $30
10 million to be used to support investment
11 activity for small businesses within the City
12 of New York and surrounding areas.
13 Thank you for your time. I hope
14 these comments have been helpful.
15 MR. LONEY: Yes. Thank you for
16 providing them.
17 Mr. Schmitz.
18 MR. SCHMITZ: Thank you. Good
19 morning. My name is George Schmitz. I am the
20 executive director of the Leviticus Alternative
21 Fund in Yonkers, New York.
22 Leviticus Fund is a certified
23 community development financial institution
24 serving the New York, New Jersey, Connecticut
25 tristate area. We offer loans to nonprofit
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2 housing groups, to women and minority-owned
3 businesses, and recently we are establishing a
4 niche as a lender in the childcare industry.
5 I'd like to begin this morning by
6 speaking of the positive impact that Citibank
7 has had in the world of CDFIs and, in
8 particular, to loan funds.
9 Leviticus Fund is one of 43 members
10 of the National Community Capital Association,
11 most of whom are regional or national loan
12 funds. Citibank was among the first financial
13 institutions to recognize the role that CDFIs
14 play in the delivery of financial services in
15 underserved geographic areas to nonprofit
16 community-based organizations and to women and
17 minority entrepreneurs.
18 Citibank encouraged the NCCA to help
19 its members define and conform to industry
20 standards consistent with its community
21 development mission and then committed $1
22 million to provide equity grants to the member
23 funds. Citibank has subsequently made an
24 additional $1 million funding commitment to the
25 NCCA. The second commitment is structured in
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2 such a way that it increases the leveraging
3 capability of NCCA and its member funds.
4 I believe that Citibank, particularly
5 through its community development unit, has
6 shown an eagerness to support a variety of
7 community development efforts, a willingness to
8 try looking with community development
9 organizations and community development
10 financial institutions as to their needs and,
11 most importantly, Citibank has demonstrated
12 flexibility and creativity in striving to help
13 us meet these needs.
14 Having outlined my very positive
15 personal impressions, I will tell you that my
16 personal experience in working with the
17 Citibank Community Development staff has been
18 excellent. Citibank and Citibankers have
19 provided financial support and valuable
20 technical assistance to Leviticus Funds. We
21 are a stronger organization able to reach a
22 wider range of community development borrowers
23 because of our relationship with Citibank.
24 However, the recent history of
25 mergers and acquisitions in the banking
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2 industry does give me pause. I am concerned
3 about how these mergers might affect the
4 delivery of financial services, particularly in
5 low-income neighborhoods, inner cities, to
6 minority groups and to immigrants.
7 I'm aware that the Community
8 Reinvestment Act has been strengthened in
9 recent years, but the Community Reinvestment
10 Act does not apply beyond the banking industry.
11 I believe that we'd all be better
12 served if CRA could have a wider reach; in
13 particular, if CRA could be applied in other
14 areas of the financial services industry, in
15 particular to the insurance industry, to
16 investment brokerage firms, to mutual funds,
17 and even FCRA could have stronger clout with
18 some of the GSEs, particularly Freddie Mac.
19 It is my hope that as the Travelers
20 Group and Citicorp form Citigroup that Citibank
21 may play a leading role, as it has in the past,
22 in educating other sectors of the financial
23 services industry about the important role that
24 community development organizations play in our
25 day-to-day lives.
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2 I welcome the recent announcement of
3 the ten-year $115 billion commitment to lending
4 and investing in low-income and moderate-income
5 communities and to small businesses. I look
6 forward to continuing a positive relationship
7 with Citigroup, and I anticipate further
8 dynamic and creative initiatives that will
9 challenge other financial institutions over a
10 range of industries to follow suit.
11 I also hope that many of the issues
12 that arise around this merger would also
13 challenge Congress and the regulatory agencies
14 to relook at the Community Reinvestment Act and
15 its impact.
16 Thank you very much.
17 MR. LONEY: Thank you.
18 Mr. Powell.
19 MR. POWELL: Good morning. My name
20 is Eric Powell, and I currently serve as the
21 vice president, director of finance, for the
22 New York City Housing Partnership. I am
23 formerly the executive director for the New
24 York Mortgage Coalition.
25 The New York City Housing Partnership
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2 is a national leader in housing development and
3 advocacy. Since 1982, the Housing Partnership
4 has developed more than 13,000 homes in 50
5 neighborhoods across New York City. Working
6 with the government, community groups for
7 profit developers and banks, the Partnership
8 Housing programs have transformed city
9 neighborhoods and resulted in private
10 investment totalling nearly $1 billion.
11 The New York Mortgage Coalition is a
12 five-year organization administered by the New
13 York City Housing Partnership. The coalition
14 is a consortium of eleven lenders and eight
15 not-for-profit community-based organizations
16 providing home ownership counseling to low- to
17 moderate-income communities throughout New York
18 City, Long Island and Westchester.
19 The New York City Housing Partnership
20 has had a positive working relationship with
21 Citibank for several years. Citibank has been
22 a leader, among leading institutions, in its
23 commitment to affordable housing and community
24 development initiatives.
25 In 1994, Citibank established a $1
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2 million line of credit to provide low cost
3 loans for minority builders, contractors and
4 subcontractors, working in the Housing
5 Partnerships, New Homes, and Neighborhood
6 Builders programs.
7 These loans have enabled small
8 businesses, enterprises owned by minorities and
9 women, to gain access to credit and to benefit
10 from business opportunities generated by
11 Partnership developments.
12 Citibank has also provided nearly $17
13 million in construction loans for several
14 Housing Partnership developments, including 147
15 two-family homes at Soundview Village in the
16 Bronx, five two-family homes in Elmhurst,
17 Queens, and 31 units at Lakewood Gardens in
18 South Jamaica, Queens.
19 This year Citibank is expected to
20 provide nearly $17 million in construction
21 financing for 216 units in the Saratoga Square
22 section of Brooklyn.
23 In addition, Citibank has provided
24 permanent mortgage loans for partnership home
25 buyers in several developments. The
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2 partnership has also benefitted from Citibank's
3 involvement in the Neighborhood Entrepreneurs
4 program which helps locally-based property
5 managers renovate and acquire city-owned
6 buildings.
7 Citibank has provided loans totalling
8 nearly $53 million for the rehabilitation of
9 more than 600 neighborhood entrepreneur units
10 in Brooklyn, the Bronx and Harlem.
11 Earlier this year Citibank awarded an
12 $80,000 grant to the Housing Partnership's new
13 initiatives program, which administers the
14 working-capital loans for neighborhood
15 contractors in both the New Homes and
16 Neighborhood Entrepreneurs program, and
17 provides technical assistance to program
18 participants.
19 Under new initiatives, the Housing
20 Partnership is working with the U.S. Department
21 of Housing and Urban Development to preserve
22 federally-assisted affordable housing units.
23 Citibank has been an active partner
24 in the New York Mortgage Coalition. As a
25 member of the New York Mortgage Coalition,
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2 Citibank has helped the New York Mortgage
3 Coalition Group provide free purchase
4 counseling to prospective home buyers in New
5 York City, Long Island and Westchester.
6 The bank offers attractive,
7 affordable housing loan products with low
8 downpayment and low interest products. It also
9 offers flexible financing for two- to
10 four-family homes, and provides support for
11 outreach and community group seminars for
12 first-time home buyers.
13 Recently Citibank awarded the New
14 York City Housing Partnership $4,000 as a part
15 of its community summer intern program. With
16 funds from this program, the partnership will
17 hire an intern to work as an assistant project
18 manager in the New Homes program.
19 In closing, our partnership with
20 Citibank has helped us achieve our mission of
21 creating affordable housing and assisting local
22 communities in realizing the benefits of
23 economic development. We anticipate the
24 following approval of its merger with Travelers
25 Group, Inc.
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2 Citibank will remain an active
3 part -- at least we expect Citibank to remain
4 an active partner in support of the New York
5 City Housing Partnership as well as the New
6 York City Mortgage Coalition.
7 Thank you.
8 MR. LONEY: Thank you, Mr. Powell.
9 Mr. Ferrandino.
10 MR. FERRANDINO: Thank you. Good
11 morning.
12 My name is John Ferrandino. I am the
13 vice president for the National Academy
14 Foundation and the national director of the
15 Academy of Financing at the National Academy
16 Foundation.
17 The National Academy Foundation is a
18 not-for-profit educational organization that
19 combines the knowledge and experience of
20 education, business, and government leaders to
21 better prepare young people in high school for
22 their future.
23 The National Academy Foundation uses
24 a model that involves career academies -- which
25 are theme-based schools -- within schools
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2 across the country that provide young people
3 with the experience and opportunity to combine
4 a curriculum that is industry validated with an
5 internship in the financial area, the financial
6 field, or other fields related to it. As these
7 partnerships take place in forming academies,
8 it is critical to understand that these are
9 located throughout the country and mostly in
10 the urban centers of the country.
11 The first academy, in the area of
12 finance, opened in Brooklyn in 1982 with 35
13 students. As of September 1998, the National
14 Academy Foundation will have nearly 300
15 academies in finance, travel and tourism, and
16 public service in 33 states across the
17 currently, plus the District of Columbia. In
18 just three years, projections say that we will
19 have over 500 academies in all 50 states.
20 Through its extensive outreach and
21 expansion, we are on the forefront of the
22 school-to-work movement. It is a focus of and
23 model for reform within American education. Of
24 the more than 20,000 students who have gone
25 through the academies, at the present time it
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2 is estimated that 65 percent have been
3 identified as being at risk of dropping out of
4 school due to their socioeconomic
5 circumstances. Over 65 percent of these
6 students are also identified as being young
7 people of color.
8 The Travelers Group and Sandy Weill
9 have served as the key factor in the growth and
10 development of the National Academy Foundation,
11 from one Academy of Finance in 1982 to a
12 national leader in the school-to-career
13 movement. Roundly acknowledged as the founder
14 of the Academy of Finance, Mr. Weill has played
15 a major role with the Travelers Group in making
16 sure that this program has grown.
17 It is of important interest to
18 understand that academies of finance, which
19 were designed by educators as a replicable
20 model appropriate for various industries and
21 geographic regions, with measured benefits to
22 young people, teachers, schools, and the
23 corporate community at large. With this
24 win-win proposition in place, the academy model
25 has grown rapidly, with broad corporate support
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2 nationally.
3 At the present time the Travelers
4 Group and its subsidiary companies provides
5 leadership in the following areas: There are
6 over 250 to 300 summer internships provided
7 across the United States, 100 of which are in
8 New York City. There are members of the local
9 advisory board in every major city of the
10 country represented by various components of
11 the Travelers Group. And in addition to that,
12 there is major corporate funding that goes into
13 providing scholarships and direct support for
14 curriculum-enrichment activities and other
15 kinds of growth activities for young people in
16 the country.
17 From 1990 to the present, the
18 Travelers Group has donated over 4.5 million to
19 the National Academy Foundation which has
20 helped to support the development of
21 computerized, industry-validated curriculum,
22 comprehensive staff development programs, and
23 technical assistance and quality assurance from
24 the national staff. This academy program has
25 been acknowledged nationwide and is now being
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2 developed to pursue the various other parts of
3 the urban communities of our country.
4 In addition to the support provided
5 to NAF's national activities, the Travelers
6 Group and its subsidiaries, local offices, and
7 employees, and the Travelers Foundation
8 sponsors paid internships, scholarships, grants
9 to local programs and other services that
10 directly impact the education and improve the
11 lives of the young people involved in the
12 National Academy Foundation programs.
13 In the New York City area alone, as I
14 said, there are a hundred student interns.
15 Together Salomon Smith Barney and the Copeland
16 Companies -- both Travelers Group
17 subsidiaries -- provide business advisory board
18 leadership, paid internships and scholarships
19 for Academy of Finance students in nearly every
20 major city of the United States.
21 Employees from all of these companies
22 go into classrooms on a regular basis and
23 discuss with students the future of the
24 financial services industry and provide direct
25 content instruction as part of their community
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2 involvement.
3 The Travelers Foundation makes grant
4 funding available to every Academy of Finance
5 across the country that demonstrates it has
6 involvement from Travelers Group employees.
7 While Travelers Group has made a
8 significant contribution to the National
9 Academy Foundation and the Academy of Finance
10 as an individual corporation, its impact on
11 broadening the base of NAF's support to more
12 young people has been one of its greatest
13 contributions.
14 Under the leadership of Mr. Weill,
15 who is chairman of the board of directors of
16 the National Academy Foundation, a base of
17 support has expanded to include the CEO of
18 Merrill Lynch, the CEO of Prudential
19 Securities, the CEO of Bloomberg Information
20 Services, and the CEO of McGraw Hill companies.
21 These additional companies coming on
22 board and becoming partners with the National
23 Academy Foundation have allowed us to grow and
24 make sure that every young person who is
25 involved in the program has access to paid
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2 internships during the summer that are
3 educational, experiential within the industry,
4 and provide young people with career
5 opportunities for the future.
6 At the present time, 90 percent of
7 all the students who have graduated from the
8 academy programs have gone on to post-secondary
9 education. As the Academy of Finance student
10 population has grown, we presently have 70
11 percent of these young people are of color and
12 over 60 percent are female.
13 In conclusion, I know that this
14 merger will bring together two major forces
15 that will continue to support the growth and
16 development of American urban education.
17 Thank you.
18 MR. LONEY: Thank you,
19 Mr. Ferrandino.
20 Mr. Emmert.
21 MR. EMMERT: I am Mark Emmert, the
22 chancellor of the University of Connecticut,
23 and I'd like to thank you for the opportunity
24 to testify today in this public meeting.
25 I'd like to specifically speak to the
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2 record of the Travelers Group as a corporate
3 partner in its manifestation of corporate
4 responsibility and its relationship with the
5 University of Connecticut and its support of
6 education and community development in the City
7 of Hartford in the State of Connecticut.
8 The University of Connecticut is the
9 flagship of the Connecticut State higher
10 education system, with specific
11 responsibilities for enhancing social, cultural
12 and educational environments of the state. As
13 well as its core mission as an educational
14 institution, we have to worry a good deal about
15 economic development of our communities and how
16 we are participants in that development.
17 Fulfilling this multifaceted mission requires
18 us to seek out and join with mutually-supported
19 partners, such as the partnership that exists
20 with the Travelers Group and the University.
21 Let me briefly describe some
22 manifestations of this partnership. Earlier
23 this year the University and Travelers
24 announced a major agreement under which
25 Travelers has donated over 30,000 square feet
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2 of space in Travelers Education Center in
3 downtown Hartford to the University for three
4 years.
5 The Travelers Education Center has
6 now given the University a high-quality urban
7 location from which we offer courses and
8 programs that enhance the vitality of downtown
9 Hartford. This space also permits the
10 University to expand our educational activities
11 into Connecticut's urban centers, which were
12 heretofore impossible for us to do.
13 Under the Education Center agreement
14 with Travelers, we are now able to offer
15 undergraduate and general studies courses,
16 courses on information systems and operations
17 management, and MBA level coursework. We have
18 just also decided to offer our masters of
19 science in accounting program at the Education
20 Center. And in this way we are able to use
21 educational resources more effectively and to
22 serve larger and more diverse populations than
23 we could have otherwise.
24 The University and Travelers are also
25 working together to promote the business
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2 education -- excuse me -- to promote the
3 education of talented high school students from
4 inner city Hartford through the continuing
5 support of the Academy of Finance, which we
6 just heard so nicely described.
7 There are two high schools inside the
8 Hartford community that are involved in the
9 Academy of Finance, as well as the University,
10 in this partnership. The University is now
11 also matching the scholarship commitments
12 supported by an endowment that Travelers has
13 provided for a Travelers' scholarship fund by
14 offering tuition scholarships to Academy of
15 Finance graduates that attend the University of
16 Connecticut.
17 These most recent actions on the part
18 of Travelers are an extension of the
19 University's long history of partnership with
20 the company.
21 Travelers has supported numerous
22 other programs at the University of
23 Connecticut. Its nearly $2 million in
24 contributions to the University -- beyond the
25 recent Education Center donation -- include the
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2 Travelers Chair in Geriatrics and Gerontology
3 at the Health Center, continuing support for
4 the Travelers Center on Aging, at all of our
5 campuses, scholarships, and a variety of
6 contributions to the University's Research
7 Foundation to assist faculty efforts in high
8 school writing programs, in math and science
9 laboratories, in corporate training, small
10 business development, our pharmacy school, and
11 evaluation of tutorial programs for Hispanic
12 students.
13 I am pleased to testify to Travelers'
14 well-defined and productive sense of corporate
15 responsibility toward higher education and to
16 underline the positive impact it is having on
17 higher education and community development in
18 Connecticut.
19 Let me end by responding to what I
20 believe was an assertion that I heard earlier
21 today, that those testifying in support of
22 Travelers or Citicorp are a direct or indirect
23 beneficiary of their largess. On behalf of the
24 students and faculty and communities who we
25 serve and who have been supported through
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2 Travelers philanthropy, I plead guilty.
3 Indeed, I hope to be guilty for many years to
4 come of being a recipient of the largess of
5 these corporations.
6 Thank you very much.
7 MR. LONEY: Thank you, Mr. Emmert.
8 Mr. Banker.
9 MR. BANKER: Thank you and good
10 morning. We appreciate the opportunity to
11 describe and to disclose Citibank's support of
12 the Low Income Housing Fund, of which I am the
13 program manager for New York.
14 LIHF is a 14-year-old national
15 community development lending institution. We
16 have made loans in about 19 states, about $135
17 million in originations and packages, and I
18 need to describe a little bit more about LIHF
19 to properly put into perspective the support
20 Citibank has rendered.
21 Our mission is to address problems
22 created by lack of capital in low-income
23 neighborhoods by acting as a link between
24 community-based development organizations,
25 capital markets, and other sources of financing
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2 and support. Our goal, since our creation in
3 '84, is to increase capital for low-income
4 communities, primarily by providing funding for
5 low-income housing and community facilities at
6 affordable rates and terms.
7 Our work has contributed to the
8 creation of almost 14,000 units of housing, and
9 77 percent of our financed projects serve very
10 low-income individuals, families or supportive
11 housing persons, and 20 percent target
12 low-income families. So LIHF's name is, in
13 fact, clear and true in that we seek to finance
14 the very lowest income, individuals and
15 families, throughout the projects around the
16 country that we provide financing for.
17 Since our inception, Citibank has
18 provided $715,000 in capital grants from four
19 banks and affiliates, primarily, they are a
20 California Savings Bank affiliate, but also
21 made loans to us from their affiliate in
22 Nevada, in the mid-Atlantic regions, with fixed
23 loans in Washington, D.C. So they have
24 supported us around the country and have
25 accepted packaged loans of approximately $4.7
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2 million. That is the second largest loan
3 packaging agreement we have with any lender.
4 The key to the capital grants for the
5 Low Income Housing Fund is, over two-thirds of
6 our operating budget comes from fees and
7 interest spread, and so capital grants are
8 critical not only to fund, in an ongoing way,
9 projects we see before us, but to allow us to
10 not have to compete with our borrowers for
11 scarce operating support.
12 So a capital grant is a better
13 approach to working with the Low Income Housing
14 Fund than an administrative grant. Although,
15 Citibank has provided about $65,000 in
16 administrative grants in New York and
17 California.
18 It is the policy of the Low Income
19 Housing Fund, some might say cleverly, to
20 neither support nor argue against nor provide
21 for CRA challenges to the lender. We seek to
22 act as a true intermediary between the
23 development, nonprofit development communities
24 and lenders. We do that by making loans.
25 Citibank has been a supporter of the
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2 Low Income Housing Fund since its inception.
3 Before we had a $10 million fund balance.
4 Before our balance sheet didn't look like much
5 of anything at all, and that is difficult to
6 quantify, but it is clear to say that their
7 support has been long-standing, far-reaching
8 and not in a single approach.
9 We thank you.
10 MR. LONEY: Thank you, Mr. Banker.
11 Any questions from the panel?
12 If not, then I will thank the panel.
13 We are scheduled to take a break
14 until 12:50 for lunch.
15 (Luncheon recess)
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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,
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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
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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
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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.
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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
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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
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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.
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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
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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
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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
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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
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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
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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
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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.
25 The next panel is panel 8 Hubert Van
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2 Tol, Phyllis Salowe-Kaye, Rashnmi Rangan, Ruhi
3 Maker, Gail Burks, and Alan Fisher from
4 California Reinvestment Committee has asked
5 that the letter that he propose be read into
6 the record as has Mr. Van Tol of the Wisconsin
7 Rural Development Center.
8 Mr. Ortiz, are you going to read both
9 of those letters?
10 MR. ORTIZ: No. I'm going to read Mr.
11 Fisher's letter.
12 Dear Mr. Loney: The California
13 Reinvestment Committee regrets it cannot be
14 present for this testimony in person. We
15 authorize the Inner City Press/On the Move to
16 enter our testimony into the record and request
17 it consent on the matter.
18 We would like to extend our
19 appreciation to the Federal Reserve for
20 inviting public comment on the Citicorp
21 Travelers proposed merger.
22 I am Ernesto Ortiz representing the
23 California Reinvestment Committee from San
24 Francisco, California.
25 We regret that we cannot attend in
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2 person and with our coalition members, who
3 represent two hundred community-based
4 organizations around California.
5 For a number of critical reasons
6 described below, we urgently request that the
7 Federal Reserve deny Travelers' application to
8 acquire Citicorp. The crux of our argument
9 rests on the record Travelers and Citicorp has
10 established in communities of color and how
11 this merger will adversely affect low-income
12 communities.
13 As you have heard or may hear in
14 testimony from other groups both Travelers and
15 Citicorp have programs supporting community
16 investment and charitable giving. Yet both
17 groups have poor histories of serving people of
18 color and of underserving low-income
19 communities.
20 In addition, the announced $115
21 billion CRA lacks scope, size and detail for an
22 institution the size and scope of the proposed
23 Citigroup.
24 Citibank has one of the worst
25 reinvestment programs for a major California
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2 financial institution. The bank has a record
3 of severely underserving Hispanics in the
4 State. California is at least 30 percent
5 Hispanic, yet only 12 percent of the
6 applications taken by Citibank in California in
7 1995 were from Hispanics.
8 In 1996 that number plummeted to only
9 4 percent of mortgage applications. Over that
10 same period of time, the number of applications
11 accepted from white applicants increased nearly
12 10 percent.
13 For many years the bank received
14 below satisfactory ratings on it's CRA
15 performance evaluation. Oddly enough, the CRA
16 rating for Citibank improved in 1996 as their
17 lending record to Hispanics was decimated.
18 Just when their rating began to
19 improve, the bank also dropped its commitment
20 to low-income people and began to pander to
21 moderate and high income people. The bank has
22 systematically eliminated low-cost products
23 such as those Citibank competitors offered
24 specifically designed to meet the needs of
25 low-income consumers.
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2 According to Citibank literature, the
3 Basic Banking Account has a monthly service
4 charge of $6.50 and is only free if you do
5 $10,000 in business with them.
6 The new EZ Checking program is a
7 no-fee account only if you keep a balance of
8 $1500. Clearly, low-income account holders
9 were not in mind when these programs were
10 develop. The Citibank developed the small
11 business loan product which has a minimum loan
12 requirement of $100,000.
13 The minimum requirement prevents most
14 small businesses owned by people of color or
15 businesses that reside in low-income
16 communities from qualifying.
17 Instead, these communities need loans
18 in the amounts of ten to forty thousand. The
19 California Reinvestment Committee has tried
20 unsuccessfully to work with Citibank. Since
21 1992 Citibank has refused to adopt Community
22 Reinvestment recommendations provided by the
23 California Reinvestment Committee. If one
24 looks at Travelers record of serving people of
25 color, the picture is equally harrowing to that
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2 of Citibank.
3 As you may already know there is
4 outstanding housing discrimination complaint
5 against Travelers Group. The suit alleges that
6 Travelers discriminates in the provision
7 underwriting, and terms and conditions of
8 homeowners insurance to homeowners and homes in
9 African American or Latino neighborhoods.
10 Travelers maintains a minimum policy
11 value of $250,000 in metropolitan Washington,
12 D.C. This excludes more than 90 percent of
13 homes in predominantly African American and
14 Latino neighborhoods from qualifying for
15 Travelers homeowners insurance.
16 In what may be an effort to right the
17 wrong, Travelers and Citicorp has delivered a
18 $115 billion commitment to communities.
19 Unfortunately, this pledge is minuscule for an
20 institution the size of the proposed Citigroup.
21 The California Reinvestment Committee
22 has been working with banks for eleven years to
23 develop community investment goals and in all
24 our times we have not had one bank measure its
25 goals based on the bank's deposit business.
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2 Banks such as Bank of America, Washington
3 Mutual, Wells Fargo, as well as others, have
4 measured their CRA goals based on a percentage
5 of the bank's assets.
6 Currently, the industry standards is
7 8 percent of assets. If a proposed Citigroup
8 were to revise its goal amount to reflect its
9 assets, as it should, the pledge will need to
10 be increased from 115 billion to 560 billion
11 dollars, nearly a 500 percent increase.
12 But more important than the size of
13 the commitment, is how it would impact the
14 communities. This commitment provides zero
15 assurance that it will benefit low-income
16 people because the commitment lacks details on
17 how the program will be delivered. For
18 example, the proposed Citigroup pledges to
19 quote expand the availability of commercial and
20 homeowners insure coverage and low and moderate
21 income customers, yet does not describe any
22 details on how this program will be developed
23 and delivered.
24 Considering Citibank and Travelers
25 histories of underserving communities of color,
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2 we are not convinced that this pledge is backed
3 up by a clear understanding of the needs of low
4 in come areas and communities of color, nor a
5 concrete commitment that the proposed Citigroup
6 would indeed serve the chronically underserved
7 communities.
8 MR. LONEY: Thank you, Mr. Ortiz.
9 MR. LEE: We will put it in the
10 record.
11 MR. LONEY: Please do. Mr. Lee.
12 MR. LEE: I don't know if you want to
13 alternate. I'll do it. To whom it may concern
14 at the Federal Reserve: I authorize Matthrew
15 Lee of Inner City Press, or whomever he
16 designates, to read the following comments
17 during my scheduled appearance at the Citicorp
18 Travelers merger hearing on Thursday, June
19 25th, in New York City as a representative of
20 the Wisconsin Rural Development Center.
21 Mr. Lee is also authorized to answer
22 any questions that you may have. We'll see.
23 Don't count on it.
24 I would have preferred to make these
25 comments myself, but unfortunately the Federal
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2 Reserve has not agreed to use readily available
3 technologies to allow testimony from people who
4 cannot afford to travel to New York.
5 The same goes for Woodstock and I
6 also raise that for the record. Here it is.
7 Wisconsin Rural Development Center testimony to
8 the Federal Reserve on the Citicorp Travelers
9 merger.
10 June 25, New York City.
11 My name is Matthew Lee. Hubert Van
12 Tol of Sparta, Wisconsin has asked me to
13 present these comments today on behalf of the
14 Wisconsin Rural Development Center.
15 Mr. Van Tol also served as a board
16 member of the National Community Reinvestment
17 Coalition and is co-chair of NCRC's Legislative
18 Regulatory Committee.
19 Thank you for the opportunity to
20 testify today. We would have preferred the
21 opportunity to testify in a location more
22 convenient to our membership, but we
23 nevertheless bring this message to you from our
24 members.
25 Don't allow this illegal merger to
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2 take place. Wisconsin Rural Development Center
3 has been assessing the credit needs of our
4 community and working with banks in Wisconsin
5 for the past five years. WRDC is a member of
6 the National Community Reinvestment Coalition
7 and we endorse NCRC's position on this merger.
8 Our members know that the
9 consolidation in the banking industry has not
10 provided them with benefits that are worth the
11 increased fees. They doubt that further
12 consolidation across the whole range of
13 financial services will bring them any more
14 benefits than banking consolidation has.
15 Our members are primarily from rural
16 and small-town Wisconsin. They are people who
17 work hard, play by the rules and often find the
18 deck stacked against them. Even if they could
19 do so, our members would never dream of making
20 an application to the Federal Reserve for the
21 privilege of breaking the law. They don't
22 think that way, and even if they did, they
23 would have no hope of succeeding.
24 When they hear the details of what
25 Citicorp and Travelers are proposing to do with
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2 merger they just shake their heads. They know
3 why government regulators are so willing to
4 bend and break the law on behalf of powerful
5 corporations, but they wonder if our democracy
6 really has to be that way.
7 The Bank Holding Company Act makes
8 clear that any bank holding company aquiring
9 another company which is engaged in activities
10 which are impermissible for a bank, has two
11 years to divest themselves of those
12 impermissible activities.
13 The Federal Reserve has ruled very
14 explicitly in previous cases that during the
15 two year waiver period the acquiring
16 institution may not engage in cross-marketing
17 and cross-selling between the bank and the
18 business in question. The two year waiver
19 period is granted in the law solely for the
20 purpose of providing a reasonable length of
21 time for the bank holding company to divest
22 itself of impermissible businesses without
23 having a fire sale.
24 The three additional one year waivers
25 were only intended for use in cases in which
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2 the bank holding company had made a good faith
3 effort to divest itself during the two year
4 period but was unable to do so.
5 With this application Citicorp and
6 Travelers are throwing the law, Federal Reserve
7 precedent and common sense out the window.
8 They seek what they believe should be an
9 automatic two year waiver, not so they will
10 have time to divest their insurance
11 underwriting business, but so they will have
12 time to integrate the different businesses.
13 They present their application with
14 the assumption that they are automatically
15 entitled to the two year waiver, and it seems
16 the additional three one year waivers as well,
17 even though they have no intention of divesting
18 their insurance underwriting business.
19 They have made it very clear they
20 intend to use the two year period to build and
21 develop their insurance business by
22 cross-marketing and cross-selling between the
23 banking and insurance sides of the business.
24 They are rubbing our faces in their blatant
25 disregard for current banking laws.
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2 It is clear the Citicorp and
3 Travelers want the Congress to pass a financial
4 modernization bill; it is also clear that the
5 Federal Reserve wants Congress to pass a
6 financial modernization bill, but such a bill
7 has not passed and in fact may not pass in the
8 next two years. The responsibility of the
9 Federal Reserve is to enforce the laws and
10 regulations as they written, not as particular
11 Federal Reserve or arrogant corporate leaders
12 may wish they were written.
13 While we agree that the Citicorp
14 Travelers CRA pledge with nearly half the
15 dollars in credit card lending is a bogus
16 pledge, we are not raising community
17 reinvestment issues or convenience and needs
18 questions at this hearing.
19 Any question of the adequacy of the
20 of Citicorp's CRA record and the future CRA
21 commitments of the merged entities is
22 overshadowed by the legal questions raised by
23 the proposed merger.
24 If corporations like Citicorp and
25 Travelers are allowed to ride roughshod over
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2 the law in this way it will mean that virtually
3 everything about our democracy is up for sale.
4 We ask the Federal Reserve to do the
5 right thing, deny this application and tell
6 Citicorp and Travelers that if they wish to
7 change the law, they are entitled to do so in
8 the same way that everyone else is in this
9 country by petitioning Congress to change the
10 law.
11 Thank you very much.
12 MR. LONEY: Phyllis Salowe-Kaye.
13 MS. SALOWE-KAYE: You had asked
14 before another speaker to give you the
15 information that they had requested from
16 Travelers that they didn't receive, and I have
17 a letter and I had marked the things that we
18 didn't receive that we requested, so I'll leave
19 it here.
20 Secondly, we received no money from
21 Travelers or Citibank, although Citibank does
22 take a table at our recent annual dinner, but
23 we haven't gotten the check.
24 (Laughter)
25 And I don't know if we'll get the
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2 check after today.
3 My name is Phyllis Salowe-Kaye and
4 I'm executive director of New Jersey Citizen
5 Action.
6 The testimony I'm going to give today
7 is on our behalf. We are the state's largest,
8 New Jersey's largest consumer watch dog
9 organization with over one hundred affiliated
10 organizations and more than sixty thousand
11 families which pay dues to us. The second
12 group is the New Jersey Affordable Nonprofit
13 Housing Network, and they are the state's trade
14 association representing over one hundred
15 nonprofit organizations.
16 We oppose this merger for the
17 following reason.
18 Number one, the merger is illegal.
19 Two, it's not safe or sound.
20 Three, Citibank comes into this state
21 into New Jersey with a less than impressive
22 record of service to low and moderate income
23 communities.
24 And, four, Travelers activities are
25 not regulated under the Community Reinvestment
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2 Act, a situation which we believe is a threat
3 to all low and moderate income residents in New
4 Jersey.
5 Speaking to the first point, it
6 almost seems silly to be addressing the
7 illegality of this merger under the current law
8 when we all know that changing the law is what
9 this is all about. Both entities have been
10 lobbying Congress to pass the Financial
11 Services Act of 1998 that would presto-changeo
12 make all of this legal. But until that happens
13 this merger is premature and dangerous.
14 Afterwards, if it happens, this merger will be
15 dangerous.
16 While Citigroup claims that the
17 merger is legal so long as the new entities
18 divest itself of Travelers underwriting
19 business within two years, there is no mention
20 of such divesture and no good faith attempt to
21 share a plan for how this might happen. We
22 don't believe that they've given it a single
23 thought.
24 Clearly, they expect to have one foot
25 out of the gate when the legislation that they
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2 have lobbied for so heavily is finally passed.
3 Why should you, the Federal Reserve Board, give
4 them the advantage?
5 On the second point, the merger
6 brings up the issue of safety and soundness.
7 No one seems to know what this new
8 sewing-together and it's entity will look like
9 or how it will behave once it has been created.
10 We believe it will be a monster. Now
11 we know that Godzilla is fake, but this new
12 Citigroup will be real, and once it is set in
13 motion with no rules to govern half of its
14 limbs and a part of its brain, it will too
15 late.
16 This merger has the potential for
17 exposing taxpayers to another situation like
18 the S&L bailout. As a result, Citigroup could
19 become dangerously exposed to sudden crises
20 either of their own making, or due to events
21 beyond their own control, that could wipe out
22 assets.
23 Citicorp remember received constant
24 oversight by both your board and the OCC when
25 it overextended itself in developing countries
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2 in the 1980s.
3 This merger could recreate a company
4 that is too big to be allowed to fail when in
5 times of trouble it would mean costly
6 government bailouts in order to prevent
7 economic catastrophe. We do remember the S&L
8 bailout and will never forget who paid for it.
9 The third issue, which is the poor
10 quality of the Citibank service to low and
11 moderate income people in New Jersey, is a
12 matter of record.
13 While they claim some improvement
14 over the last year, their 1996 record is
15 abysmal. Loans by Citicorp to African
16 Americans were denied 2.4 times more than
17 whites, the number being far higher than the
18 national denial rate.
19 The record shows that the bank is
20 clearly underserving a significant portion of
21 minority and low and moderate income people in
22 New Jersey. They trail their peers in all
23 categories with the exception of having the
24 same denial rate to Hispanics as all lenders.
25 Now Travelers. Citizens Action and
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2 the Affordable Housing Network have held some
3 promises meetings with Citibank over the last
4 few months about how they could better meet the
5 needs of New Jersey, but nothing has been
6 finalized.
7 Our recent discussions have only
8 emphasized the lack of clarity regarding the
9 intentions of their bride-to-be, Travelers
10 insurance company. Travelers has been a real
11 Neanderthal when it comes to recognizing and
12 understanding their responsibility to low,
13 moderate and minority communities in New
14 Jersey.
15 Here is an example. When questioned
16 about -- and we met with the general counsel of
17 the P and C for the whole country -- when
18 questioned about their Fair Housing complaint
19 filed against Travelers last year which accused
20 them of not insuring homes valued at less than
21 $250,000, the answer was that the property
22 casualty insurers in New Jersey actually has
23 been doing much better, because they market the
24 houses of a lower value, somewhere between two
25 hundred thousand and $225,000. That should
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2 really make the aspiring homeowners in Newark,
3 Trenton and Camden breathe easier.
4 That's not the worst of it. On a
5 Tuesday we were told that New Jersey was one of
6 the top ten markets for P and C insurance and
7 that they write lots of homeowners insurance in
8 New Jersey.
9 The following Monday we get a call
10 from them telling us that almost all the
11 wonderful things that were announced in the
12 Citigroup press release won't be done in New
13 Jersey because they hardly write any homeowners
14 policies in New Jersey.
15 Two days later they call us and tell
16 us they have 4.9 percent of the market and
17 yesterday we find out from the Department of
18 Banking that they're number 6 out of 77
19 companies in New Jersey that write homeowners
20 insurance.
21 We don't know who they are. We've
22 asked for information from them. This points
23 to why they must be forced to disclose all of
24 the information just like the bank has to.
25 Finally, in their press release, Citigroup
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2 makes the following pledge and I'm going to
3 quote. They say: They promise to be fair and
4 transparent in dealing with our customers and
5 their communities, so we can earn their trust
6 and support.
7 In light of their lack of clarity and
8 candor regarding the nature of Travelers
9 current business in New Jersey, or its future
10 commitment, or its plan to divest of
11 underwriting business under the current law, I
12 would say that transparent is light years away.
13 In fact, they haven't made it out of opaque
14 into translucent, and the only thing that's
15 transparent here is their clumsiness in trying
16 to avoid making a clear commitment to the
17 people of New Jersey. This merger must be
18 stopped.
19 MR. LONEY: Thank you, ma'am.
20 Ms. Rangan.
21 MS. RANGAN: Good afternoon. My name
22 is Rashmi Rangan. I am the executive director
23 of Delaware Community Reinvestment Action
24 Council. I am also board member of National
25 Community Reinvestment Coalition, a trade
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2 association of more than six hundred fifty
3 organizations nationwide.
4 I am also a member of Inner City
5 Press/Community On the Move. I'm also a tax
6 paying citizen, and I'm very concerned about
7 this merger.
8 I am testifying today under protest.
9 These proceedings are already tainted because
10 of the illegality of this merger, and the fact
11 that apparently it has already been
12 preapproved.
13 Without taking away the important
14 role that groups who have testified and will
15 testify in favor of this merger, and the
16 support that the banking community rendered
17 Citicorp offered these communities, we still
18 say that we are the community reinvestment
19 experts. We assess a bank's performance
20 exclusive of its subsidiaries and affiliates
21 and other entities locally, nationally and now
22 globally, and what the impact will be on our
23 community.
24 We are a ten-year old nonprofit
25 advocacy organization. We are opposed to the
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2 merger, proposed merger of Travelers to
3 Citicorp, and there are a number of adverse
4 issues.
5 The announced merger is an illegal
6 proposal. Under the federal Bank Holding
7 Company Act and even under the Federal Reserve
8 Board's own precedents and regulations, the
9 BHCA prohibits a bank holding company from
10 owning insurance underwriter or agency
11 operations.
12 The Act was enacted precisely to
13 prohibit combinations like Travelers and
14 Citicorp. Even Travelers say that under
15 current law it would have to divest its
16 insurance underwriting operation. The
17 announced merger is and unethical proposal.
18 Back in 1956 when the Bank Holding
19 Company Act was enacted the two year waiver
20 made sense to the newly created bank holding
21 company to buy time to come into compliance
22 with the law. 42 years later to ask for it
23 this time does not make sense, particularly
24 when the intent is absolutely clear that
25 lobbying efforts will be stepped up.
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2 Of much concern to us is the fact
3 that the discussion between applicants and the
4 Federal Reserve System prior to the merger
5 announcement which make a mockery of today's
6 proceedings and tomorrow's proceedings.
7 I also would like to, actually, I
8 have too little time, so I'll skip some. But I
9 have a big packet out there already presented
10 with transcripts from the Delaware Department
11 of Insurance public hearing and I want to
12 request that you get the transcript of the New
13 Jersey Insurance Department hearing, the
14 Delaware Banking Department public hearing, and
15 we testified at all those places.
16 The proposed merger is an expensive
17 bet. We have been led to believe in the
18 doctrine of too big to fail. If the big giants
19 have to be bailed out, we, the taxpayers, will
20 be stuck with that cost.
21 The savings banks will end up paying
22 hefty premiums. Maybe some of you don't
23 remember the S&L crisis. We do. Most megabank
24 mergers today tout the advantage of electronic
25 banking and technology.
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2 Can you imagine within this
3 environment the impact on safety and soundness
4 when with one stroke on the keyboard you can
5 move your deposit, particularly when the entity
6 which is a large insurer of property in a
7 geographic area struck by a national
8 catastrophe also happens to be your bank?
9 What about the implied subsidies?
10 We're talking about the FDIC insurance. This
11 proposal also raises concerns with the
12 community convenience and need. Travelers
13 Group to our community symbolizes antitrust.
14 We do not trust PrimeAmerica
15 Financial Service in our community. We do not
16 trust Commercial Credit loan officers in our
17 community. We do not trust property casualty
18 insurance insuring our community. We do not
19 trust Travelers Group, period.
20 Relative to that, we remain
21 unimpressed. This application should be
22 dismissed or otherwise denied.
23 Thank you.
24 MR. LONEY: Thank you, Ms. Rangan.
25 Ms. Maker.
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2 MS. MAKER: Good afternoon. My name
3 is Ruhi Maker, and I am co-convenor of the
4 Greater Community Reinvestment Coalition in
5 Rochester, New York, and I present this
6 testimony on their behalf.
7 We have been in existence since 1993
8 and approximately serving not-for-profit
9 organizations which is actually quite a large
10 number in Rochester, and I would say about a
11 million, and I'm show you some of our
12 demographics later.
13 I also work as a Senior Attorney at
14 the Public Interest Law office of Rochester.
15 Many of our colleagues have spoken
16 about some of the technical legalities and I
17 won't belabor those specific points. I'm here
18 to speak against the proposed merger today. In
19 the name of modernizing the laws governing the
20 financial institutions of this country the CEOs
21 of the largest of those institutions have been
22 lobbying for a number of years to repeal the
23 Act. Despite pouring of millions of dollars
24 into the contributions into the campaigns of
25 the House and Senate Banking Committee, they
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2 have failed to achieve their goal, and there is
3 still no consent on what financial
4 modernization should look like, despite the
5 version of HR we have before the Senate today.
6 In the face of their failure, the
7 CEOs of Citicorp and Travelers, two of the
8 largest financial institutions in the country,
9 have now decided to simply forge ahead with the
10 merger that takes advantage of a loophole in
11 the existing law trusting that their political
12 and financial clout will insure that there fait
13 accompli is legalized.
14 This is not modernization. It is a
15 reversion to the oligarchies of the past. As
16 someone who grew up in Pakistan, I emigrated to
17 this country about 13 years ago, I know what it
18 is like to live in an oligarchy, where a
19 handful of families control the economy and are
20 free to act as if they were above the law.
21 For the Federal Reserve to approve
22 this merger under these conditions would send a
23 clear signal to the financial elite that their
24 privileged status carries no corresponding
25 obligations to the community.
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2 True financial modernization would
3 require the systematic revision of the laws
4 governing the financial industry. It cannot be
5 done by granting piece meal exceptions to
6 existing regulations of time there is a new
7 merger application.
8 True financial modernization would
9 require the systemic extension of existing
10 community investment obligation from the
11 banking industry to the securities and
12 insurance industry in line with their recently
13 acquired rights to provide services formerly
14 restricted to banks.
15 True financial modernization would
16 require an increase in the responsiveness of
17 financial institutions to the needs of their
18 host communities.
19 Here I can speak from my own
20 experience as a member of the RC, the
21 coalition. We have had ongoing discussions
22 with four area banks about the credit needs in
23 Rochester. The three banks with the regional
24 or local-decision making authority have been
25 far more responsive than has the megabanks in
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2 our region. We have had virtually no dialogue
3 with Citibank.
4 When Rochester represents a
5 significant portion of a banks market share the
6 regional presence returns our phone call, and
7 makes sure the deal gets done, even if someone
8 has to work on it over the weekend.
9 When Rochester represents 1 percent
10 of an essentially global bank's market which is
11 probably what we will be if this merger goes
12 through, the needs of a local community are
13 very low priority.
14 As the trend of globalization of the
15 economy proceeds apace, we must ensure that the
16 democratic accountability of those who control
17 the commanding heights of the economy keeps
18 pace, otherwise false modernization is liable
19 to lead us back in the era of robber barons.
20 One of the things that we said when
21 the merger was first announced was that the
22 pledge, the CRA records for me, it's
23 irrelevant. Even if the CRA record was
24 perfect, this for policy reasons that I've just
25 outlined, I would have problems with this
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2 merger.
3 However, we have analyzed some of the
4 data. We have been analyzing it since 1993.
5 We released reports. You always rank all major
6 nine banks doing business in the Rochester.
7 '93, '94, '95, Citibank has had the worst
8 record of lending in low-income neighborhoods
9 and always the last of all nine banks.
10 I would like to, maybe you can wake
11 us up a little bit, Matt. Matt has agreed to
12 work with me on this in showing the three
13 little maps.
14 I'll first show you the racial
15 composition map which will show what the
16 demographics of Rochester looks like.
17 Turn that on. Essentially the red is
18 poorer, redlining. The yellow is median income
19 indications over there, and the green are the
20 more moderate income neighborhoods and then the
21 little black pie charts show you the rates.
22 The ones that are predominant black are
23 predominantly minority neighborhoods. The ones
24 that are predominantly.
25 So you understand what the racial
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2 composition looks like, I will then quickly
3 show you two maps of 1996 small business and
4 home mortgage lending.
5 Here is home mortgage, and I don't
6 know how familiar you are with Rochester but
7 basically the red with the black pies and
8 that's black and tends to be poor and you can
9 very quickly see there were no loans in the red
10 center, and if you look at the red, many of
11 them are predominantly minority census tracts.
12 That is clear with the numbers that I could
13 speak to if I have more time.
14 Matt, look at the small business.
15 This is, again, you know very recent data. The
16 red represents the no loans and, again, very
17 graphically the lack of lending occurs in many
18 of the minority low-income neighborhoods and
19 I've submitted copies of the maps along with
20 written testimony.
21 Very quickly, if I may proceed, you
22 know, if you look at 1996 loans to blacks and
23 Hispanics in the entire MSA, Citibank had 11.
24 The person who is number 8, and all of this is
25 again in charts that are submitted in terms of
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2 market share, had twice, two times as many
3 loans, the nearest competitor. The one who is
4 right at the top, the bank that was right at
5 the top, had eight times as many loans to
6 blacks and Hispanics. Again, looking at low
7 numbers, 21 loans home mortgage loans in the
8 MSA to low census tracts. Bank number 8 had
9 four times as many loans.
10 The bank that was number one had 13
11 times as many loans, and in terms of deposits,
12 they are the second largest deposit in
13 Rochester, so it's not that they are small
14 presence. They have a lot of our money. I
15 don't know what they do with it. So I will
16 conclude at this point.
17 Thank you.
18 MR. LONEY: Thank you.
19 Ms. Salowe-Kaye, I wasn't quite clear
20 what you were saying about the issue of
21 Travelers' present involvement activities in
22 New Jersey.
23 MS. SALOWE-KAY: Sure.
24 MR. LONEY: Is it a mystery to
25 people? I mean it sounded like were getting
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2 different answers.
3 MS. SALOWE-KAY: When Travelers came
4 down from Connecticut and met with us they told
5 us that they did a whole lot of, they wrote a
6 whole lot of policy for homeowners insurance in
7 the state. They told us they were one of the
8 top ten, they had a great amount of market
9 share.
10 A week later, when we asked that we
11 be included as one of the states that was
12 announced in their press release to receive a
13 bunch of special programs, like their diversity
14 training for ages -- they had a whole bunch of
15 things to increase their policy sales. They
16 had a program where they would decrease the
17 cost of policies for people of lower income.
18 They said, no, now we can't do that
19 in New Jersey because we really write virtually
20 no homeowners insurance in New Jersey. Then
21 we, they called two days later they said, well,
22 our market share is 4.9. By that time, the
23 Department of Banking in New Jersey had gotten
24 back to us with the statistics -- insurance --
25 and we discovered that in fact they are number
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2 6 out of 77 in terms of who writes the most
3 homeowners policy in New Jersey.
4 What I'm saying is we asked them for
5 some very specific information about the
6 income, the race, the census tracts as to where
7 they write their policies. They refused to
8 give us that information, plus a whole lot of
9 other information that we requested, and what
10 I'm saying is it seemed that they were less
11 than truthful with us when they met with us
12 about what kind of business they actually were
13 doing in New Jersey, and when we actually found
14 out they in fact were doing a fair amount of
15 market share.
16 MR. LONEY: Okay.
17 MS. SALOWE-KAY: The letter shows you
18 who we met with, also.
19 MR. ALVAREZ: I have a question for
20 Ms. Maker on the charts.
21 Did you do your analysis based on the
22 controlling for income or taking into account
23 income levels? You showed us charts that were
24 based primarily on race.
25 MS. MAKER: The first chart actually
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2 had race and income on it. It's the red was
3 the low income and the yellow was the median.
4 MR. ALVAREZ: I'm asking a slightly
5 different question.
6 Did you control for the income of the
7 borrower in the area where there were loans?
8 You showed us some areas where there are no
9 loans, and some areas where there are loans and
10 then you break the chart out into various
11 racial groups.
12 Did your analysis go another step to
13 include also an analysis of income levels of
14 the various people who did receive loans to
15 show disparities among income levels?
16 MS. MAKER: Yes, I think I need to
17 refer to -- you're talking about HMDA at this
18 point as opposed to small business?
19 MR. ALVAREZ: I'm just asking if it's
20 in the study you're going to be providing.
21 MS. MAKER: We looked at both.
22 (Continued on next page)
23
24
25
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2 MS. MAKER: Low-moderate houses,
3 low-moderate census tracts, I have the previous
4 year's numbers; all of that is provided in
5 there.
6 I can see, for example, in 1996 there
7 were 78 loans in low-mod households in the MSA
8 and, again, that was the last low-mod household
9 that received the least number of loans in the
10 MSA. And the next bank up was, actually, First
11 National Bank, which was a tiny bank in
12 Rochester, which was 130. Again, that persists
13 across income. Yes. That is all in the -- the
14 little charts are attached to stuff that was
15 handed out, and handed out, again, as with the
16 maps.
17 MR. HODGETTS: You say it appears to
18 form better -- I can't hear you. You said the
19 peers perform better than City. Do they
20 perform better in those inner city census
21 tracts?
22 MS. MAKER: In all of the categories,
23 the peers perform. If you look at 1996, for
24 HMDA, Citibank is, I think, last, apart from
25 that bank which now doesn't exist anymore; it
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2 has merged with a tiny bank. Citibank is last
3 for the MSA. It is last for the City of
4 Rochester. It is last in black Hispanic
5 households in the MSA. It is last in terms of
6 low-mod households in the MSA. It is last in
7 terms of low-mod income census tracts as well.
8 So it is consistently -- I think when we did --
9 the '96 data hasn't been put into that ranking.
10 But '93, '94, '95, we look at loan to
11 deposit, we have 13 different
12 characteristics -- and, again, that study is
13 also included in the comments. We looked at 13
14 different characteristics, and however you spun
15 the numbers, because I know statistics can say
16 a lot and this is why I have done it, I have
17 spun the numbers every single way and they
18 always came at the bottom.
19 The middle ranks -- sometimes the
20 banks would move depending on how you cut the
21 numbers. Citibank, maybe they could figure out
22 a way to make themselves come out ahead. But I
23 cut the numbers many, many different ways when
24 I did this and they all came ranked ninth.
25 Again, the point is they are the
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2 second largest depository bank in Rochester.
3 They are not a nonexistent presence. It is
4 Citibank New York State which is, in fact, a
5 subsidiary of the entity you have here.
6 MR. HODGETTS: Thank you.
7 MR. LONEY: Any other questions? If
8 not, I will thank the group, and don't forget
9 your slides.
10 The next is Panel Nine, Gilbert
11 Rivera, Mark Pinsky, Clara Miller, Paula Gavin,
12 Peter Elkowitz and William Dorsey.
13 Mr. Rivera is not here, I take it.
14 All right.
15 We will start with Mr. Pinsky.
16 MR. PINSKY: Thank you. Good
17 morning.
18 MR. LONEY: Afternoon.
19 MR. PINSKY: Good afternoon. My name
20 is Mark Pinsky. I am the executive director of
21 the National Community Capital Association,
22 which is a membership organization representing
23 more than 210 organizations around the nation,
24 including 50 member community development
25 financial institutions or CDFIs.
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2 Just to give you a sense of who we
3 are, at year end 1997 those CDFIs managed about
4 $475 million in predominantly private-sector
5 capital, had loaned and invested about $710
6 million, with a cumulative loss rate of about
7 1.2 percent in working in many of the nation's
8 poorest and most distressed communities. That
9 lending and investing had created about 4,000
10 jobs and about 22,000 affordable housing units.
11 National Community Capital believes
12 that every financial institution that received
13 a public benefit should provide a commensurate
14 public return. Through its performance and its
15 practices, Citibank has proven to National
16 Community Capital that it is committed to
17 providing a public return more than
18 commensurate with the benefits it receives at
19 taxpayer expense.
20 Over the past six years, Citibank has
21 been a key player in building and expanding the
22 CDFI industry. In the U.S. in particular, it
23 has done four things that I want to highlight.
24 First, it's embraced community
25 development finance as integral to its core
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2 business. Second, it's invested invaluable
3 expertise, as well as capital in its community
4 development finance work. Third, it's treated
5 CDFIs as customers rather than as applicants.
6 Fourth, it's supported the expanding CDFI
7 industry without regard to geographic
8 boundaries.
9 Citibank has never required National
10 Community Capital to limit the use of its
11 equity, debt or operating support to the
12 Citibank service area. Citibank understands
13 that building a strong CDFI industry requires
14 National Community Capital to pursue market
15 opportunities where they exist.
16 Citibank has worked closely with
17 National Community Capital and many CDFIs, and
18 a couple are here today. In its work with
19 CDFI, Citibank has exceeded every reasonable
20 expectation.
21 National Community Capital's
22 relationship with Citibank began in 1992 when
23 Citibank made a $1.1 million grant to launch
24 our National Equity Grants program. By year
25 end 1998, National Community Capital will have
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2 awarded more than $3.3 million in equity grants
3 to nonprofit CDFIs, including the money that
4 has been provided to us some years ago.
5 The success of this program has been
6 important. It's influenced three other
7 major -- three other important initiatives.
8 First, National Community Capital's experience
9 providing equity grants helped shape the
10 federal community financial institutions of the
11 CDFI. Second, National Community Capital's
12 success paved the way for Citibank's $1 million
13 grant to the National Federation of Community
14 Development Credit Unions, that you heard about
15 earlier, for an Equity Grants program that was
16 modeled on ours. And, finally, in 1997
17 Citibank made 17 equity grants directly to
18 CDFIs across the nation.
19 National Community Capital and
20 Citibank partnered again in 1996 to develop an
21 innovative equity financing product called the
22 Equity Equivalent, or the EQ2. The EQ2 is, in
23 our perspective, a win-win-win product.
24 Banks win because they make high-risk
25 equity investments in CDFIs that promise to
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2 return their principal and because they receive
3 multiplied CRA credits for making these
4 investments. An EQ2-investing bank can receive
5 lending test credit equal to the pro rata share
6 of the CDFI's lending over the life of the EQ2
7 investment. The share is based on the bank's
8 percentage of total equity in the CDFI. In the
9 alternative, the bank can receive investment
10 test credit.
11 CDFIs win because the EQ2 leverages
12 debt to fuel the CDFI's lending and investing
13 activities; and low-income -- most importantly,
14 low-income and low-wealth communities benefit
15 because more financing is available to them
16 through CDFIs.
17 In late 1996, Citibank made a $2
18 million equity equivalent investment in
19 National Community Capital to put this
20 ambitious concept into practice. Citibank also
21 has provided substantial financial support for
22 National Community Capital's human capital
23 building activities, including our training and
24 our consulting business.
25 Let me in the interest of time sort
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2 of jump to the conclusion and say that the
3 ultimate goal for CDFIs is to link economically
4 poor people to the financial products and
5 services they need to act in their own
6 self-interest. To do this, CDFIs need to
7 recognize change and respond with creative,
8 innovative solutions.
9 We feel that CDFIs and community
10 development in general will not succeed if we
11 get caught up perpetuating CDFI for their own
12 sake -- because they exist -- defending the
13 CRA, without acknowledging the revolutionary
14 changes in the financial services industry, or
15 justifying the behavior of financial services
16 companies without regard to their performance
17 in serving low-income and low-wealth people in
18 communities. We need a community investment
19 strategy that builds on the strengths of the
20 financial services industry as it is, not as we
21 want it to be.
22 The industry is in the midst of a
23 major and rapid transformation which will
24 reshape how poor people, like most people, use
25 financial services. The proposed
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2 Citibank/Travelers merger is now the cutting
3 edge of this transformation.
4 The question before us today is
5 whether the proposed Citigroup can lead the way
6 on community development finance in the
7 financial services marketplace of the future.
8 Given Citibank's past performance and practice,
9 particularly, from our perspective, its vision
10 in helping to develop the CDFI industry as a
11 distribution system that bridges gaps between
12 poor people and conventional capital and
13 financial services, National Community Capital
14 is confident that Citigroup will continue
15 Citibank's leadership in community development
16 finance.
17 Thank you.
18 MR. LONEY: Thank you, Mr. Pinsky.
19 Ms. Miller.
20 MS. MILLER: Hello. Good afternoon.
21 My name is Clara Miller. I am the president of
22 the Nonprofit Facilities Fund. I also chair
23 the Board of the National Community Capital
24 Association, and I am an advisory board member
25 of the U.S. Department of the Treasury's
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2 Community Development Financial Institutions
3 Fund, which together give me a fairly broad
4 perspective on the field.
5 I am speaking today, however, from
6 the perspective of NFF, the Nonprofit
7 Facilities Fund. We operate nationally and
8 have about $23 million in assets, and we make
9 loans and provide development services to
10 nonprofit organizations that make broad and
11 diverse contributions to low- and
12 moderate-income communities. We have financed
13 approximately $90 million in projects, with $25
14 million in loans, most of them being in the New
15 York area, but we have offices now in five
16 sites throughout the nation.
17 Small- and medium-sized nonprofit
18 organizations, especially those serving low-
19 and moderate-income communities, have a
20 difficult time accessing capital in general.
21 Their access to debt is complicated by the
22 underlying problem of lack of access to money.
23 The debt is not always the problem in the
24 growth of these organizations. They are
25 frequently engaged in low- or no-margin
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2 businesses, thus lack retained earnings to fund
3 their growth needs. They lack the ability to
4 raise equity because individual ownership is
5 not an option for nonprofits.
6 We at the NFF work in a variety of
7 ways to improve their access to capital. One
8 of the main strategies we have in doing so is
9 to partner with banks -- as direct lenders to
10 nonprofits, as investors in NFF's loan program,
11 and as partners in innovation, to help us
12 create new products, understand the industry,
13 go to scale and provide services to address the
14 changing needs of our market.
15 NFF has a long history of bank
16 partnerships. Ten banks are direct investors
17 in NFF's loan funds now; some take part in
18 other ways. With a few, we have relationships
19 that include a complex mix: Volunteer
20 involvement, financial and business advice,
21 product development, participation in deals and
22 referrals -- in addition to investment and
23 grant support. Citibank has really been such a
24 partner for us, working with us not only to
25 fill the capital gap, but to strengthen the
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2 nature and volume of financial and advisory
3 services that we can provide to the nonprofit
4 sector in order to increase its capacity
5 overall.
6 Citibank has been a particularly
7 valuable contributor to innovation in our
8 sector because of the quality as well as the
9 size of its investment.
10 Mark mentioned the EQ2 investment,
11 which NFF has undertaken as well. Citibank has
12 made long-term commitments -- and long term is
13 in many ways more important than scale, in my
14 opinion -- to the field and to NFF in the form
15 of innovative subordinated loan product, and we
16 are currently working closely with Citibank to
17 develop a nondebt financial product that helps
18 build essentially the equity-like part of a
19 nonprofit organization, even though that is not
20 really the correct term.
21 We have found that Citibank is
22 willing to take the long view, and that is a
23 rare and enormously important piece of this.
24 It looks at the long-term growth needs of
25 borrowers, including CDFI such as the Nonprofit
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2 Facilities Fund. It is curious about and
3 engaged in the community development market and
4 understands the broad needs of the market. We
5 together are trying to serve, including
6 management development, non-debt financing and
7 ongoing financial advice, as well as capital.
8 Based on our direct experience with
9 over an 18-year period, we believe that the
10 proposed acquisition of Citicorp by Travelers
11 Group will not affect Citibank's proven
12 commitment and track record in long-term
13 community investment.
14 Thank you.
15 MR. LONEY: Thank you.
16 Ms. Gavin.
17 MS. GAVIN: Good afternoon. My name
18 is Paula Gavin. I am president of the YMCA of
19 Greater New York, which is the largest YMCA in
20 our country. We were founded in 1985, and we
21 are a community service organization which
22 supports positive values, development in
23 programs that range from spirit, mind and body
24 activities. We serve today 144,000 young
25 people and by the millennium expect to serve
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2 200,000.
3 I am here today to strongly support
4 the merger of Citibank and Travelers as one of
5 the organizations who today and in the future
6 will continue to help organizations like the
7 YMCA serve young and very needy children
8 throughout our urban areas.
9 We have had a very long and
10 supportive relationship with both the Citibank
11 and Travelers Group. Over the last decade,
12 Citibank has contributed well over $200,000 to
13 our YMCA, and the rest to go into the course of
14 communities. Similarly, Travelers, including
15 Salomon Smith Barney, has also contributed
16 $200,000. As a result, our programs have
17 expanded again in areas of youth sports,
18 character and leadership development, community
19 service and literacy -- to as many as thousands
20 of children who otherwise would have gone
21 unserved.
22 I am most proud of their support of a
23 new program we launched in 1997 called the
24 Virtual Y, which brings afterschool programming
25 to the poorest and most needy schools. We have
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2 sponsors for this program, and early on
3 Citibank, Salomon Smith Barney and Travelers
4 were all strong supporters of this program in
5 three schools in the Bronx, Brooklyn and
6 Chinatown.
7 What we do is go in, help children
8 learn to read, and love to read, and they have
9 been extremely supportive in all cases. We
10 have been very grateful for their support. And
11 on a personal note, I would like to say that
12 the leadership of the foundations have
13 demonstrated themselves not only to me, but to
14 my counterparts, to be extremely strong
15 supporters of community groups like ours. I
16 specifically highlight Paul Ostergard from
17 Citicorp Foundation, Chip Raymond from the
18 Travelers Foundation, and Jane Heffner from
19 Salomon Smith Barney.
20 I do believe a lot of this turns out
21 to be people, and these people who are leading
22 these organizations are pledged to continue to
23 support community groups like ours. So in
24 closing I just want to say thank you for giving
25 us this opportunity to testify on behalf and in
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2 support of this merger of Citibank and
3 Travelers.
4 Thank you.
5 MR. LONEY: Thank you.
6 Did you say a Virtual Y?
7 MS. GAVIN: I did.
8 MR. LONEY: And do you serve virtual
9 children?
10 MS. GAVIN: But now the Y is
11 virtually all over.
12 MR. LONEY: Interesting concept.
13 Mr. Elkowitz.
14 MR. ELKOWITZ: Good afternoon. My
15 name is the Peter Elkowitz. I am the executive
16 vice president and chief financial officer of
17 the Long Island Housing Partners and its
18 affiliates.
19 The Housing Partnership is a
20 not-for-profit organization whose mission is to
21 create housing opportunities for those who,
22 through the unaided operation of the
23 marketplace, would be unable to secure decent
24 and safe, affordable home ownerships.
25 LIHP has been accomplishing its
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2 mission through the development and sale of
3 homes to persons of very low, low and moderate
4 incomes as well as through the provisions of
5 various support services such as mortgage and
6 financial counseling, technical assistance and
7 downpayment assistance.
8 I would like to take this opportunity
9 to thank the Federal Reserve Bank of New York
10 for allowing me to speak at this hearing. On
11 behalf of the Long Island Housing Partnership
12 and its affiliates, I would like to express
13 sincere support of the proposed acquisition of
14 Citicorp by Travelers Group, Inc. on the
15 assistance that the Housing Partnership has
16 received from Citibank/Citicorp Foundation.
17 LIHP and its various affiliated
18 corporations have been extremely productive
19 with various accomplishments relating to
20 housing production, community development and
21 supportive programs. Since its founding ten
22 years ago, the Partnership has constructed and
23 sold over 400 units of affordable housing and
24 has counseled thousands of prospective
25 first-time home buyers. In addition, the
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2 Partnership administers municipal community
3 development programs and downpayment assistance
4 programs throughout Long Island.
5 The Housing Partnership has many
6 members from business, labor, religious,
7 education and financial sectors. Much of our
8 support, including administrative grants,
9 construction loans for our affordable housing
10 programs, and mortgage loans for our
11 purchasers, comes from our member financial
12 institutions.
13 I am pleased to say that the
14 Citibank/Citicorp Foundation has been an active
15 member of the Long Island Housing Partnership
16 and has provided financial support and
17 expertise over the past ten years. In fact,
18 Citicorp has been one of LIHP's most responsive
19 partners, consistently demonstrating a
20 commitment to affordable housing and community
21 development. Over the years the institution
22 has provided the Housing Partnership with well
23 over $179,250 in contributions for various
24 programs and operating expenses.
25 Citibank serves as an active member
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2 of the Long Island Housing Partnership board of
3 directors and its regional lending consortium,
4 as well as the Mastic/Shirley, Long Beach,
5 Membership, Minority Outreach, Bablyon,
6 Nominating and Foreclosure Task Force
7 committees and the partnership. Specifically,
8 Citibank's representative on the Partnership
9 board, Michelle DiBenedetto, is chairman of the
10 Mastic/Shirley, Long Beach, Nominating and
11 Membership Committees.
12 In addition, Citibank cosponsored
13 mortgage counseling seminars for very low, low
14 and moderate Long Islanders. Citibank has
15 provided mortgage loans to low- and
16 moderate-income persons who purchased homes
17 through the Long Island Housing Partnership.
18 Citibank is also a member of the New
19 York Mortgage Coalition, an effort by financial
20 institutions and community organizations,
21 including the Long Island Housing Partnership,
22 who are committed to increasing home ownership
23 opportunities for persons of low and moderate
24 income by helping them qualify for mortgages.
25 As part of the New York Mortgage Coalition,
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2 Citibank offer mortgage products that it make
3 easier for lower income persons to qualify for
4 loans.
5 Citicorp Foundation funds were given
6 to LIHP for training to the not-for-profit
7 mortgage counselors in Brooklyn, Queens, and
8 Long Island, and to assist with the development
9 of 78 low- and moderate-income rental and home
10 ownership units in downtown Bayshore.
11 Specifically, the funds were used to offset
12 administrative costs associated with securing
13 public funds and to hire a social worker to
14 assist with the relocation of current
15 residents.
16 Citibank is also an active
17 participant in the Long Island regional lending
18 consortium, a group of lending institutions
19 that pool their funds and share the risk so
20 that socially and creditworthy affordable
21 housing can be financed and constructed.
22 It should also be pointed out that
23 Michelle DiBenedetto from Citibank was
24 instrumental in the success of the Federal
25 Reserve Long Island Home Purchase Process
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2 Initiative. In addition, as an LIHP board
3 member, Ms. DiBenedetto kept the Board informed
4 of the progress made by this initiative.
5 It is noteworthy that, in
6 anticipation of the merger, the new Citigroup
7 has indicated that it would continue to provide
8 substantial administrative support and special
9 project grant funds for affordable housing
10 initiatives to low- and moderate-income home
11 buyers. In addition, the Housing Partnership
12 has been assured that the new Citigroup will
13 continue to provide both construction and
14 mortgage loans for its various affordable
15 housing development programs.
16 Over the next five years, the Housing
17 Partnership will be embarking on many of the
18 affordable housing projects, the largest of
19 which are redevelopment efforts in the Town of
20 Islip and Riverhead that are projected to yield
21 over 150 affordable housing units for families
22 of low income.
23 The Housing Partnership also plans to
24 develop other housing units in Nassau and
25 Suffolk County will which require both
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2 construction and end-loan financing. While it
3 is difficult to estimate the value of end loans
4 projected for our affordable home buyers over
5 the next five years, it is expected that such
6 values will exceed $10 million. Based on past
7 experiences, the Housing Partnership is certain
8 that the new Citigroup will be an active
9 participant in the financing of its affordable
10 housing and community development programs.
11 The Housing Partnership is grateful
12 to Citibank for its support through various
13 community development programs. Furthermore,
14 it commends the new Citigroup for its foresight
15 of the importance of such programs. Again, the
16 Housing Partnership would like to express its
17 support of the acquisition of Citicorp by
18 Travelers Group. Based upon our past
19 interactions with Citicorp, it is our belief
20 that Citicorp's demonstrated commitment to
21 development of affordable housing and community
22 development in this region will continue.
23 Thank you for the opportunity to
24 speak to you today. The Housing Partnership
25 looks forward to working with the new Citigroup
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2 to fulfill its pledge of $115 billion for
3 affordable housing and community development.
4 Thank you.
5 MR. LONEY: Thank you.
6 Mr. Dorsey.
7 MR. DORSEY: Good afternoon. My name
8 is William Dorsey. I am the executive director
9 of the Grow Bridgeport Fund.
10 The Grow Bridgeport Fund is a capital
11 access program designed to provide credit to
12 small- and medium-sized businesses in the
13 greater Bridgeport region. GBF is a
14 partnership made up of the City of Bridgeport,
15 the State of Connecticut, Bridgeport Economic
16 Development Corporation, Community Economic
17 Development Fund, and three banks, including
18 Citibank.
19 I came here today to talk about the
20 crucial role that Citibank has played in the
21 formation of the Grow Bridgeport Fund and how
22 the bank's continued involvement is critical to
23 the fund's future development.
24 GBF grew out of Bridgeport's
25 empowerment zone application process, when the
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2 entire community recognized that a key
3 impediment to the city's economic growth was
4 that credit from traditional lenders was not
5 available for small businesses. This sentiment
6 was particularly acute in the wake of the New
7 England banking crisis, which witnessed the
8 demise of several local financial institutions
9 and the removal of credit institutions from
10 local to regional banking centers.
11 The community as a whole suffered
12 from this lack of access to credit because it
13 stunned Bridgeport's ability to expand its tax
14 base and create job opportunities for low- to
15 moderate-income residents.
16 In early 1995, the City of Bridgeport
17 set out to request 18 banks operating in
18 southwestern Connecticut to participate in the
19 Grow Bridgeport Fund. Citibank was only one of
20 three banks that responded. From the earliest
21 planning sessions, it has actively participated
22 in the fund through its representative Ellen
23 Tower, and its counsel, Larry Brown. They
24 asked tough questions, but they were also
25 willing to make the compromises necessary to
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2 make this unusual coalition of the private and
3 public sectors work.
4 Further, once our operating agreement
5 was put into place in late 1997, Citibank was
6 the first bank to provide an equity
7 contribution in the amount of $250,000.
8 Since that time, the Grow Bridgeport
9 Fund has gone on to make loan commitments
10 totaling $61,000, with another million seven in
11 requests. Ellen Tower sits as a member of our
12 board of managers and Michael LaBella serves on
13 our investment committee, which reviews and
14 approves all requests for credit.
15 They continue to bring resources to
16 the table, both human and financial, which
17 contribute to the growth and stability of GBF.
18 Citibank has made training available to develop
19 and expand the capacity of our staff and
20 classes, taught by the National Development
21 Council on the Design and Administration of
22 Rabb Funds. It has helped to defray a portion
23 of our marketing expenses, it has helped shape
24 a risk rating system for our loan portfolio,
25 and it has identified potential sources of
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2 capital, which will allow GBF to expand its
3 lending activities.
4 I think Citibank's participation in
5 the Grow Bridgeport Fund and other
6 Bridgeport-based organizations is all the more
7 praiseworthy because there are no Citibank
8 branches or loan offices in our city. What we
9 are witnessing is not the infiltration of some
10 marketing strategy, but, rather, the type of
11 corporate citizenship that has recognized the
12 genuine needs of an underserved community and
13 has taken steps to serve those needs.
14 Citibank's commitment to Bridgeport
15 represents an act of leadership that is all too
16 often absent in this era of consolidation
17 within the financial services industry, which
18 has been marred by rampant disinvestment of
19 smaller and less wealthy communities.
20 The collective expertise and wisdom
21 of a Citibank is an invaluable resource and it
22 is the most valuable asset to a fledgling
23 organization such as the Grow Bridgeport Fund.
24 As the financial services industry
25 continues to contract, and creative alternative
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2 lenders continue to emerge to serve the needs
3 of those business borrowers at the low end of
4 the spectrum, we don't need additional credit
5 criteria. Energetic participation by lenders
6 is needed to support the efforts to manage and
7 expand these portfolios. It is the transfer of
8 the larger institution's expertise that is
9 almost as critical as capital in making these
10 alternative lending institutions viable.
11 Citibank's participation in Grow
12 Bridgeport Fund has been a model of how those
13 knowledge transfers can take place, and we hope
14 this example of responsible and enlightened
15 corporate support will continue in the future.
16 Thank you.
17 MR. LONEY: Thank you, Mr. Dorsey.
18 Any questions from the group? If
19 not, then I will thank the panel.
20 Let's take till 2:45, take a break.
21 (Recess)
22 MR. LONEY: We will begin with the
23 panel that was scheduled for 2:35, Panel Ten.
24 Everybody is here.
25 Mr. Schallau, is that how you say
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2 your name?
3 MR. SCHALLAU: Very well done. Thank
4 you. My name is Doug Schallau. I am president
5 of Junior Achievement of New York City. We are
6 a franchise of Junior Achievement Inc., which
7 has 163 domestic franchises in the United
8 States and it has programming in over 100
9 foreign countries.
10 This year in New York City we will
11 reach 150,000 students with our programs, all
12 taught by volunteer role models from companies
13 like we are here to talk about today. And
14 specifically I'd like to just spend a moment
15 talking about our experience with Citibank,
16 which has been absolutely tremendous and
17 positive and, therefore, I am here to speak
18 very much in favor of the consolidation.
19 Over the past ten years, Citibank has
20 contributed funds to Junior Achievement of New
21 York in excess of half a million dollars, which
22 has allowed us to bring our programs to young
23 people that are very much in need of these. In
24 addition to that, they have provided their
25 employees, approximately 350 of those over the
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2 last ten years, to go into the classrooms with
3 our programs to teach kids about free
4 enterprise and economics. In fact, our purpose
5 is to educate and inspire young people to value
6 free enterprise business and economics in order
7 to improve the quality of their lives.
8 I think this is where the similarity
9 exists with, for example, Citibank, that we
10 have a great experience with, and our
11 organization. We are both trying to improve
12 the quality of lives for the kids we reach, and
13 for Citibank the people in the locations where
14 they exist.
15 In addition to all that, they have
16 been very generous. Their employees have been
17 very generous with their time in teaching in
18 the classroom, as I mentioned, and also helping
19 in our special event fund-raising. They have
20 raised probably another half a million dollars
21 over the last ten years through our special
22 events and, primarily, through our Bowl-A-Thon.
23 That involves their employees helping raise
24 money and then participating in the event.
25 I'd also like to specifically talk
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2 about the leadership role that Citibank has
3 played with us and other organizations like
4 ours, particularly our focus, which is the
5 education system. Without question, they have
6 taken a leadership role in a number of areas,
7 some of which -- as an example, in education
8 technology Paul Ostergard, who heads the
9 foundation, has been a pioneer and a driving
10 force in involving technology in education. He
11 has also been very supportive with Junior
12 Achievements International operations and is in
13 Citibank involved in a number of foreign
14 locations, has been very innovative in
15 connecting the people that they are lending
16 money to in their microlending program,
17 involved in their Junior Achievement program,
18 to help those people understand business and
19 free enterprise and responsibilities that go
20 with it.
21 So I just would like to summarize by
22 saying that I believe that this can only be an
23 expansion of this leadership role to help
24 improve the quality of lives in everyplace that
25 this organization is located, and we certainly
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2 appreciate it not only here in New York City
3 but all the locations where they are involved
4 with us. And they are truly a leader,
5 enlightened philanthropy not only in the United
6 States but globally, and we appreciate it very
7 much.
8 Thank you.
9 MR. LONEY: Thank you.
10 Mr. Porter.
11 MR. PORTER: Good afternoon. My name
12 is Ralph Porter. I represent Mid-Bronx
13 Desperados Community Development Housing
14 Corporation. So on behalf of the board, staff
15 and its residents, it a pleasure to come speak
16 before you today.
17 I am especially going to speak about
18 our involvement with Citibank over the past ten
19 or more years. One, when we first started
20 sponsoring a community development credit
21 union, Citibank came to our aid in terms of
22 giving us a grant for operations over a two- to
23 three-year period. As time went on, we also
24 received grants for general operating.
25 The last two specific grants that we
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2 received, which we were in dire need of, was
3 one for our job resource center, which was a
4 job training program basically geared to deal
5 with welfare recipients and our residents to
6 take them off of the welfare rolls.
7 Another grant -- we were approved
8 last year -- was the grant where we were
9 dealing with economic development, and this
10 grant went to maintaining a director of
11 development, which presently we are in the
12 process of developing a 136,000 square foot
13 shopping center, which that money was given
14 directed toward the salary for that particular
15 person who had been on that project for some
16 years, and also consulting fees.
17 Citibank has also made it available
18 for free training for some of our development
19 staff to come to many courses and to increase
20 their knowledge and talents so that they can
21 come back into our community and be put to use
22 in development in our community.
23 I do have -- I asked myself the
24 question that, what can this merger contribute
25 to especially a not-for-profit organization,
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2 and directly a community development
3 cooperation such as Mid-Bronx Desperados and
4 other community groups?
5 I view community development groups
6 as the glue for this society, to maintain what
7 has been invested in these communities in
8 affordable housing, economic development, etc.
9 They become a living organism and a hub for
10 being able to support the community in its
11 efforts.
12 It's important that private industry
13 gets involved, and especially in the banking
14 area I can say that I know you are in the
15 business of making money, but there is also the
16 business of social corporate responsibility.
17 And as I look at this merger and I see this
18 $115 billion over a ten-year period, I ask the
19 question, in terms of community development,
20 how much of those funds are going to be
21 contributed in grants for operation support for
22 buildings, for organizations, of
23 not-for-profit. It is extremely important that
24 we look at those dollars figures that they have
25 recommended, and they be increased in reference
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2 to insurance Travelers and what have you.
3 I would ask you to take a very hard
4 look at how can you reduce your rate for lower
5 income communities.
6 Thank you.
7 MR. LONEY: Thank you, Mr. Porter.
8 Mr. Morrow.
9 MR. MORROW: I am Phillip Morrow,
10 president of the South Bronx Overall Economic
11 Development Corporation. We are an economic
12 development corporation that covers the Bronx
13 south of Fordham Road, and I should say we were
14 organized in 1972. Citibank at that time was
15 one of a group of people who gathered together
16 with the Bronx borough president at the time,
17 Bob Abrams, in terms of creating an economic
18 development organization that would help
19 reverse the decline and deterioration of the
20 Bronx. Citibank was there at the beginning.
21 They are one of the founding banks, one of five
22 founding banks, that started the organization,
23 that financed it over the years. They have
24 provided us with continuous support over 26
25 years of operation, both for project staff and
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2 support of economic development projects.
3 Lately, in our more recent activity
4 there, Citibank has been involved in a project
5 called Credits, providing early funding, a
6 $100,000 revolving loan fund, and $10,000 a
7 year for five years to provide financing for
8 small businesses in the south Bronx. The money
9 they loan to us, which we loan to businesses
10 that otherwise would not qualify for credit.
11 Members of Citibank sit on the credit committee
12 and review those loans and work with us in that
13 fashion.
14 In addition to that, Mr. Hector
15 Ramirez is on our organization we call
16 Employers for Education, because in addition to
17 doing commercial revitalization and industrial
18 development, SOBRO is a major actor in the
19 world of training unemployed residents of that
20 neighborhood for jobs. So Hector is a founding
21 member of SOBRO's advisory group called the
22 Boarders of Education, with the specific
23 purpose of identifying ways in which we can
24 make end roads to find jobs for unemployed
25 people, for people on welfare, for youth in the
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2 south Bronx.
3 We are also a member of Citibank's
4 Partners for Progress, which is working on
5 commercial development and revitalization
6 projects with both grants and loans, and we are
7 looking forward to doing some financing of
8 those projects in an area of the south Bronx,
9 that up until now has been totally ignored by
10 the south Bronx, and revitalization of that
11 community.
12 We are working quite hard on
13 community development. As Ralph Porter was
14 talking, in commercial revitalization, economic
15 development, industrial development, and job
16 training, Citibank has been there as a partner.
17 That is why we enthusiastically support the
18 merger.
19 I think when I look at this -- and
20 there is also a branch on 149th Street in the
21 hub, in the middle of the south Bronx, a
22 Citibank-based branch, and we anticipate will
23 remain there, and they will have a fight with
24 us if they are going to move it since branch
25 backing is pretty important to our neighborhood
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2 and community. And we have been engaged by
3 them -- they happen to have stolen one of my
4 staff members, one of my best people, Paula
5 Espinosa. I had to say that because she's
6 sitting out there. And we have been engaged
7 with them in planning on how some of this
8 money, which is going to be available as a
9 result of the commitment, the $115 billion
10 commitment that's been made, would be
11 reinvested in the south Bronx.
12 I wanted to also mention that I have
13 been in New York for 15 years, and before that
14 I was in Hartford, and I was very familiar with
15 Travelers Insurance Company as a partner and
16 supporter and a founder of an organization that
17 I used to run there. So I can speak positively
18 about my recollection of Travelers in the days
19 20 years ago I left Hartford. But at the time
20 we were -- they were a good corporate citizen.
21 To me, the key here is that you have
22 two companies that have a demonstrated history
23 of being a good citizen in their communities
24 where they work, providing support for these
25 efforts of making reinvestments and being in
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2 leadership, and none of that brings me pause
3 about these two giants coming together and
4 pooling the resources to try to make things
5 better in communities like the south Bronx.
6 Thank you.
7 MR. LONEY: Thank you, Mr. Morrow.
8 Ms. Gerrol.
9 MS. GERROL: My name is Lisa Gerrol.
10 I am the president of the Greater Connecticut
11 Chapter of the National Multiple Sclerosis
12 Society, and we are in the Hartford area, where
13 Mr. Morrow is from, and I can talk a little bit
14 about what has been happening in recent years
15 with the Travelers.
16 As in most communities, the
17 Connecticut area has thousands and thousands of
18 corporations and businesses. Among those
19 numbers, one local corporation, the Travelers
20 Group, has distinguished itself as the
21 corporation of the year of the National
22 Multiple Sclerosis Society. I would like to
23 take a few minutes to tell you why we selected
24 the Travelers Group as the corporation of the
25 year and how they have changed the lives of
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2 thousands of people with multiple sclerosis.
3 Multiple sclerosis is a chronic,
4 often disabling disease of the central nervous
5 system. Symptoms can be mild, like a tingling
6 sensation in your limbs, or they can be severe
7 and cause total disability, blindness, and
8 increasing towards serious further disability.
9 Most people with MS are diagnosed
10 between the ages of 20 and 40 years old, yet
11 the impact of MS lasts a lifetime. The
12 progress, severity, and specific symptoms of MS
13 can't be predicted. They are devastating, and
14 with MS someone can wake up in the morning and
15 not be able to see and not see for days on end
16 or weeks on end and be totally blind. They can
17 wake up several weeks later, be able to see,
18 but be in a wheelchair and completely unable to
19 walk.
20 The National Multiple Sclerosis
21 Society provides local services and research.
22 The services are to help end the devastating
23 effects of multiple sclerosis, and the research
24 is to find the cause, new treatments, and
25 eventually a cure for multiple sclerosis.
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2 Our history with the Travelers
3 Foundation began about ten years ago when a
4 small group of Travelers employees helped at
5 one of our programs called MS Vacation Week.
6 This is a program for people who are primarily
7 severely disabled with MS, although they are
8 young adults.
9 People with MS at Vacation Week can
10 enjoy an accessible environment where they are
11 accepted, understood, and they are able to
12 participate in programs that otherwise they are
13 not able to do. For example, they are able to
14 go boating, they are able to go fishing, they
15 are able to go swimming, they are entertained,
16 and they have the opportunity to learn about
17 treatment programs and ways of coping with
18 their disease.
19 The program also benefits caregivers,
20 because people who are day in, day out, caring
21 for someone who is severely disabled need a
22 break, and this gives those caregivers an
23 opportunity to have a break.
24 The Travelers Foundation, in the
25 early years when we first began Vacation Week,
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2 supported this program in a small way. Their
3 support increased during the last three years.
4 They have been the major sponsor of MS Vacation
5 Week allowing us to provide the program to far
6 more adults than we have ever been able to. In
7 addition to that we have been able to improve
8 and increase the quality of the programs that
9 we offer.
10 In addition, the Travelers
11 Foundation, the Travelers Group, allows their
12 employees to come help at Vacation Week, even
13 though it is a program that is held during the
14 week and they pay their employees to attend
15 Vacation Week for the entire week, which is a
16 wonderful benefit to our organization.
17 Another example of how the Travelers
18 has shown a commitment to giving back to our
19 community and in helping the MS Society is
20 through our walk. Eight years ago a small
21 group of Travelers employees participated in
22 the walk, and that group has grown to this year
23 250 employees participated in the MS walk on
24 their own, raising about $23,000 in Connecticut
25 alone.
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2 In addition, the Travelers in their
3 continuing efforts to support the MS Society
4 and encourage their employees to do so, allowed
5 them to publicize and promote the event
6 throughout the country, so that there are
7 hundreds of people in the communities
8 throughout the United States that are
9 participating in walks.
10 Two years ago, the Travelers became
11 the major sponsor of this particular event for
12 the greater Connecticut chapter. This is our
13 largest fund-raising event, and it helped us
14 raise about $400,000 this year with the MS
15 walk. This will help fund research to
16 determine new treatments for MS, and one of
17 those treatments has just been approved by the
18 FDA in recent months, as well as two others
19 that actually slow the progression of the
20 disease by about a third.
21 The Travelers has also been
22 instrumental in helping more than 10,000 people
23 in Connecticut and countless others throughout
24 the country in providing local services that
25 change the lives of people with multiple
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2 sclerosis.
3 The Travelers Group exemplifies how a
4 corporation can significantly impact the
5 welfare of our community and improve the lives
6 of its residents. The merger between Travelers
7 Group and Citicorp can only make them stronger
8 and more able to help all those we care so
9 deeply about at organizations like the National
10 Multiple Sclerosis Society.
11 MR. LONEY: Thank you.
12 On a personal note, I am rooting for
13 you, because a very good friend of ours in the
14 Federal Reserve system has been battling that
15 horrible disease for a number of years and a
16 breakthrough would be most welcome.
17 MS. GERROL: We agree, definitely.
18 MR. LONEY: Mr. Buerger.
19 MR. BUERGER: Thank you. I'm Ted
20 Buerger. I am external liaison for the
21 Coalition for Welfare to Work.
22 The Coalition was formed in 1997 by a
23 group of business, religious and volunteer
24 organizations who wished to bring the resources
25 of the corporate and the private sector to help
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2 people move from welfare to productive work.
3 We do this in conjunction with all of the
4 training programs and agencies in Westchester
5 County, simply trying to add supplemental
6 services and resources.
7 Examples of things that we do,
8 briefly, are that we provide
9 interview-appropriate clothing, we provide
10 practice interviews, and we provide mentors
11 after people actually get jobs, to help them
12 not only get jobs but then to keep jobs and
13 move on to better jobs down the road. We do
14 this throughout Westchester County, from Mount
15 Vernon and Yonkers to Peekskill, and everywhere
16 in between.
17 In doing this, we create a human
18 bridge between the world of welfare and the
19 world of work, which is important. As we think
20 of Citibank in a minute, because we are not
21 just providing services, we are providing an
22 open door that says to people we in the working
23 world want you in the world of welfare to join
24 us and work with us.
25 In every area that we have made
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2 efforts, Citibank has shared their professional
3 workforce development skills in great depth and
4 breath, as well as giving us numerous volunteer
5 hours.
6 One example, Citibank, in February of
7 this year, did a clothing drive with large
8 posters and racks in every Citibank in
9 Westchester County and they kept those racks
10 and posters up for months, and they put our
11 brochures out in every Citibank soliciting
12 volunteers for us. They have also had their
13 head of human resources provide professional
14 interview training to our volunteers for
15 interviewing.
16 Citibank employees have volunteered
17 to be mentors and to do practice interviews
18 themselves, including offering to have
19 candidates come into Citibank offices so they
20 could do the interviews in a corporate setting;
21 it would be realistic. They have also trained
22 our clients in personal budgeting and provided
23 tours of their office facilities so people
24 could experience or see the world of work.
25 It doesn't stop there. Citibank has
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2 referred us to other organizations in community
3 development and to potential sources of funds.
4 They have always moved to deepen our contacts
5 elsewhere in the Citicorp organization, and we
6 would hope in the future into the Travelers
7 Group organization.
8 They have given us friendly and good
9 advice about building and managing our young
10 organization over the last year. In all, the
11 Citibank community development team, led by
12 Peter Mosbacher, who I have to mention but
13 would also acknowledge that his group includes
14 six other people who meet with us every other
15 month and then again connect us into their
16 different branches to provide services, they
17 have been professional, focused, creative and
18 always helpful.
19 We are proud of what the Coalition
20 for Welfare to Work has accomplished in its
21 first year, but I will tell you, we would not
22 be where we are today without the many
23 Citibankers who have gone the extra mile to
24 help us. There is no corporation who has
25 helped us more and who has offered so many
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2 services to benefit our clients.
3 Thank you.
4 MR. LONEY: Thank you, Mr. Buerger.
5 Mr. Torres.
6 MR. TORRES: My name is Edwin Torres,
7 and thank you very much for the opportunity to
8 present Bill Aguado's views on the proposal by
9 the Travelers Group, Inc. to acquire Citicorp.
10 Bill Aguado is the executive director of the
11 Bronx Council on the Arts.
12 Citicorp has been a long time
13 supporter of the Bronx Council on the Arts and
14 in recent years has had a significant impact on
15 the Bronx Council on the Arts' community
16 development initiatives as well as its basic
17 operations.
18 Because of its relationship with
19 Citicorp, the Bronx Council on the Arts has
20 been able to expand its focus of the cultural
21 development of the Bronx to include a new
22 corporation, the BCA Development Corporation.
23 Citicorp, specifically their community
24 development department, recognized the value of
25 our efforts and those of other like-minded arts
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2 organizations to begin exploring the role that
3 we as arts organizations can play in the
4 revitalization of our inner city communities.
5 To that end, Citicorp designed and
6 implemented a special initiative entitled
7 "Cultural Builds Community." The premise is a
8 relatively simple one; that is, by creating
9 partnerships between arts organizations and
10 community development corporations a new and
11 meaningful paradigm of service can be created.
12 Culture Builds Community included a
13 special training initiative for the proposed
14 partnerships to enable them to effectively work
15 together, to overcome and identify whatever
16 management obstacles would emerge, and to
17 assist the participants in program development.
18 BCA and another technical assistance
19 provider, Brooklyn In Touch, were contacted to
20 conduct this important training. The
21 importance of this initiative cannot be
22 stressed enough. The recognition that the arts
23 can enhance community development efforts is
24 what distinguishes Citicorp from other
25 financial institutions.
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2 Over 30 organizations were served by
3 Culture Builds Community. The concept and the
4 experience was such a positive one that BCA
5 created its own version, entitled Community
6 Cultural Partnerships. The concept has had
7 also a positive impact on our Bronx
8 organizations.
9 To be sure, the arts are more than
10 performances and exhibitions. The arts reflect
11 culture which in turn reaffirm the value system
12 of the individuals comprised in that culture.
13 Within the context of the community, the arts
14 have the potential of bringing residents
15 together in a proactive fashion. The arts can
16 and have effectively complemented the efforts
17 of other traditional revitalization entities.
18 Given the economic impact the arts
19 have on the economy of New York City -- $9.3
20 billion -- the arts is an area with tremendous
21 potential for job and business development in
22 our undeserved communities.
23 Citicorp has indeed recognized that
24 potential by being the first to support our new
25 development corporation and one of its major
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2 initiatives, our Arthandlers Job Training
3 Program, of which I am assistant director and a
4 case manager.
5 Specifically, the Arthandlers Job
6 Training component is a first of its kind
7 program which is designed to prepare the
8 unemployed for careers as arthandlers.
9 Arthandlers are individuals who work behind the
10 scenes at museums, galleries, auction houses
11 and corporate collections and help to maintain
12 art collections, install exhibitions, frame
13 artworks, pack and crate, and provide risk
14 management, to name a few tasks.
15 The salaries at the entry level can
16 range from $10 to $30 per hour. Many with
17 experience can have a very lucrative career and
18 in turn support their families and contribute
19 to their community's economies.
20 We are now completing the training
21 and the trainees will be placed in internships
22 during July. By the fall, we expect to place
23 them in permanent positions. Also, many
24 opportunities are now presenting themselves in
25 the form of new services and for profit
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2 business opportunities which would employ
3 additional personnel from our communities.
4 Lastly, Citicorp has allowed us to
5 sustain our efforts during our difficult cash
6 flow times by extending to us an important
7 credit line. Given the uncertainty of
8 contracts for nonprofits, you can imagine the
9 value of the credit line. Moreover, there is a
10 ripple effect one must consider; that is, the
11 credit line allows us to sustain the integrity
12 of our commitment while fulfilling our mandate
13 of service during difficult times.
14 Citicorp is owed a debt of gratitude
15 for the forward thinking, and we have been
16 assured that their commitment to our
17 communities will continue after the acquisition
18 of Citicorp by the Travelers Group.
19 MR. LONEY: Thank you, Mr. Torres.
20 Do we have any questions for the
21 group? If not, I will thank you. You are a
22 very impressive group of folks doing some
23 really nice things. So thank you very much for
24 coming to testify.
25 Panel Eleven is Claudino Otenez,
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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,
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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.
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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
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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.
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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
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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.
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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
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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
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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
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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
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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.
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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.
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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
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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
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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.
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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.
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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
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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.
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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
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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.
22 Next panel will be panel 12, Patricia
23 O'Neill Galin, Raymond C. Bowen, Amalia
24 Betanzos, Sue Bastian and Peter Barnett.
25 Ms. Galin, you're first on my list.
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2 MS. GALIN: Ladies and gentlemen,
3 thank you for the opportunity to speak to you
4 regarding the acquisition of Citibank. My name
5 is Patricia O'Neil Galin, and I am the
6 executive director of the These Our Treasures
7 in the Bronx. We are a not-for-profit agency
8 serving youngsters and families for the past
9 twenty-five years.
10 Twenty-five years ago there were many
11 banks to choose from regarding loans, credit
12 lines, et cetera. Citibank was the only
13 banking institution who considered loans and
14 the credit line for this Bronx organization.
15 Citibank continues twenty-five years
16 later to be a major influence in the Bronx
17 community, and more particularly has helped
18 These Our Treasures with our vision and mission
19 to provide services to young disabled children
20 and their families.
21 As we have grown since 1973 with
22 children and families and a budget of $288,000
23 to a budget of over three and a half million
24 dollars, Citibank has influenced our growth and
25 has truly been a friend to TOTS.
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2 Thank you.
3 MR. LONEY: Mr. Bowen.
4 MR. BOWEN: Good afternoon, members
5 of the Federal Reserve Board, ladies and
6 gentlemen. My name is Raymond C. Bowen,
7 president of the LaGuardia Community College of
8 the City University Of New York. I am here
9 today to speak on behalf of LaGuardia and its
10 long-standing relationship with Citibank.
11 LaGuardia Community College, the
12 youngest institution in the City University,
13 enrolls about 33,000 students, 11,000 in the
14 degree programs and 22,000 in noncredit
15 programs.
16 Our student body is comprised of
17 individuals who are 37 percent Hispanic, 20
18 percent black, 15 percent white, 13 percent
19 Asian, 2 percent native American and 4 percent
20 other, making us one of the most diverse higher
21 educational institutions in America.
22 Also noteworthy is the fact that 66
23 percent of our students are women. About 75
24 percent of our new students reported family
25 incomes under $20,000. Most are on their own
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2 and in need of work in order to support
3 themselves. Many of our students work while
4 they are enrolled at LaGuardia, 46 percent
5 part-time and 54 percent full-time.
6 We have the fifth largest foreign
7 student enrollment of any Community College in
8 the country. Our students are drawn from over
9 135 countries speak 85 languages other than
10 English. For several consecutive years
11 LaGuardia Community College has ranked among
12 the top community colleges in the country in
13 graduating minority students.
14 In 1977 LaGuardia ranked fifth among
15 the nations two-year institutions in awarding
16 degrees to minorities. Priority initiatives
17 for the college include cultural pluralism,
18 economic development, and international
19 education.
20 LaGuardia has also been recognized by
21 the US Department of Education as a model
22 Community College both nationally and
23 internationally. As a collaborative
24 partnership between the college and the New
25 York City Board of Education LaGuardia hosts
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2 three model high schools on its campus; the
3 Middle College High School creates a unique
4 educational opportunity for students who are at
5 risk of dropping out; the International High
6 School serves recent immigrants from numerous
7 countries by offering a comprehensive secondary
8 curriculum while developing students oral and
9 written English language competence, and the
10 Robert F. Wagner Institute for Arts and
11 Technology, a New Visions school that takes the
12 standard core curriculum and melds art and
13 technology into every phase.
14 From its inception LaGuardia
15 Community College has been a cooperative
16 education institution based on the premise that
17 learning should take place in a variety of
18 settings both inside and outside the classroom.
19 The cooperative program is designed
20 to help students determine their individual
21 goals, explore various career options, apply
22 classroom learning to real work situations, and
23 strengthen interpersonal and technical skills.
24 LaGuardia Community College has the
25 largest cooperative education program of all
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2 two-year institutions. This collaboration will
3 have a dynamic impact on the lives of the
4 students and families that LaGuardia serves and
5 we look forward to many new positive ventures.
6 Needless to say that we at the
7 college are extremely excited to learn that
8 Citicorp and the Travelers Group have made a
9 ten year commitment of $115 billion to lending
10 and investing in low and moderate income
11 communities and small businesses.
12 In addition to providing special
13 pricing to low and moderate income consumers
14 interested in commercial and homeowner
15 insurance coverage, I was particularly
16 interested in the financial and technological
17 literacy program proposed in this merger.
18 As an urban educator I also agree
19 along with both Citicorp and Travelers Group,
20 that consumers need financial and technical
21 skills, as well as access to superior products
22 and services, if they are to achieve financial
23 well being.
24 The opportunity for educators to join
25 an advisory panel on financial literacy who
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2 will assist the bank in understanding the
3 problems of this diverse population, and to
4 ultimately develop effective solutions to meet
5 their needs is critical and warranted endeavor.
6 Citibank is no stranger to LaGuardia
7 Community College. Whether supporting programs
8 for our older adults on wellness and consumer
9 education, or providing funding for our college
10 for childrens programs, over the years,
11 Citibank grants have helped all segments of our
12 population.
13 In our high schools, Citibank has
14 been a responsive partner in addressing the
15 need for SAT test preparation, in preparing our
16 students to enter the world of finance, and in
17 understanding the responsibilities associated
18 with savings, credit and money management.
19 Citibank has provided our students with hands
20 on exposure to financial curricula that the
21 college was unable to offer.
22 They have also supported many
23 cultural events through our Academic Excellence
24 Program. Citibank has also been involved in
25 our Talent Search Program which is a
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2 comprehensive support service program designed
3 to facilitate access to post-secondary
4 institutions for low income and first
5 generation college students from Western
6 Queens.
7 I am proud to say that during this
8 academic year nineteen LaGuardia students have
9 been hired as interns at various Citibank
10 locations, including Court Square, Wall Street
11 and Citicorp Center, and five LaGuardia
12 graduates have accepted permanent employment.
13 Three students have been hired as
14 interns in a partnership between Citibank and
15 Cushman & Wakefield for this summer. In
16 addition, a permanent annual donation of $3,000
17 has been given to LaGuardia's Partners in
18 Cooperative Education for scholarships.
19 Citibank administrators and staff
20 have worked hand in hand with LaGuardia
21 Community College over the past 25 years as a
22 mentor, sponsor and a friend.
23 On behalf of LaGuardia Community
24 College, its faculty, staff and students and
25 alumni, I am proud to support the merger of
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2 Citibank and Travelers Group and look forward
3 to benefits of this merger which will bring to
4 many of our students and various programs who
5 depend upon us and Citibank to help them to
6 fulfill their dreams.
7 Thank you for this opportunity to
8 speak on behalf of LaGuardia Community College
9 for the proposed merger between Citibank and
10 the Travelers Group.
11 MR. LONEY: Thank you, Mr. Bowen.
12 Ms. Betanzos.
13 MS. BETANZOS: Thank you. Good
14 afternoon. My name is Amalia Betanzos, and I
15 offer this testimony in support of the proposed
16 acquisition by Travelers Group with Citicorp.
17 I am the president and CEO of the Wildcat
18 Service Corporation, a not-for-profit human
19 service agency which has provided training and
20 employment opportunities to more than 70,000
21 New Yorkers since 1972.
22 Our agency assists the most
23 disadvantaged and underserved populations in
24 the city, including ex-offenders, ex-addicts,
25 long-term welfare recipients and at-risk youth.
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2 Travelers group's illustrious history
3 has been punctuated by providing continuing and
4 generous support to a growing number of diverse
5 communities and their residents throughout the
6 country. Travelers' commitment to increasing
7 the capacity and well being of the
8 disadvantaged and its commitment to community
9 is unsurpassed.
10 This commitment permeates throughout
11 the Travelers organization's staff and its
12 subsidiaries. Our own experience at Wildcat is
13 demonstrative. This year, Salomon Smith
14 Barney's MIS staff contributed furniture and
15 computer equipment and volunteered hundreds of
16 hours of time to help Wildcat fill the computer
17 training lab at a shelter for battered women on
18 the lower east side of Manhattan.
19 This one of a kind effort has become
20 a model for enabling shelter-bound residents to
21 receive much needed job skill training without
22 the cost or the risk of traveling throughout
23 the city to attend school, and serves as an
24 example of what private industry can do to help
25 those with multiple barriers to employment.
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2 In addition, three years ago, two
3 years prior to the enactment of the historic
4 new federal welfare reform legislation, Smith
5 Barney, now Salomon Smith Barney a Travelers'
6 subsidiary pioneered with Wildcat in an
7 innovative training and employment program for
8 single mothers receiving welfare.
9 Approximately one year ago Travelers
10 lent its full support to begin that program
11 with two other subsidiaries, Commercial Credit
12 Company in Baltimore and Primerica Financial
13 Services in Atlanta, Georgia. These welfare
14 women after six months training, three months
15 with Wildcat and three months of internship
16 with Travelers Smith Barney, get jobs that
17 average $24,000. It really is wonderful to
18 contemplate that these women who were on
19 welfare and had no hope of getting off welfare
20 after one year now own Travelers stock in
21 addition.
22 Despite these accomplishments,
23 Travelers was not content to see the program
24 nourish only with within its own corporate
25 sphere, and so the senior management has
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2 recently reached out to sister companies and
3 competitors in the financial services industry,
4 and has brought five additional Wall Street
5 giants together to develop similar programs
6 with Wildcat. This is as unique and unselfish
7 and undertaking as I've seen in my thirty years
8 in public office and private enterprise.
9 Travelers has demonstrated time and
10 time again as it expands, so do the benefits
11 and opportunities that accrue to every member
12 of the community in which it develops roots,
13 and in particular to the most disadvantaged and
14 marginalized youth and adult residents of these
15 communities.
16 I am confident that this merger with
17 Citi will bring the strength of Travelers and
18 the strength of Citicorp together. Citicorp
19 also has had a wonderful record of dealing with
20 nonprofit organizations and helping to employ
21 welfare recipients in their banks, and we are
22 currently working on a program that started way
23 before merger talk, to make sure that more
24 Wildcatters who will be fully trained by
25 Citibank and by Wildcat, will have the
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2 opportunity to really remake their lives.
3 I'm certain that consistent with both
4 their long history of expanding assistance to
5 the needy as they expand their only commercial
6 activities, the acquisition of Citicorp by
7 Travelers will provide a new generation of
8 support and an extended commitment to assist
9 those most in need and, therefore, I urge the
10 acquisition be approved.
11 Thank you.
12 MR. LONEY: Thank you. Ms. Bastian.
13 MS. BASTIAN: Yes. Good afternoon
14 Federal Reserve Board members, ladies and
15 gentlemen.
16 I am here as the president of
17 Teaching Matters Inc. to describe our
18 relationship with the Citicorp Foundation.
19 Teaching Matters Inc., CMI is a New York City
20 based nonprofit organization founded four years
21 ago by Elizabeth Ruletin.
22 Our mission is to help teachers in
23 the New York City public schools learn to use
24 the technology that is everywhere in a creative
25 and effective way to strengthen student
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2 performance.
3 To date we've served over 350 schools
4 and this year we're working in 190 schools. We
5 send approximately 35 to 40 teacher trainers in
6 technology into the five boroughs everyday.
7 Our recent accomplishments were to
8 work with the Board of Ed to write their
9 strategic development plan for technology.
10 We're funded, proud to say, by Annenberg and
11 J.P. Morgan, and Seagram's, and we are
12 partnership in the Department of Education
13 challenge grant.
14 We have at TMI a three year history
15 of collaboration with Citibank which began in
16 1995 with their support of $140,000 for the
17 first CitiTech series gateway to technology
18 planning for high school educators. We felt
19 that the principals of the schools were being
20 left out of the education everyone needs about
21 what to do with this puzzling phenomenon called
22 technology, telecommunications and the
23 computer.
24 The series provided a leadership
25 institute for staff and for leaders in the
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2 metropolitan area, including Westchester and
3 Long Island.
4 We followed that kind of initial
5 exposure up with very regular visits to those
6 schools. Because of the attendees enthusiasm
7 for the quality of training they received,
8 Citibank funded us for a second year. The
9 second series reached 30 high schools, the
10 first one I believe approximately 35.
11 The bank's commitment again was
12 approximately $140,000. Last year we were
13 pleased to receive a third grant from Citibank
14 foundation for new thinking, new teaching,
15 technology across the curriculum in order to
16 bring the curriculum into subject matter area,
17 and not have technology be an end in itself.
18 We target the mayor's project smart
19 principals this year and the teachers. We're
20 working with 110 teachers in two districts.
21 Through their banking on education programs
22 Citibank's contribution has been significant.
23 The Foundation's ongoing commitment
24 is evident time and time again to the public
25 school. Their contributions have been careful,
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2 informed and comprehensive. They focused both
3 on the principal and the classroom teacher many
4 of whom are in underserved neighborhoods. It
5 is our belief that the Citicorp Foundation has
6 helped establish the standard of what good
7 corporate philanthropy is all about.
8 Thank you.
9 MR. LONEY: Thank you, Ms. Bastian.
10 Mr. Barnett.
11 MR. BARNETT: That was the cry of the
12 poor. A lot of people don't want to hear it.
13 A lot of people can't hear it, and Glenn, Scott
14 and James and Barbara, I want to tell you that
15 Citibank is one of the few places that hears
16 the cry of the poor and the needy and does
17 something about it.
18 I can remember a very poor community
19 out on Long Island called Wyandanch and on that
20 community there are many poor and homeless
21 families. On Long Island if you're a mother
22 with three children you need to have about
23 $30,000 a year to come in to survive on Long
24 Island to have a decent house, food and a junk
25 car to get around in.
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2 What Citibank does is care about
3 other people. I really don't know the
4 corporation, but I know what Citibank has in
5 one person.
6 I've been working with a woman named
7 Michelle Debenedetto who is an employee of
8 Citibank and her main job is to look around at
9 the communities of Long Island and say, what is
10 needed? What can the not-for-profit groups do
11 to help the poor and needy of Long Island? And
12 she does it.
13 She is a mother with a great heart
14 and she represents what I feel is what's needed
15 in America today with corporations, to help
16 those who are in need, and Citibank is one of
17 those groups that does that.
18 (Continued on next page)
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21
22
23
24
25
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2 MR. BARNETT: Wynandach Homes &
3 Properties is my nonprofit that builds and
4 renovates houses for homeless women. We take
5 them out of the shelter, we take them out of
6 their cars, we take them out of tents that they
7 are living in and we give them a clean, decent
8 place to live. Then we help them get educated.
9 We help them get into GED programs. We help
10 them get their AA degree at Suffolk Community
11 College. We help them get a decent job where
12 they are on the road to making that $30,000.
13 Citibank over ten years ago -- when I
14 was just starting, just starting to get some
15 money to do funding -- gave us the money to
16 hire a summer intern, a woman that later we
17 were able to hire full time; again, with help
18 from Citibank, to work with these mothers to
19 bring them from welfare to being
20 self-sufficient women taking care of their
21 families, with their degrees, getting a chance
22 to make their AA degree.
23 One of the things I find that with
24 these mergers -- and we are not going to stop
25 it; I was reading today another AT&T and
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2 Cablevision merging -- they are happening. It
3 is the way companies are stabilizing these
4 days. And what I am hoping to see with
5 Citibank's merger is that they are going to
6 create a very strong bank and they are going to
7 create a very strong corporation that is going
8 to have a heart, it is going to have the heart
9 of Michelle DiBenedetto, because she's there
10 and she's going to tell the banks and tell
11 Travelers, you've got to stay committed to
12 helping the poor and the needy. I think that
13 is what is going to happen.
14 The Federal Reserve Bank two years
15 ago started a program called LIHPPI. It was
16 called the Long Island Home Purchasing Process
17 Initiative. They helped bring together all
18 sorts of banks and nonprofits on Long Island,
19 saying how can we help people in minority
20 communities, people who are just making that
21 $30,000 buy a house on Long Island. Citibank
22 through its funding and its creative work with
23 Michelle and other people that she brought in
24 from Citibank created pamphlets, that we are
25 getting into every library, every school on
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2 Long Island, "Breaking the Barriers to Home
3 Ownership, Guides to Purchasing a Home." These
4 are things that are needed. These were worked
5 out with not-for-profit groups like myself to
6 help them make a difference.
7 One of the things I find is that many
8 corporations need to hear the poor. They need
9 to hear the voice of the needy. And one of the
10 things that Citibank will do is help bring that
11 about. As they grow and develop, I have no
12 doubt that they are going to help people hear
13 that voice, people to care about the needy.
14 There was a speech given by Carl
15 Messenger to the United Nations in 1981 -- I
16 will just end with this -- where he spoke to
17 corporate America and said: In corporate
18 America, as you prosper, you can't just get up
19 there all by yourself, but you have to help
20 those rise with you, and we have to learn that
21 we all have to rise together. If one segment
22 of our society gets up there all by itself, it
23 will tackle. It can't handle the attitude.
24 You have to bring everybody else up with you.
25 Carl Messenger said it this way, and
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2 I believe that Citicorp believes in this:
3 People are unreasonable, illogical,
4 self-centered; love them anyway. If you do
5 good, people will accuse you of selfish
6 ulterior motives; do good anyway. If you are
7 successful, you will win false friends and true
8 enemies; try to be successful anyway. The good
9 you do today will be forgotten tomorrow; do it
10 anyway. Honesty and frankness make you
11 vulnerable; be honest and frank anyway. People
12 favor underdogs, but I notice they follow the
13 top dogs; fight for some underdogs anyway.
14 What you spend years building may be destroyed
15 overnight; build anyway. People really need
16 help, but they may attack you if you help them;
17 try to help people anyway. Give the world the
18 best you have and you'll get kicked in the
19 teeth; give the world the best you have anyway.
20 Thank you.
21 MR. LONEY: Thank you. I like that.
22 Any questions from the panel? If
23 not, then I will thank you for coming and
24 sharing your experiences with us.
25 We are going to take a 15-minute
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2 break and be back at 4:25.
3 (Recess)
4 MR. LONEY: Before we begin, we are
5 trying to organize the open microphone
6 testimony for this afternoon, and we have a
7 list of people who have signed up, and I would
8 like to find out if they are, in fact, here.
9 If you hear your name called, would
10 you go out to the registration desk and make
11 sure that they know you are in fact here and
12 still want to talk.
13 Miguel Miranda, Hector Ramirez,
14 Constantina Jones, Lionell Ouellette, Lloyd
15 Bethune. If you will go out and make yourself
16 known to the folks at the registration desk, I
17 would appreciate it.
18 The next panel is Panel Thirteen. I
19 understand only one person is here representing
20 the East Fulton Street Group, and that is James
21 Daniel. Mr. Daniel, if you would come forward.
22 Are there two people? I guess
23 Reverend Dillon is here and James Daniel, who
24 is the son of Reverend Daniel, who was
25 originally scheduled to testify.
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2 Since you are on my list first,
3 Reverend Dillon, maybe you should start first,
4 if you are ready to go.
5 One thing, if you will notice we have
6 a timekeeper here. We are giving everybody
7 five minutes. We give you a two-minute warning
8 and then a final times-up notice.
9 REVEREND DILLON: I thank you very
10 much, and I am certainly grateful for the time
11 to share this testimony, this information. I
12 am Reverend Dennis Dillon, the publisher of the
13 New York Christian Times. We publish a
14 newspaper that serves the black church
15 community here in the City of New York.
16 The reason for our participation in
17 support of the 21st Century Partnership is our
18 information that we have developed over the
19 years relative to the treatment of the black
20 community by Citibank.
21 I would like to draw our attention to
22 a report that came out in the New York Daily
23 News the 20th of April, 1997. The report
24 states that despite the fact that Citibank made
25 quite some loans to the community here in New
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2 York, that only one out of every three blacks
3 were considered for those loans.
4 There is a report also that I would
5 like to bring to our attention, and that is a
6 report by Congressman Charles Schumer, and the
7 report states that for the first quarter of
8 1997, Citibank received a total of 8,000
9 applications from the white community compared
10 with 2,000 applications from the Hispanic
11 community and only 665 applications from the
12 black community.
13 It concerns us greatly that here we
14 are in a city we call New York where the black
15 population is a fair one-third of the city, the
16 black population deposits $13 billion in
17 Citibank every year, and Citibank is only able
18 to walk away with 665 applicants for mortgages
19 in our community.
20 We've been pretty focused on looking
21 at how this impacts upon the economics of our
22 community, and we have discovered that the fact
23 that, with the HMDA data, the fact that this
24 information is made public, the numbers are so
25 pitiful relative to mortgages we cannot begin
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2 to imagine what the numbers look like relative
3 to Citibank making loans to black businesses
4 that are looking to make progress in our
5 community.
6 The end result is that the United
7 States Department of Commerce came up with a
8 report and study that shows that in 1996,
9 despite the fact that we have a total of almost
10 40,000 black-owned businesses in the City of
11 New York, the average black-owned business in
12 this city does less than $43 million a year in
13 gross business.
14 I think we are at a critical point as
15 we look to the 21st century, and banks that are
16 so serious about investing in the global
17 market, such as a Citibank, need to seriously
18 look at where their deposit base is coming from
19 and need to seriously deal with how we reinvest
20 in our community in a real sense.
21 In conclusion, it appears to me that
22 there is a facade, Citibank is presenting a
23 picture, as they have worked hard last year,
24 knowing of the merger, to present a good
25 picture, to present a positive picture to the
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2 regulators. But the end result, gentlemen,
3 ladies, is that we have a bank that is showing
4 a picture that is not true because they are not
5 truly serving the black community, and I'm
6 concerned that our deposits are ending up in
7 Asia, across North America, and elsewhere, and
8 it is not ending up in Harlem, Bedford
9 Stuyvesant, and in our communities across this
10 city.
11 I thank you very much for your time,
12 and we shall leave you some documents.
13 MR. LONEY: Thank you Reverend
14 Dillon.
15 Mr. Daniel.
16 MR. DANIEL: Unfortunately, because
17 of a conference, my father is not able to make
18 it, so I will be delivering his statement on
19 behalf of him and the East Fulton Street Group
20 21st Century Partnership.
21 First let me state that the biggest
22 merger in American history should be closely
23 scrutinized before being passed.
24 We of the 21st Century Partnership
25 have had a relationship with Citibank for over
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2 ten years and believe that they mean well in
3 their efforts to meet the credit needs of their
4 service area; however, meaning well and doing
5 well are distinctly different. The bank's CRA
6 ratings need to improve.
7 Because the merging financial
8 institutions have not at this point given any
9 indication of how this proposed merger will
10 serve the public interest and, more
11 particularly, low- to moderate-income
12 communities, the investment alliance believes
13 consideration for approving the merger should
14 be considered only based upon a definitive
15 community reinvestment plan with a definitive
16 action plan and a time line created in
17 consultation with community organizations and
18 elected officials from the impacted
19 communities.
20 We call upon the government bank
21 regulators, members of the United States
22 Congress and Senate to look more closely at
23 this merger.
24 This merger at face value does very
25 little to expand credit and other needed
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2 financial services within inner city
3 communities. Right now it only increases the
4 value of Citicorp and Travelers stock.
5 It is important to note that Citicorp
6 has a less than exemplary CRA record among the
7 major banks. Salomon Brothers and Smith Barney
8 have never developed any community investment
9 plans, and Travelers Insurance is a redliner
10 with little presence in low-income communities.
11 One can only hope that if this merger
12 goes through that before it does there will
13 have been a plan developed, in cooperation with
14 the broader community, that succinctly details
15 how the bank will do better than it presently
16 does.
17 Our concerns with these findings and
18 Citibank's lack of substantiative involvement
19 in support of community programs lead us to
20 believe that if government regulators were to
21 earnestly assess Citibank's reinvestment record
22 they would rate them with a need to improve and
23 stipulate such that before any merger is
24 approved their rating must substantially
25 increase.
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2 I at this time would like to raise
3 another point. This country already has enough
4 crime, and in a number of circles it is
5 believed that this merger is illegal. The
6 illegality stems from a notion that Alan
7 Greenspan, the Federal Reserve chairman, in a
8 closed-door weekend meeting with Citicorp,
9 tentatively agreed to give Citicorp an
10 exemption from the law without approval from
11 Congress. One can only hope and trust that
12 such allegations are just that, allegations.
13 When we hear that the chairman of
14 Travelers made over $208 million on the day the
15 merger was announced, just from the
16 announcement of the merger, and that this
17 amount is more than his company contributed to
18 minorities over its entire history, we hope
19 that such enormous amounts of money can somehow
20 find their way back into areas where poverty
21 still reigns.
22 These are the issues as we now see
23 them. Alan Greenspan and/or Secretary of the
24 Treasury Robert Rubin can delay or stop this
25 merger if they want, and they should if as is
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2 alleged under present law the merger is illegal
3 and if we accept that as a fact that something
4 that starts out illegally is more than likely
5 to end up the same.
6 Last, consider the following: If the
7 merger deal is successful, Merrill Lynch and
8 Wells Fargo would most likely disappear as
9 separate entities. Chase Manhattan Bank could
10 consider purchasing Merrill Lynch, and even
11 Bank of America could become a thing of the
12 past if this proposed merger is approved, and
13 after that, why not Fleet Bank, American
14 Express or Allstate?
15 We have laws against monopolies and
16 with this merger leading the way, can America
17 afford a monopolized banking industry under the
18 guise of more efficient and low-cost financial
19 services? If the answer is yes, what
20 assurances will low-income communities have
21 that they will be better served because of
22 these mergers, and will any of the alleged cost
23 savings reach undeserved communities through
24 greater access to credit?
25 While we would like to believe this
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2 will happen, without a definitive plan as to
3 how, we believe that any approval of this
4 merger should be associated with a definitive
5 plan worked out in consultation with the
6 effective communities and in advance of any
7 approval of the applications.
8 While the 21st Century Partnership
9 has enjoyed the support of Citibank and it
10 would welcome the expansion of our
11 relationship, we call upon them to act in a
12 more responsible and accountable manner than
13 what is exhibited in their present efforts
14 concerning this merger and, more particularly,
15 to commit to getting an outstanding CRA rating.
16 There must be a direct correlation
17 between what Citibank and Travelers do and put
18 on paper and what they invest in communities
19 through lending and philanthropy. Presently we
20 don't see that happening with this merger.
21 In closing, we choose to believe that
22 Citibank and Travelers want to do the right
23 thing and if the merger's approved as is or in
24 a modified state, we will work with them, to
25 the degree it becomes possible, to assure that
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2 the delivery of quality financial products and
3 financial services to the underbanked and all
4 people in general is a reality. We call upon
5 the bank regulators and elected representatives
6 to help them do just that. For too much is at
7 risk to do anything else.
8 Thank you very much. Signed, the
9 21st Century Partnership.
10 MR. LONEY: Thank you very much,
11 Mr. Daniel.
12 Are there any questions? If not, I
13 will thank you very much for coming.
14 We have worked Panel Fourteen just a
15 bit to accommodate some people who were
16 originally scheduled to speak tomorrow and for
17 other purposes.
18 As presently constituted, Panel
19 Fourteen will be Jane Perkinson, David Wolin,
20 Vicki Wacksman, Roslyn Goldmacher, Naomi Brown
21 and Monique Spike.
22 Thank you all. Can we begin with
23 Ms. Perkinson, please.
24 MS. PERKINSON: Good afternoon. My
25 name is Jane Perkinson. I am chair of
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2 Permanent Housing for SHORE, Inc., an interface
3 nonprofit housing organization in the White
4 Plains, Central Westchester area, with its
5 membership based in more than 40 local churches
6 and temples, as well as business in civic
7 groups and individual members. The purpose of
8 our organization is to help people in the
9 community with housing needs.
10 SHORE started in 1985 as a
11 spontaneous effort among several downtown White
12 Plains churches and temples to provide
13 short-term overnight shelter to homeless men.
14 This has developed into a 24-hour-a-day
15 fully-staffed men's shelter that provides
16 counseling for substance abuse, mental health,
17 assistance in finding housing, jobs, and job
18 training, and has helped more than 500 men
19 return to normal, productive life in the
20 community.
21 Since 1990, SHORE has turned its
22 resources to developing apartment units as
23 permanent affordable housing for families who
24 need homes. Using New York State grants and
25 privately-raised funds and volunteer labor and
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2 furniture donations, we have acquired and
3 renovated two vacant two-family houses creating
4 rental apartments for deserving families who
5 until that point had been homeless.
6 These families, as paying tenants,
7 have now stabilized their lives and those of
8 their children, and the renovated housing has
9 also enhanced two downtown neighborhoods of
10 White Plains.
11 We will shortly begin construction on
12 fourteen units of affordable mixed home
13 ownership and rental housing on two sites in
14 White Plains; one of those sites currently
15 owned by the city.
16 Seven two-family townhomes will be
17 marketed at affordable prices to qualified
18 first-time homeowners of modest income. Each
19 of these homeowners will live in one of the
20 units and rent the other to a selected family
21 coming from emergency housing. Buyers will be
22 given mortgage counseling and assistance in
23 obtaining favorable terms. Income from the
24 rental unit will help them meet the carrying
25 costs of home ownership.
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2 We believe the community will benefit
3 through the improvement of two marginal
4 neighborhoods, with a restored tax base on two
5 presently very deteriorated properties and
6 through an increase in the amount of badly
7 needed affordable rental and home ownership
8 housing available for its citizens.
9 This development is supported by a
10 composite of funding sources, including two New
11 York State agencies, a HUD grant administered
12 through Westchester County, the Federal Home
13 Loan Bank, and also a package of low- or
14 no-interest bridge loans from SHORE member
15 houses of worship and other nonprofit lenders.
16 Citibank, as a local bank in the
17 community, has shown us its recognition that it
18 has a critically important role to play in the
19 success of this housing development. The
20 first-time home buyers will be in need of
21 mortgages and Citibank will make end loans
22 available to them so that they can take
23 advantage of this rare opportunity to become
24 property owners.
25 A Citibank officer from one of the
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2 local branch banks serves on SHORE's board of
3 directors. She is rooted in the community
4 herself and she works actively to be the
5 all-important link between the needs SHORE
6 seeks to fulfill and the resources that
7 Citibank can provide. Citibank has also made
8 several grants to SHORE in the amount of $1,000
9 to $2,000 which enable us to underwrite ongoing
10 operations in our fund-raising and community
11 outreach efforts.
12 We are hopeful that all future
13 developments of Citibank will enhance its
14 ability to be present in the community, to know
15 the community and be responsive to its needs,
16 and we hope that it plays this important role
17 not only with SHORE but with other partners,
18 other organizations, in collaborative projects
19 that can give all of us a stake in a better
20 life for the community as a whole.
21 I thank you.
22 MR. LONEY: Thank you.
23 Mr. Wolin.
24 MR. WOLIN: Good afternoon, ladies
25 and gentlemen. My name is David Wolin. I am a
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2 partner in the law firm of Willkie Farr &
3 Gallagher. I am testifying today on behalf of
4 our client Habitat for Humanity International,
5 which we represent on a pro bono basis.
6 My purpose in testifying today is to
7 describe Citibank's involvement in Habitat's
8 innovative securitization program which raises
9 millions of dollars to build low-income houses,
10 and to describe the Travelers Group program for
11 providing low-cost homeowner's income to
12 Habitat families.
13 I will give a very brief background
14 of the program first and of Habitat.
15 Habitat was founded in 1976 to build
16 and sell simple, decent homes at no profit to
17 low-income families who are not eligible for
18 conventional financing.
19 In the United States, Habitat is run
20 by over 1,400 not-for-profit affiliates in
21 local communities. In 1997, Habitat affiliates
22 built, repaired and renovated over 3,700
23 houses. Typically family income for a Habitat
24 family of four ranges from just under $11,000
25 to under $22,000. Those families finance their
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2 homes with a no-interest mortgage to Habitat.
3 The typical mortgage is for 20 years and the
4 average combined monthly payment, including
5 taxes and insurance, is $290.
6 However, although the homes are
7 generally built by volunteers, the affiliates
8 are limited by a lack of funds in the number of
9 homes they can build.
10 Citicorp has invested in Habitat's
11 securitization program in providing volunteers
12 to work on houses. Habitat's securitization
13 program converts Habitat's portfolio of
14 mortgages into cash to finance additional
15 housing. Its affiliates hold millions of
16 dollars in zero interest mortgages which
17 previously were illiquid assets. With
18 approximately 18,000 mortgages held in the
19 United States, the total potential pool of
20 Habitat mortgages is approximately $500
21 million.
22 Habitat's goal is to raise $100
23 million for its affiliates through this program
24 over the next five years. To date, 25
25 affiliates have raised approximately $5 million
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2 to build new homes. Habitat is expecting to
3 make its next offering of bonds in the fourth
4 quarter of this year. The bonds pay interest
5 at a below market rate to its investors of
6 between 1 and 5 percent.
7 In the past year, Citibank has
8 invested $400,000 in low-interest bonds that
9 were secured by mortgages issued by the
10 Rochester, New York and Washington, D.C.
11 affiliates. By providing the necessary
12 liquidity for these affiliates, Citibank has
13 allowed their programs to expand.
14 For example, for years the Rochester
15 affiliate had been trying to establish a
16 program to rehabilitate homes in its
17 communities, in addition to its program of
18 building new homes. However, it has been
19 unable to raise funds for this rehabilitation
20 program. Using Citibank's investment in the
21 Habitat bonds, the Rochester affiliate has been
22 able to institute its long-awaited
23 rehabilitation program. In addition, Citibank
24 has provided direct grants to the Rochester
25 affiliate and also permits its employees to
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2 take time off from work to work on Habitat
3 homes.
4 Citibank has committed to Habitat
5 that it will continue to invest in the bonds
6 which are secured by mortgages held by
7 affiliates in Citibank's service areas.
8 Through Citibank's commitment to the
9 securitization program, affiliates in Citibank
10 service areas have the needed liquidity which
11 allow them to build more homes with their
12 low-income families.
13 In addition, Habitat has worked with
14 Travelers since 1993 to provide low-cost
15 homeowner's insurance to its families.
16 Travelers currently insures approximately
17 one-third of all Habitat homeowner's in the
18 United States.
19 Travelers' program has helped to
20 alleviate the difficult problem of Habitat
21 families obtaining homeowner's insurance.
22 Because Habitat homes are typically in
23 low-income neighborhoods and have low dollar
24 values, many insurance carriers will not insure
25 them. Some affiliates have in the past been
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2 unable to transfer ownership of homes because
3 the family could not obtain insurance. Even
4 when coverage was available, the policies only
5 provide limited coverage, and the family had to
6 pay substantially higher premiums than would be
7 paid by homeowner's in more affluent
8 communities.
9 Travelers' policies are issued to
10 homeowner's without any credit checks or
11 limitations on home value. Travelers' coverage
12 is even available to Habitat families in state
13 where because of weather-related problems,
14 insurance is difficult to obtain. Under its
15 program, Travelers charges Habitat homeowner's
16 its lowest rate for homes situated in the
17 community.
18 The policy that Travelers provides is
19 for full replacement costs for the home and
20 property, and $100,000 in liability coverage.
21 The typical homeowner pays between $150 and
22 $250 per year for this coverage. Because the
23 average Habitat homeowner earns between 25
24 percent and 50 percent of the area median
25 income, the low premium can be the difference
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2 between being able to afford a home and not.
3 In conclusion, I want to emphasize
4 that Habitat has been fortunate to be working
5 with Citibank and Travelers in the past and
6 looks forward to working with them in the
7 future.
8 Thank you.
9 MR. LONEY: Thank you, Mr. Wolin.
10 Ms. Goldmacher.
11 MS. GOLDMACHER: I am fine right now.
12 I apologize for the interruption.
13 Thank you and good afternoon, ladies
14 and gentlemen, and thank you for the
15 opportunity to testify before you today on the
16 proposed acquisition of Citicorp by the
17 Travelers Group, Inc. I have prepared a more
18 detailed written statement which I have
19 submitted for your consideration.
20 My name is Roslyn Goldmacher. I am
21 the executive director of the Long Island
22 Development Corporation, which is a
23 not-for-profit economic development membership
24 organization which provides loans and technical
25 assistance to small businesses in Nassau and
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2 Suffolk counties in New York.
3 Long Island Development Corporation
4 has made over 1,000 loans to small businesses
5 totalling more than $300 million and has
6 assisted over 1,800 very small Long Island
7 companies to obtain $180 million in Department
8 of Defense contracts.
9 LIDC is the U.S. Small Business
10 Administration's 504 Certified Development
11 Company for Long Island. It administers a
12 variety of other government-related finance
13 programs and it operates the Department of
14 Defense Procurement Technical Assistance Center
15 for Long Island.
16 Long Island Development has worked
17 extensively with Citibank. Citibank is a
18 member of our organization and is represented
19 on our board and committees. Citibank also
20 participated in the SBA 504 program as a first
21 mortgage lender.
22 Citibank provides a small grant to
23 Long Island Development Corporation to help
24 conduct its procurement technical assistance
25 program and it works with us in a local
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2 initiative which provides technical assistance
3 to community groups to help them redevelop
4 blighted areas.
5 Citibank participates in a regional
6 capital access loan fund operated by Long
7 Island Development, and I am thrilled to say
8 Citibank has recently committed to invest in
9 two new small business investment companies
10 providing debenture capital to small business
11 for economic development in Long Island, New
12 York, New Jersey, Puerto Rico and Nevada.
13 Long Island Development Corporation
14 supports the proposed acquisition. It will
15 increase the resources devoted by Citibank to
16 economic and community development on Long
17 Island. It will result in increased small
18 business lending under the SBA 504, SBA 7A and
19 conventional loan programs.
20 The acquisition will also bring
21 additional and innovative finance products to
22 the table for small business. The resources of
23 the Travelers Group will bring needed insurance
24 products to the small business community,
25 including bonding, which is much needed for our
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2 small businesses seeking government and other
3 contracts.
4 The investment banking and other
5 finance divisions of Travelers will provide the
6 knowledge to create innovative financing
7 alternatives for small business such as
8 securitization of small business loans. The
9 acquisition will provide increased
10 accessibility for small business customers on
11 Long Island because they will be able to access
12 Citicorp services through their Travelers
13 insurance agents.
14 Finally, LIDC supports the proposal
15 because Citicorp is committed to creating an
16 Office of Financial Literacy as a result. This
17 office will increase small business awareness
18 of financing programs and resources such as
19 those offered by Long Island Development
20 Corporation.
21 For these reasons, Long Island
22 Development Corporation supports the proposed
23 acquisition of Citicorp by Travelers Group,
24 Inc.
25 Thank you for this opportunity.
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2 MR. LONEY: Thank you.
3 Ms. Wacksman.
4 MS. WACKSMAN: Thank you. My name is
5 M. Vicki Wacksman. I am the president and CEO
6 of the New York State Association of Black
7 Women Owned Enterprises, Inc. The Association
8 is known publicly as BWE. I will refer to our
9 organization during this testimony as BWE.
10 I am here this afternoon on behalf of
11 the board of directors and our 625 members to
12 share some of the experiences our organization
13 has had with Citibank over the years. It is
14 our hope that these experiences will assist
15 your deliberations related to the proposed
16 Travelers Group, Inc. acquisition of Citicorp.
17 Black Women Enterprises is a
18 nonprofit, statewide, 501(c)3 organization,
19 established in 1993 under the charity law of
20 New York State. We are based in Hempstead,
21 Long Island.
22 The 1991 Croson Report was the
23 catalyst for the founding of the organization.
24 The report studied the awarding of contracts to
25 women and minorities by New York State
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2 agencies. The report revealed that the
3 greatest disparity fell upon black women-owned
4 firms. To reverse this trend, a group of
5 progressive black women business owners
6 established BWE.
7 The mission of our organization is
8 simply to remove barriers that impede the
9 success of black women who desire to start or
10 expand a business. Our mission is achieved
11 through the delivery of a comprehensive Monday
12 to Friday, 10 to 6 p.m. counseling, technical
13 assistance and training service to BWE members.
14 The organization started in November 1993 with
15 25 members. Today, four-and-one-half years
16 later, we have 625 members.
17 We remain the only organization in
18 New York State to specifically target the
19 disparity issues affecting black women-owned
20 firms and black minority women-owned firms; the
21 state's largest group of minority women-owned
22 enterprises.
23 The chart below presents data
24 provided by the 1998 report by the National
25 Foundation of Women Business Owners. It
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2 describes the enormous gap that exists between
3 black women-owned enterprises and enterprises
4 owned by Caucasian, Hispanic and Asian
5 women-owned businesses.
6 I would like to note that all women
7 and minority enterprises fall at the bottom
8 rung in overall sales in our great state.
9 However, it is important to our mission to show
10 that the targeting of black women-owned firms
11 in economic development are not race-based but
12 need driven. Black women-owned firms average
13 $63,000 annually in sales, while the Hispanic,
14 Asian and Caucasian counterparts average from
15 $155,000 to $439,000 annually per business.
16 Since opening our doors for services
17 in January 1994, BWE has sponsored 84 workshops
18 in small business planning and management,
19 provided over 2,000 hours of individualized
20 technical assistance and business development
21 coaching, and in 1997 piloted a Corporate
22 Procurement and Technical Assistance Program.
23 This program makes a frontal attack
24 on the disparities we talked about earlier by
25 helping our members win corporate contracts.
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2 Our goal for Phase I of the program was
3 $700,000 in contract awards, and we achieved
4 $1,619,000.
5 We are finally getting a handle on
6 how to help small microbusinesses compete
7 effectively, and we hope to double and triple
8 these achievements in the coming year. The
9 goal is 2 million for 1998.
10 BWE's achievements would be far less
11 without the help and support from Citibank. In
12 establishing the organization, we broadly
13 reached out to government and the corporate
14 community to assist the funding and
15 implementation of our mission.
16 Citibank was among the first to
17 respond. To assist our outreach and start up
18 service delivery, Citibank donated $20,000.
19 I would like to add that when BWE
20 started this organization, New York State
21 listed 67 black women-owned firms. As far as
22 agencies were concerned, they said that we
23 could not be found.
24 Citibank also invited us to attend
25 some of the community development and
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2 revitalization training that Citibank offers
3 which broaden our perception, skills and
4 knowledge about economic development and
5 revitalization issues.
6 We needed to get our mission before
7 legislators, especially those serving minority
8 communities. Citibank assisted this need by
9 sponsoring our BWE Legislative Reception that
10 is held in Albany each year during the black
11 and Puerto Rican Caucus Weekend.
12 We cannot achieve our mission without
13 advice and guidance in identifying easy-to-use
14 resources from the private sector. We formed a
15 corporate advisory board for this purpose.
16 Citibank accepted our invitation to join and
17 actively assists the planning and
18 implementation now of all BWE programs,
19 including the Corporate Procurement and
20 Technical Assistance Program. Citibank also
21 provides $5,000 annually to assist the cash
22 match requirement of the grant that we
23 generally receive.
24 We have attached a newsletter,
25 brochure and a calendar of events to illustrate
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2 how we have leveraged this important help into
3 a comprehensive service delivery.
4 Thus, Citibank has truly been an
5 excellent partner for BWE. It provides us
6 invaluable assistance. From the very beginning
7 of our relationship, Michelle DiBenedetto,
8 Citibank's vice president for government and
9 community relations provides advice on a
10 regular basis. She has encouraged us also to
11 reach out to other lending institutions for
12 support and assistance. As illustrated in our
13 newsletter, this outreach has fostered a
14 variety of helping relationships with other
15 banks.
16 We feel certain that the
17 Citibank/Travelers acquisition will result in
18 greater opportunities for the entire community
19 and especially for small minority and
20 women-owned businesses. Our members say that
21 Citibank listens and provides real guidance in
22 business finance. We know firsthand that
23 Citibank knows how to help people who need help
24 the most and have the capacity to do so while
25 maintaining the integrity of a helping
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1
2 relationship.
3 I would also like to add that BWE
4 works very closely with the Long Island
5 Development Corporation, and those figures that
6 Roslyn Goldmacher mentioned, you can count on
7 lots and lots of BWE members in those figures.
8 We certainly hope that this testimony
9 will provide decision makers a clearer insight
10 to the people behind the name Citibank and ask
11 that the proposed acquisition request be
12 granted. We feel confident that the combined
13 strength of Travelers and Citicorp will enhance
14 their capacity to support and assist women and
15 minorities in their quest to participate more
16 fully in economic development.
17 Thank you for the opportunity to
18 share our views. Respectively submitted, the
19 BWE board of directors and founding officers,
20 Phyllis Hill Slater, Chair; Vera Moore, Vice
21 Chair; and Secretary/Treasurer, Viola Newton;
22 and M. Vicki Wacksman, President and CEO.
23 MR. LONEY: Thank you.
24 Ms. Spike.
25 MS. SPIKE: Good afternoon. My name
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2 is Monique Spike, and I am 16 years old, and I
3 attend Hartford Public High School in Hartford,
4 Connecticut.
5 I am here to talk about the Travelers
6 support of a program called Postponing Sexual
7 Involvement which I studied in Hartford to
8 decrease the teen pregnancy rate, because
9 Hartford has one of the highest numbers for
10 teen pregnancy, one of the worst numbers for
11 teen pregnancy in the country. Travelers has
12 provided current funding for 60 of Hartford's
13 high school students, funds for the fifth grade
14 classes of Hartford to be put into the
15 curriculum.
16 The curriculum consists of ways that
17 the fifth graders can learn how to use sexual
18 pressures and techniques -- to say no to sexual
19 pressures, how to handle their curiosity about
20 sex without having sex and how to deal with
21 their peers. Along with the benefits the
22 program gives the fifth graders, such as the
23 tools to resist peer pressure, and confidence,
24 the program also benefits the teenagers
25 themselves.
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2 As teen leaders, we are given tools,
3 such as communication skills, that assist us in
4 our everyday lives. We also get extensive
5 training in the PSI curriculum and have
6 experience, improved grades and improved
7 attendance at school.
8 Teen leaders have shown a great
9 responsibility to their community and to
10 themselves and have served as role models to
11 the fifth graders. Teen leaders show great
12 enthusiasm going to the fifth grade classrooms
13 and I always look forward to the five weekly
14 sessions that we do with the children. As a
15 teen leader myself, I believe that the program
16 is very beneficial and I regret that is not
17 offered to other cities in the country.
18 Thank you.
19 MR. LONEY: Thank you, Ms. Spike. I
20 have to say you are a credit to teenagerhood.
21 Ms. Brown.
22 MS. BROWN: Good afternoon, ladies
23 and gentlemen. My name is Naomi Brown, and I
24 am also a 16-year-old teenager, and I am
25 entering the 12th grade at Hartford Public High
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2 School in Hartford. I was asked here to
3 testify about the Postponing Sexual Involvement
4 program and how it benefits the fifth graders.
5 This past year was my first in PSI
6 and I had the privilege of teaching at three
7 schools and assisting at one. When I go in
8 there to teach the curriculum to the fifth
9 graders, their faces light up. They are
10 absolutely willing and waiting to learn. They
11 are excited when we go in there, and the whole
12 week before they ask their teacher when is PSI
13 coming in, when are they coming in? They love
14 to see us.
15 We teach them skills that will help
16 them in today's rapidly changing world. We
17 teach them assertiveness techniques so they can
18 resist different kinds of pressure. The first
19 technique we teach them is to say no in a
20 clear, firm voice and keep repeating it. The
21 second technique we teach them is to ask the
22 person why are you pressuring me or to tell the
23 person how the pressure is making them feel.
24 The third technique we teach them is to refuse
25 to discuss the matter further or just walk
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2 away.
3 With these techniques in mind, the
4 students have the knowledge that they know how
5 to say no and that they will mean it when they
6 say no. They also come away with the belief
7 that they will be listened to and that they can
8 make a difference not only in their own lives
9 but in other people's lives.
10 I believe that PSI helps students
11 greatly because the relationship that the fifth
12 graders form with the teen leaders helps them
13 with their confidence and to help them come
14 away with the belief that they mean something
15 to someone and that someone wants them to
16 succeed.
17 I personally think that the students
18 who go through PSI will be the future business
19 leaders of today because they will have
20 confidence and they will have respect, they
21 will be able to do well in the workplace and
22 they will be able to live a quality life
23 themselves, a life through PSI that is
24 hopefully drug free, that is
25 sexually-transmitted disease free. It will
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2 also be free of unwanted early pregnancies.
3 And I feel that this program is a great asset
4 and I would like to thank the Travelers company
5 for providing the funding to help us with this.
6 Thank you.
7 MR. LONEY: Thank you. You two young
8 ladies did a fine job.
9 MS. BROWN: Thank you.
10 MR. LONEY: Do we have any questions
11 of this group? If not, I will thank you all
12 very much for coming.
13 We are going to do a little more
14 agenda shifting.
15 James Wyche and Lydia Tom from Panel
16 Fourteen have arrived, and, also, Douglas
17 Warens from the Sixteenth Panel is here, too,
18 and we have room. So if you would like to come
19 up now, that would be good.
20 (Continued on next page)
21
22
23
24
25
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2 MR. LONEY: Mr. Wyche, are you ready?
3 MR. WYCHE: Sure, I am. Good
4 afternoon. I'm pleased to be present and to be
5 part of the testimony and support of the merger
6 for Citibank and Travelers Corp.
7 I represent an organization called
8 the Leadership Alliance. As executive director
9 I forged this alliance of 25 which are
10 represented by the eight Ivy League
11 institutions, the ten historic black colleges
12 there are three Hispanic serving colleges as
13 well as the seven tribal colleges in Montana
14 associated with Montana State University. This
15 is an educational alliance that was formed back
16 in 1992, and I'm pleased to tell you a part of
17 the story, because Citibank was our first
18 corporate sponsor.
19 This organization was formed with the
20 ideal of trying to reach toward under
21 representation, specifically with
22 African-American students, with Hispanic-Latino
23 students, with Native American students, and to
24 try to bring them through the process of our
25 educational system, to get them into the
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1
2 terminal degree process, but, more importantly,
3 to set up a monitorship program, to set up a
4 networking system by which these students would
5 then for ever be professionally enmeshed within
6 our educational system.
7 The sole purpose as we had started
8 this endeavor was to change the classroom. We
9 had hoped that we would begin to change the
10 demographics of the faculty situation in our
11 institutions as well as nationally.
12 As this organization has matured in
13 the past seven years, we found it necessary to
14 really stimulate all segments of our society,
15 and indeed, as a national institution and
16 organization we have now grown internationally
17 where we have programs in 14 different
18 countries in Asia, East-West Europe, Africa,
19 Latin and South America.
20 The important aspect of this program
21 that I'd like to also stress is our ability to
22 reach out worldwide, globally through our
23 network and forge an alliance both for the
24 students, for the faculty, the administrators
25 as well as politicians.
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2 I'm just returning from a trip to
3 Africa visiting east, south and west African
4 countries in which we're going to globalize the
5 experience for over 240 faculty and students
6 within this organization with support from
7 organizations like Citibank.
8 Now, let me tell you a little bit
9 about what Citibank has meant to us
10 specifically. Over the course of the last six
11 years in which Citibank again was our first
12 corporate sponsor, it has enabled us to train
13 over 700 students, 125 of which are now in
14 terminal degree PhD. programs, all
15 underrepresented minorities.
16 These students are ushered through a
17 system where we not only mentor them, where we
18 network them, but we expose them to highest
19 caliber educational environment that we can
20 afford within our educational system.
21 Within that system of 125 students
22 we've provided them the opportunity to also go
23 to foreign countries, to come back now wanting
24 and desiring to discover things that many of
25 them heretofore had not even thought of.
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2 I'll tell you a story also about our
3 latest key note speaker in a national symposium
4 and that is Fredrico Pe�a, former secretary of
5 energy and Mr. Pe�a talked about a student from
6 New York City of all places -- he obviously was
7 based in Denver -- and he talked about a
8 student who did not really know anything about
9 higher education, a student who would look in
10 the heavens and gaze and had no idea what he
11 was looking at.
12 This student came to him and talked
13 to him about his vision of what he'd like to
14 do, and as Mr. Pe�a described this student. He
15 talked about what this student might do for
16 America and what he might do for himself. This
17 student is currently enrolled in a PhD.
18 program.
19 It gives you some idea of the power
20 of the interface with people that this
21 difference can make for these individuals. The
22 second and last of the stories has to do with
23 someone that I was interfaced with, a very
24 important story for me because, again, it
25 brings in the context of New York when I used
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2 to be here as a professor in the City
3 University Of New York.
4 One Saturday I was in my laboratory
5 and a student was draped across the door of my
6 office, and I went to see him, and this student
7 came to me and said: I've been looking for
8 you. I've come from Beliz. I said: Well, how
9 did you know me? He talked about a program
10 that I used to head here in New York City,
11 which now has been expanded as part of the
12 Leadership Alliance network and he said: I was
13 about to go back because I had just enough
14 money to JFK and take a plane back home.
15 Well, needless to say, I was
16 enthralled by the student. He enrolled, he
17 finished his degree program, he went on, he got
18 a PhD. at MIT. He then went to Bell Labs. He
19 is now a professor at Princeton University in
20 the mathematics department.
21 These are stories again that are
22 heart warming, that show that we have the
23 opportunity to really expand the human talent
24 pool, but we need corporate America. We need
25 the federal sector. We need individuals to
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1
2 participate, and, again, what I want to stress
3 to you, but the first corporate partner, in
4 fact, the first funder of this venture was
5 Citibank.
6 I can't tell you how important
7 Citibank continues to be in our lives. We have
8 a member, a vice-president from Citibank who
9 sits on our corporate board.
10 The important issue I'd like to leave
11 you with is simply this. The expectation of
12 the Leadership Alliance is that with this
13 merger we are anticipating that Citibank
14 Travelers will not only continue, but enhance
15 the outreach of the Alliance, not only within
16 the United States, but globally. These are
17 global organizations and these are global
18 times. We need young people who are going to
19 be competitive and see their world globally.
20 Finally, I'd like to simply say that
21 I'm hopeful that through this merger that you
22 will approve, and that it is your
23 recommendation that we will go on and do better
24 things for America. Thank you.
25 MR. LONEY: Thank you Mr. Wyche
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2 Ms. Tom.
3 MS. TOM: Good afternoon. My name is
4 Lydia Tom and I am director of housing and
5 finance for the Enterprise Foundation's New
6 York office.
7 I would like to tell you briefly
8 about Enterprise's involvement with Citibank,
9 and how the bank has partnered with Enterprise
10 in working to improve the quality of life in
11 low income neighborhoods, through the
12 development of housing and support services,
13 both nationally and in New York.
14 Citibank has been an invaluable
15 partner in helping Enterprise to provide
16 different financial resources to low-income
17 communities. Citibank has assisted us on many
18 levels; as a funder, tax credit investor and
19 loan source.
20 Enterprise and Citibank have been
21 working together since 1991. Enterprise was
22 established by Jim and Patty Rouse in 1982 to
23 provide the opportunity for low-income
24 Americans to secure decent affordable housing
25 and move up and out of poverty. Since that
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1
2 time, Enterprise has helped create over 86,000
3 affordable apartments nationally, including
4 8,000 in New York.
5 Citibank has worked with Enterprise
6 in many cities around the country, including
7 New York, Buffalo, Rochester, Syracuse,
8 Delaware, Maryland, the District of Columbia,
9 Florida, San Antonio, St. Louis, Nevada, and
10 California.
11 Since 1991, Citibank and the Citicorp
12 foundation have provided $987,000 in grants to
13 Enterprise and $1.75 million in below market
14 rate loans. Citibank has provided or committed
15 to provide $74 million in equity through the
16 low income housing tax credit. This $74
17 million includes $50 million invested in the
18 New York Equity Fund, as well as nearly $20
19 million in national funds that have supported
20 special needs housing in New York. This
21 housing serves the formerly homeless, the
22 elderly, those with a history of mental illness
23 or substance abuse, and those with AIDS.
24 These numbers have a real impact on
25 communities. The funds have been used to
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1
2 extend to low-income families for home
3 ownership, to develop affordable rental housing
4 by placing equity from Citibank in tax credit
5 eligible multifamily housing and to support
6 special programs through grants, in such areas
7 as job training and child care that improve the
8 quality of life for residents.
9 As an investor in tax credit and a
10 source of predevelopment loans, Citibank has
11 facilitated the creation of affordable housing
12 for those who need it most. You may have read
13 a recent New York Times article that noted that
14 the numbers of housing-needy families in the
15 United States outnumber affordable apartments
16 by 4.4 million.
17 The low-income housing tax credit has
18 been a valuable tool in filling this gap.
19 Citibank's total commitment to the credit will
20 help produce an estimated 1,750 safe, decent
21 affordable homes nationally.
22 Citibank is also participating in
23 Enterprise's City Home Program, an effort with
24 NYC and the Community Preservation Corporation
25 to provide home ownership opportunities for low
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1
2 and moderate income families. Citibank will be
3 providing mortgages for these first time
4 buyers. City Home targets smaller, abandoned
5 city-owned buildings and helps bring stability
6 to neighborhoods by transforming eye sores into
7 community assets, and bringing back owners to
8 deteriorated blocks.
9 Predevelopment loans are another tool
10 Citibank has provided for the development of
11 affordable housing. In New York, Citibank has
12 provided $1.5 million in predevelopment funds
13 over the past two years. This includes some
14 monies to upstate regions. These funds help
15 nonprofits pay for expenses such as
16 architectural and legal fees, so that
17 construction can close.
18 Support services such as child care,
19 job training and greening projects build on
20 housing and uplift the quality of life in
21 neighborhoods. Citibank has been sensitive to
22 these needs.
23 Citibank was an early funder of a
24 child care initiative Enterprise established.
25 Through this project, two facilities have been
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2 developed that provide quality child care for
3 over 200 children from low-income families.
4 Citibank also provided funds for a training
5 program connected with one of these centers
6 through which low-income women receive training
7 in the Montessori Method of early childhood
8 development while working as a teachers aid and
9 classroom assistants. This program, serving
10 about 20 women, has made it possible for
11 several participants to get off welfare and
12 pursue a career in early childhood education.
13 Citibank has also used its resources
14 to fund employment initiatives, a major concern
15 now that welfare reform has impacted
16 communities.
17 On a national level, Citibank funds
18 made it possible for Enterprise to launch the
19 Volunteer Institute in 1994. The Volunteer
20 Institute provides training for AmeriCorps
21 volunteers solicited by selected nonprofit
22 groups for community safety programs. Thanks
23 to Citibank's generosity, this program has had
24 outstanding results for people at very low
25 income levels, some of whom are having their
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1
2 first experience in the work world.
3 Citibank also funded a new job
4 training effort in New York called the Tree
5 Keeper Training program which will train
6 residents in low-income neighborhood in tree
7 maintenance and landscaping and link them with
8 jobs with smaller landscaping contractors
9 looking to create city-based work crews.
10 On the community level, Citibank has
11 used its resources to develop creative
12 partnerships to meet local needs. Through its
13 Culture Builds Community program, Citibank
14 funded a program implemented by Enterprise and
15 Trees New York in 1995, to plant street trees
16 along West 159th Street in Washington Heights.
17 The Community League of West 159th Street was
18 the local sponsor.
19 Residents helped plant and have since
20 cared for and maintained the trees. Not only
21 has the program helped bring greenery to the
22 block, but the care of the trees has served as
23 an organizing tool for tenant associations.
24 Finally, the leadership of Citibank
25 senior executives has been a great asset to
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2 Enterprise. Janet Thompson and Emilio
3 Fernandez serve on Enterprise advisory boards
4 in New York and Miami, respectively.
5 In New York, Janet has been
6 instrumental in examining ways in which
7 Enterprise and Citibank can contribute to a
8 more comprehensive approach to community
9 development. Other Citibank executives have
10 been very active in Enterprise New York's
11 Junior Board, a group of young professionals
12 who participate in hands-on activities in
13 neighborhoods, such as planting community
14 gardens and furnishing community rooms.
15 Citibank has been very helpful with
16 Enterprise's annual network conference, which
17 now involves over 1,300 housing professionals
18 from around the country. Citibank executives
19 have addressed the conference and participated
20 in workshops.
21 Enterprise supports the application
22 for Citibank and Travelers to merge. We hope
23 that this is an opportunity to expand services
24 to low-income communities, through the
25 combination of Citibank's existing initiatives
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2 with the resources that Travelers brings,
3 including $100 million in tax credit
4 investments made by Salomon Brothers.
5 MR. LONEY: Thank you, Ms. Tom.
6 Mr. Warns.
7 MR. WARNS: Thank you for the
8 opportunity to speak in support of Citibank and
9 their work with us.
10 I am president of the United Way of
11 Tri-State which is a regional organization
12 serving New York, Connecticut and New Jersey
13 here in the New York metropolitan area. The
14 past year we raised about $103 million from
15 about 140 regional companies of which Citibank
16 is one.
17 We distribute this money to 30
18 participating United Ways in the three-state
19 region. These United Ways provide funding to
20 1800 health and human service agencies in
21 almost every community.
22 Citibank has a major supporter of the
23 United Way for many years. Their support in
24 fact helped found our organization in 1977 and
25 prior to our founding, there was the Greater
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2 New York Fund and several other United Ways in
3 this area that they supported. We were the
4 first regional United Way to be formed here,
5 thanks to their help.
6 In 1997 Citibank donated $750,000 for
7 the United Way campaign and their generous
8 employees contributed another $1,850,000 for
9 the campaign. Since 1992 Citibank and it's
10 employees have contributed over ten million
11 dollars to the United Way in this region, that
12 doesn't count the thousands of dollars they
13 contribute elsewhere in the country. These
14 donations in conjunction with the donations of
15 all other participating companies and their
16 employees helps an estimated 6.5 million people
17 in this region, or roughly about one in every
18 three people over the past ten years.
19 In addition, Citibank encourages
20 their employees to volunteer, as you've heard
21 here, with organizations in communities to help
22 improve these communities in which they live,
23 work and receive services themselves. This
24 help, as you've heard here, also has helped
25 other nonprofits do well, as well as improve
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2 the communities and the neighborhoods, at least
3 in this region.
4 The United Way is grateful for
5 Citibank's support and believe the future
6 combined entity with Travelers will also be a
7 strong corporate supporter of health and human
8 services throughout the tri-state region
9 helping to meet critical human needs in this
10 area. Thank you very much.
11 MR. LONEY: Thank you, Mr. Warns.
12 We are going to have to do a little
13 adjusting on the schedule so if you can bear
14 with us. Do we have any questions?
15 We thank you very much for coming.
16 As I understand it the panel that was
17 scheduled to be here at 5:15, an ACORN panel,
18 has decided not to appear. We have a couple of
19 folks from -- Mr. Warns was actually scheduled
20 on the 16 panel -- we have a couple of other
21 folks Maria Rosado and Donna Panton, who are
22 here from the panel 16, so using the
23 prerogative of the chair I guess I will ask
24 that those two come forward.
25 We can hear from them now, and then
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2 maybe there is only one other person from that
3 panel, and we can see if he arrived later.
4 Ms. Rosado and Panton, if you would come
5 forward.
6 MR. LONEY: Ms. Rosado are you ready?
7 MS. ROSADO: Yes. My name is Maria
8 Rosado and I am the president of MHR
9 Management, a real estate management company
10 based in Williamsburg, Brooklyn. I'm here to
11 speak on behalf of the proposed merger of
12 Citicorp and Travelers Group.
13 My testimony is based on my
14 experience with Citibank's community
15 development and their commitment to the
16 neighborhoods where we manage low and moderate
17 income properties.
18 Through the NEP program we were able
19 to borrow $10 million from Citibank to renovate
20 12 buildings in Bedford-Stuyvesant. We have
21 already completed seven buildings, and are
22 preparing to initiate phase two of this
23 restoration work.
24 Although the venture is modest, it is
25 one of many projects that are necessary to
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2 revitalize the well being of an important
3 community.
4 Many families for the first time see
5 the reality of investment in the metamorphosis
6 of their apartments, their homes and their
7 neighborhood.
8 It is tangible evidence of the
9 commitment already made, and suggests a
10 grander, more stable future for communities
11 already following this dynamic duo.
12 Everyone benefits from an enlightened
13 acquaintance. Investment, loans, insurance,
14 and financial reeducation will follow a natural
15 progression from those already persuaded. And,
16 just as surely, as a new home engenders real
17 hope, conservation, and commitment, an educated
18 partner will see the need for savings,
19 insurance, and reinvestment in and beyond their
20 self interests.
21 This merger I believe will put all
22 the needed tools for financial establishment
23 within the reach of communities previously
24 undernourished in this area. It is only right
25 that we have an opportunity to learn from the
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2 biggest and the best. Thank you.
3 MR. LONEY: Thank you, Ms. Rosado.
4 Ms. Panton.
5 MS. PANTON: I am Donna Panton,
6 executive director of the Nonprofit Connection.
7 The Nonprofit Connection provides management
8 assistance to nonprofit, community based
9 organizations throughout New York.
10 For the past 21 years we have worked
11 with these nonprofits to improve their
12 administration and operations in order to
13 enhance the effectiveness of their services.
14 Citibank has supported our work since 1997 with
15 grants totalling $125,000.
16 Since our clients are the human
17 service, arts and communities development
18 organizations that build and strengthen the
19 communities and neighborhoods of New York City,
20 the goal of my statement today is to present
21 three partnership initiatives that the
22 Nonprofit Connection has undertaken with
23 Citibank's support, and to urge that these
24 programs be strengthened should the merger be
25 approved.
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2 First: Citibank has helped the
3 Nonprofit Connection to expand the services we
4 provide in the boroughs of Queens and Staten
5 Island, boroughs that historically have been
6 underserved by foundations and corporate
7 funders.
8 Citibank funded us directly to
9 provide workshops and technical assistance and
10 also gave grants to the organizations
11 themselves to pay for technical assistance, and
12 gave grants to the organizations themselves to
13 pay for technical assistance services to
14 improve fund raising, board development,
15 financial management, strategic planning,
16 programs and other area of operation.
17 Second: In 1993 and 1995, Citibank
18 funded two series of planning workshops for
19 senior managers of community-based
20 organizations funded by the bank.
21 Many of these groups had never
22 planned their programs and operations and these
23 workshops helped them to understand the process
24 and to apply strategy to increase effectiveness
25 of their programs and strengthen their
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2 positions vis-a-vis the funding community.
3 Third: Since 1996, the Nonprofit
4 Connection has received funding to conduct the
5 Citibank Community Development Institute, a
6 five-month course aimed at helping community
7 development corporations strengthening their
8 sustainability by developing their internal
9 capacity and putting together economic
10 development projects.
11 As you know CDCs play a crucial role
12 in community revitalization and in the creation
13 of opportunity for businesses and low income
14 residents.
15 Specifically, the institute helped
16 these CDCs to review needs of their
17 constituents, strengthen staffing and
18 administrative procedures to refocus programs,
19 utilize market analysis and create market and
20 planning to maximize the potential of the
21 success of new initiatives and to prepare and
22 submit economic development projects for
23 financing.
24 Twenty-five CDCs have participated in
25 three separate Institutes conducted for
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2 organizations from Brooklyn, from Queens and
3 Staten Island, and from the Bronx and upper
4 Manhattan which is currently under way.
5 As a direct result of this
6 participation, eight CDCs have raised over 1.5
7 million dollars from private and public sources
8 to support new administrative and program
9 initiatives. We are discussing with Citibank
10 the possibility of extending the program to
11 Westchester County in the fall.
12 Specific economic development
13 projects created or refined through the
14 Institute include merchant organizing,
15 commercial and retail strip development, advice
16 and incubator services for small businesses;
17 increased access to credit and capital for
18 local businesses and home buyers, and the
19 development of for-profit ventures including, a
20 funeral parlor, a book store, a residential
21 weatherization business, thrift shops, home
22 health care services and food service delivery.
23 In addition, the CDCs were able to
24 strengthen relationships with Citibank. Four
25 of the Brooklyn groups were awarded first round
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2 grants in Citibank's Partners in Partners in
3 Progress program which provide substantial
4 funding for economic development projects.
5 A number of other groups developed
6 new relationships with community relations
7 officers that helped them to access Citibank
8 funding for the first time. Benefits also
9 accrued to Citibank itself.
10 Staff from the foundation and the
11 community development and loan departments
12 served as speakers and advisers. Branch
13 managers, loan officers and mortgage analysts
14 had an opportunity to meet with people involved
15 in community building and learn about the work
16 of the CDCs.
17 In closing, let me say that Citibank
18 has had considerable impact on community
19 development initiatives in New York City
20 through its support of CDCs, community
21 development financial institutions; arts,
22 educational and human service organizations;
23 and of technical assistance providers like the
24 Nonprofit Connection.
25 We hope that the new corporate
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2 entity, if it is realized, will expand this
3 commitment to community building, particularly
4 here in New York. Thank you.
5 MR. LONEY: Thank you, Ms. Panton.
6 Is there any question?
7 Folks, if not, we will thank you very
8 much for your participation today.
9 Let me ask is Mr. Kiernan here?
10 Mr. Kiernan is scheduled for 6 p.m.
11 and he's the last person that I understand is
12 to testify. He is on his way. We will wait
13 for him to hear from Mr. Kiernan, and we'll be
14 in recess until he arrives.
15 (Recess)
16
17 MR. LONEY: Mr. Kiernan.
18 MR. KIERNAN: Good evening and thank
19 you for waiting.
20 My name is Peter Kiernan and I'm
21 chairman of the Brooklyn Sports Foundation.
22 That's the capacity I have testified here
23 tonight, and I'm very grateful for this
24 opportunity.
25 My testimony is about Citicorp and
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2 the very positive and significant and generous
3 contributions Citicorp has made in respect of
4 the Brooklyn Sports Foundation.
5 The foundation is duly organized
6 501(c)(3) not-for-profit foundation. It's
7 fundamental purposes are to address and solve,
8 the lamentable dearth of amateur sports
9 facilities in Brooklyn.
10 As you know, Brooklyn has more than
11 2.3 million residents, a school-age population
12 of nearly 500,00 kids, but its sports
13 facilities are completely inadequate.
14 For example, there are more than one
15 hundred thousand kids per outdoor track in
16 Brooklyn, and there is only one indoor track,
17 and you have about 500,000 kids for that track.
18 That doesn't leave a lot of room to run.
19 I mean some of the other data is even
20 more discouraging. 25,000 kids per ball field,
21 nine thousand kids per gymnasium.
22 Organized sports in our belief plays
23 a key role in nurturing, in socialization, in
24 education and in building healthy bodies and a
25 healthy society. Learning how to play by the
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2 rules, learning how to set goals and how to
3 measure progress against those goals and
4 learning how to win, and learning how to lose
5 are among life's most important lessons.
6 Society has the obligation and the need to
7 provide the opportunities for such lessons to
8 be taught and experienced.
9 The Foundation, predicated on the
10 belief that sports can be an antidote to racism
11 and crime began a sustained effort about 1987
12 to maximize the opportunity for Brooklyn's
13 youth and really the city's youths to
14 participate in organized sports and I am
15 pleased to report today that the final design
16 is under way for a sport complex known as
17 Sportsplex.
18 It will be located in Coney Island.
19 It will have several buildings, but it will
20 feature an arena that will seat 12,500 and
21 currently the largest public assembly space in
22 Brooklyn is 2,500. The Foundation will be the
23 developer and operator of that and it is fully
24 funded.
25 In this effort to achieve what has
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2 been achieved the Foundation has enjoyed the
3 support and the participation of Brooklyn's
4 business, academics, religious, athletic
5 communities, but none of the foundation's
6 support has exceeded that of the support
7 provided by Citicorp, both in terms of
8 financial contributions, personnel, time and
9 talent, and its reputational stake.
10 Sportsplex will be located in Coney
11 Island, and there is a variety of reasons for
12 that, not the least of which is that was once
13 was a world famous location synonymous with New
14 York City, and symbolizing an era of
15 recreation, fun and harmony has become a dreary
16 example of abandonment and decay and urban
17 segregation.
18 Citicorp in its role as providing
19 members of our board and guidance and
20 participating in all of our activities,
21 Citicorp recognized that while Brooklyn
22 desperately needs sports facilities, it also
23 needs economic development.
24 It was Citicorp that recognized that
25 Coney Island is not simply a vestige of a
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2 forgone economic era, an era made obsolete by
3 air conditioning and interstate highways;
4 rather, Coney Island is the choice repository
5 of economic opportunity, because Coney Island
6 has land, it has transportation, it has human
7 resources and it has a tradition of
8 entrepreneurship, and Citicorp prominently
9 associated itself with the determined effort to
10 demonstrate that public capital funding of a
11 sports complex on public land in Coney Island
12 will generate private economic development on
13 ancillary private land.
14 Citicorp prominently committed itself
15 to the notion that development of what will be
16 an adjunct to New York City's education
17 infrastructure, because the primary users will
18 be the Board of Education, board of higher
19 education, that the development of an adjunct
20 to the city's education infrastructure can be
21 good economics and conversely that good
22 economic development can be very wise education
23 policy.
24 Since 1997 the state and City of New
25 York have pledged more than $70 million in cash
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2 and land to Sportsplex. Ancillary private
3 commercial development of one hundred million
4 dollars has been announced, and an additional
5 $20 million for a minor league baseball stadium
6 in what is now to be a revitalized Coney Island
7 was just approved by the City Council. It's
8 part of the mayor's budget.
9 More than 25 million dollars in
10 direct tax revenue has been forecast to result
11 from this economic activity, and that's not to
12 mention the good that will be done for those
13 who have the opportunity to participate.
14 Hundreds of permanent jobs are going to be
15 created. A major expansion of the subway in
16 Coney Island has now entered the final planning
17 stage and you all this has been given impetus
18 by Sportsplex.
19 To Coney Island what this infusion of
20 new activity will be, it will be to the early
21 21st century what the amusement parks in Coney
22 Island were to the early 20th century. It's
23 going to bring life and excitement back to a
24 world famous place.
25 Citicorp continues to assist this
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2 effort broadly, and in so doing, in my view, it
3 gives definition to the phrase corporate
4 citizen. The Citicorp gave and gives far more
5 than just money, and a gave a lot of that,
6 facilities, the use of its offices and
7 equipment, it gives more than that. It gave
8 more than just the talent that it provided and
9 the talent it provided in terms of individuals
10 on our board and in our committees has been
11 very considerable, but in addition it gave the
12 weight of its credibility and its commitment to
13 a proactive public policy. And Citicorp has
14 never asked for anything in return.
15 If I could just add one last anecdote
16 that I didn't write -- it's not in the written
17 statement. We were seeking for several years
18 state legislation for the funding or the public
19 funding of the capital cost of Sportsplex in
20 1995, legislation permitting that passed both
21 the Assembly and the Senate, but it didn't
22 become a law because there was a single
23 difference in the two versions.
24 The difference was that in the Senate
25 the sponsor in the Senate had deleted the
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2 affirmative action requirement. Now we decided
3 that, it was deliberately done to create a
4 controversy and to call into question
5 affirmative action, which was beginning to be
6 the subject of a national debate, particularly
7 with the Supreme Court decision that made
8 headlines in every newspaper in the country,
9 but affirmative action policy was the law of
10 New York State, and we didn't think that it was
11 right to try to change it in Brooklyn, on a
12 single example of Brooklyn, probably the most
13 diverse county in the United States, a county
14 where 93 languages are spoken.
15 So we decided to fight that, and
16 every major corporation on our board to their
17 credit stuck with us on that fight. But I
18 think I should salute Citicorp in this regard,
19 because they never strayed from that fight,
20 were very prominent in it, and it was simply a
21 matter of social justice.
22 But, like a lot of the other
23 corporations, they had a legislative agenda.
24 Banks are regulated and banks have laws they
25 want to get passed all the time by the state
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2 legislature. And they stood up in this case in
3 the State Senate for what they believed was
4 right and it had a happy ending and I think for
5 that they should be saluted as well and I thank
6 for your attention.
7 MR. LONEY: I'd like to ask you one
8 thing, again, showing my ignorance. Where is
9 Coney Island exactly, and what is there now?
10 (Laughter)
11 MR. KIERNAN: Coney Island is in
12 Brooklyn. It's on the eastern shore of
13 Brooklyn obviously on the Atlantic Ocean. It's
14 on sort of a peninsula. As you may know what
15 used to be there were thriving amusement parks.
16 MR. LONEY: Right, I've heard of
17 that.
18 MR. KIERNAN: Those amusement parks
19 are still there, but most of them are closed.
20 It has public housing and some very
21 deteriorated housing stock. It has a lot of
22 vacant land. It has fields that are growing
23 weeds. It has maybe in the summertime it still
24 can have a taste of its past glory when maybe
25 300,000 people will come to the beaches, but in
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2 the wintertime it's a very dark and dreary
3 place.
4 MR. LONEY: You're thinking there is
5 a market here for minor league baseball?
6 MR. KIERNAN: Well, the Brooklyn
7 Sports Foundation which I'm representing is not
8 advocating professional sports. It's
9 advocating amateur sports, but because the
10 commitment was made by both the state and the
11 city, the city is putting 37 million dollars
12 and the state is putting up 30 million dollars
13 and the land and services worth much more than
14 that, because they made the commitment to build
15 the sports complex for amateur sports.
16 The Mets in conjunction with the
17 Mayor decided they would put a minor league
18 baseball stadium there that they believe there
19 is a market there and the point I was trying to
20 make is the Sportsplex has given impetus to
21 other economic development, and that includes a
22 hundred million dollars of private development
23 which is primarily going to feature
24 entertainment, 21st century kind of
25 entertainment, movie theater, virtually reality
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2 centers and high tech feature entertainment and
3 entertainment retail and the developers and the
4 tenants of those developers that are putting
5 up, making that commitment obviously were in
6 the market and, again, that was given impetus
7 by the fact that they were able to generate a
8 public investment of more than $70 million and
9 we had always looked at Sportsplex as an
10 education project with economic development
11 dimension, and Citibank in their participations
12 with us urged us to look at it as an economic
13 development project with very good education
14 benefits and dimension and that's what turned
15 the trick.
16 That's what really got the public
17 support. And it was their leadership, in part
18 with some other major corporations, their
19 leadership that attracted the real business
20 support of the Brooklyn business community
21 which is considerable.
22 MR. LONEY: Are there any other
23 questions? If not, I will thank you for
24 coming.
25 MR. KIERNAN: Thank you.
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2 MR. LONEY: I believe we are finished
3 with the prepared agenda. The only question is
4 whether there is anybody going to make use of
5 the open mic.
6 So we go into recess until somebody
7 comes and asks for the open mic or a decent
8 interval passes without anybody asking for the
9 mic.
10 (Recess)
11 MR. LONEY: We are hereby adjourned
12 for the evening. We'll see you here at 8
13 o'clock tomorrow.
14 (Adjourned)
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