Public Meeting Regarding Citicorp and Travelers Group
Transcript of Friday, June 26, 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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10 FRIDAY, JUNE 26, 1998
11 NEW YORK CITY
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2 (8:00 a.m.)
3 MR. LONEY: If we could begin,
4 please. I want to welcome you all to this
5 public meeting. This is a continuation of the
6 public meeting that we are holding on the
7 application by Travelers Group to acquire
8 Citicorp.
9 Yesterday we held a meeting here. We
10 had approximately 90 witnesses, and I think it
11 was a very useful exercise for everyone
12 involved. I am confident that today's meeting
13 will be useful as well.
14 Let me first introduce myself. I am
15 Glenn Loney, Deputy Director of the Division of
16 Consumer and Community Affairs of the Federal
17 Reserve Board in Washington D.C. I am the
18 presiding officer for this meeting.
19 Our other panelists today, to my
20 immediate left Scott Alvarez, Associate General
21 Counsel from the Board's legal division, and to
22 his left is Jim Hodgetts, Senior Vice President
23 from the Federal Reserve Bank of New York, and
24 to his left is Barbara Kent, who is Acting
25 Deputy Superintendent of the Consumer Services
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2 Division of the State of New York Banking
3 Department, and we are particularly happy to
4 have the State of New York Banking Department
5 represented here today.
6 We are here today because Travelers
7 Group of New York has applied for the Federal
8 Reserve's approval to acquire Citicorp, also in
9 New York.
10 When the Federal Reserve system
11 considers one of these applications, we look at
12 a number of factors under the Bank Holding
13 Company Act. These include financial issues,
14 managerial issues, competitive issues and the
15 convenience and needs of the communities
16 affected. In doing so, we are particularly
17 looking at the record of performance of the
18 parties under the Community Reinvestment Act.
19 The Community Reinvestment Act
20 requires the Board to take an institution's
21 record of meeting the credit needs of its
22 entire community into account.
23 In addition, the transaction also
24 involves the proposed acquisition or retention
25 of nonbanking companies engaged in activities
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2 permissible for bank holding companies, as well
3 as a proposal to divest or otherwise conform a
4 number of other activities that are not
5 permissible for bank holding companies under
6 current law.
7 With respect to the proposal to
8 conduct permissible nonbanking activities, the
9 Board also must determine whether conducting
10 the proposed nonbanking activities can
11 reasonably be expected to produce benefits to
12 the public that outweigh possible adverse
13 effects, such as undue concentration of
14 resources, decreased or unfair competition,
15 conflicts of interest, or unsound banking
16 practices.
17 The purpose of today's meeting is to
18 receive information regarding these factors,
19 and we are very pleased that you have all been
20 willing to come and testify in our public
21 meeting.
22 Over the two days we will have had
23 over 120 witnesses, representing varying groups
24 or speaking on their own behalf at these
25 meetings. Let me make a few remarks about the
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2 procedures.
3 This is what is called an informal,
4 public meeting. Members of the panel, those of
5 us up here, may ask the people who are
6 testifying questions about their testimony in
7 this kind of a forum. This is not a formal
8 administrative hearing, so we are not bound by
9 rules regarding evidence, cross-examinations,
10 and some of those formal trappings of that kind
11 of a proceeding.
12 We will be here for a full morning
13 and, as you see from the agenda, we need to
14 stick to that schedule very rigorously in order
15 to give everyone a chance to say what they
16 would like to say. We are going to ask the
17 people today to help us stay on schedule. The
18 panels will be expected to keep within their
19 allotted time, so please be mindful of the
20 needs of others.
21 We have a very dramatic, and as it
22 turned out at yesterday's meeting, an effective
23 timekeeping system that you will see from the
24 first row will help people keep on target in
25 terms of their timing. The timekeepers, the
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2 lady sitting in the middle of the front row,
3 will give you a signal when you have two
4 minutes left to speak and another signal when
5 your time is up.
6 Thank you all for coming. There may
7 have been some individuals who haven't had a
8 chance to sign up in advance, and to the extent
9 possible we want to give them a chance to speak
10 as well.
11 At the end of the meeting, we will
12 throw the mike open to anyone who would want to
13 make a presentation at the end of the time,
14 time permitting.
15 Witnesses may submit a written
16 supplement to the oral testimony by July 2 and
17 then the record for this matter will be closed.
18 Any written supplements must be
19 received by close of business at 5 p.m. on July
20 2 and directed to Jennifer J. Johnson,
21 Secretary of the Board, Board of Governors of
22 the Federal Reserve System, Washington D.C.
23 20551. You may fax your submission to area
24 code 502-457-3462.
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 in the record,
4 please leave them with the Federal Reserve Bank
5 staff at the registration table outside. It is
6 important that we get this material for the
7 record.
8 The transcript of the meeting will be
9 available by June 30 for the June 25 meeting
10 yesterday, and by July 1 for the June 26
11 meeting today to the Federal Reserve Bank of
12 New York.
13 In addition, the official transcript
14 will be available by close of business on June
15 29 for the June 25 meeting, and by the close of
16 business on June 30 for the June 26 meeting on
17 the Board's website on www.bog.frb.fed.us.
18 With that, I would like to begin this
19 morning's proceedings. The first panel, Number
20 Seventeen in the agenda is made up of Marie
21 Nahikian, George McDonald, Freddy Espaillat and
22 Julie Colon. If those folks would come
23 forward.
24 Ms. Nahikian, is that how you say
25 your name?
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2 MS. NAHIKIAN: That's right.
3 MR. LONEY: Will you begin for us,
4 please.
5 MS. NAHIKIAN: Certainly. I do have
6 copies, which I can either give you now.
7 MR. LONEY: You can leave it at the
8 table out front.
9 MS. NAHIKIAN: The Queens County
10 Overall Economic Development Corporation, which
11 was created in 1978, has a central focus --
12 MR. LONEY: Excuse me. Could you
13 move the mike closer to you, please.
14 MS. NAHIKIAN: The Queens County
15 Economic Development Corporation has a central
16 focus to increase economic opportunity for the
17 residents of Queens County, and this really
18 requires Queens County to maintain multiple
19 roles in the economic life of an area that is
20 probably the nation's most diverse area in
21 population and has a population equal in size
22 to the fourth largest city in the United
23 States.
24 Our mission could not be met without
25 close working relationships with sources of
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2 national and international capital. We work
3 with over 75 financial institutions, and how we
4 work with these institutions is probably best
5 summed up in one word, and that is that we
6 sell. We sell Queens neighborhoods, locations,
7 businesses, residents as essentially good
8 investments. And the interest in our sales
9 pitch, so to speak, varies, but one fact is
10 critical, and that is that the financial's
11 institutions listen much more closely since the
12 passage and the strengthening of the Community
13 Reinvestment Act.
14 The matter before the Board this
15 morning, the acquisition of Citicorp by
16 Travelers, speaks somewhat to our concerns and
17 our hope. Citicorp and its affiliates, such as
18 Citibank, has worked closely with Queens County
19 for the past ten years. We've been fortunate
20 in having the direct participation of Citibank
21 in much of our work, and this work has taken
22 the form of Citibank employees who were civic
23 leaders, provide leadership within the county
24 itself, who live in Queens County, but also
25 more directly in lending to small business
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2 clients. As a financial supporter, we have
3 enjoyed Citibank philanthropic support and
4 providing technical assistance, particularly
5 around issues of how to structure real estate
6 investment.
7 The question that is posed for this
8 acquisition is harder. After listening to
9 community developers, which Citibank I think
10 does very well, the question is, would there be
11 action? And action is another way of defining
12 the purpose of this public hearing. What
13 actions had been taken or are proposed to be
14 taken to meet the credit needs of our
15 community?
16 We have very little experience with
17 the Travelers Group. The issues of the
18 availability of insurance products and the
19 cost/risk analysis that seems to always produce
20 higher premiums in a place like Queens County
21 is well-known. One hopeful note, however, we
22 believe that the Travelers Group can learn from
23 Citicorp: Investing in our communities is a
24 good business and profit does not need to come
25 from higher costs charged for a perception of
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2 higher risk.
3 More information is needed about the
4 potential for a bank holding company to conduct
5 nonbanking activities. If access to affordable
6 products is available as a result of this
7 relationship, these nonbanking activities could
8 produce significant benefits to our community
9 For example: Investment health and retirement
10 products for nonprofits and specific groups of
11 individuals; local recruitment for training and
12 employment opportunities.
13 The other part of the question is,
14 will there be a strategy to invest the $6
15 billion increased commitment by Citicorp in
16 community development? So far Citibank's
17 participation has been significant. The
18 commitment to increase lending and support for
19 community economic development from the current
20 level of $136 million to $6 billion over the
21 next ten years should mean that the impact will
22 be even larger. The commitment is a major
23 challenge, and we have encouraged that
24 implementation strategies with the community
25 development partners must begin immediately.
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2 In order to move $6 billion into
3 community development over the next ten years,
4 I think Citicorp has realized that it requires
5 increased resources, staff and support, to move
6 those kinds of commitments.
7 We urge the strategy to include the
8 use of community development intermediary and
9 technical assistance providers which have a
10 knowledge of local communities. It is the only
11 way we'll ever seen the resources in Maspeth,
12 in Cambria Heights or on Sutphin Boulevard,
13 which I should just footnote has already been
14 supported by Citicorp.
15 I think it is important, one final
16 concept, that there be created an investor
17 environment. Over the last 15 years, as you
18 all well know, we have seen a major change in
19 how affordable housing gets financed in this
20 country. In New York City alone, thousands of
21 units have been created. The reason why is
22 because there was an economic concept of
23 creating value in the marketplace, where none
24 previously existed by coupling investment with
25 tax credits is a strategic way of rebuilding
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2 and revitalizing communities.
3 This has allowed investors to analyze
4 a different way of analyzing return and has
5 mitigated the traditional discussion of
6 underwriting risk. I can remember trying to
7 structure some of the very early tax credit
8 deals with some of Fannie Mae's very early
9 investments with banks in Philadelphia, and we
10 weren't even sure what those investments should
11 look like, but the same economic concept needs
12 to be used.
13 The same economic concept must be
14 used in economic development. Small business
15 owners, and particularly minority and
16 women-owners rarely have the luxury of
17 considering an investment. Most financial
18 institutions cannot mitigate the risk of
19 lending to startups or when an operation needs
20 to grow and expand.
21 So hopefully the combination of the
22 Travelers and Citicorp, with Travelers' history
23 in investment, will bring about a different
24 kind of risk analysis that includes
25 nontraditional equity, such as labor, family
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2 cosigners or intellectual property, developing
3 a secondary market for small business loans,
4 using a pooled risk concept, and, finally, the
5 possibility of providing leadership for
6 federal, state and local tax credits, and to
7 create value in small minority-owned businesses
8 in our neighborhoods will make a huge
9 difference.
10 Is the $6 billion commitment enough?
11 The answer is no. Is it significant? Yes.
12 The only correlation I can draw is that Queens
13 County is a 60-percent owner of a shopping
14 center, one of the first built in the Hollis
15 neighborhood in Queens. We've received about
16 $200,000 in income from the ownership, net
17 income from the ownership of this shopping
18 center as a limited partner.
19 Recently the corporation made a
20 commitment to invest $25,000 in the Queens
21 Access Neighborhood Fund with two premises.
22 One, it can be used to be invested or loaned as
23 risk and, two, that it would be a magnet to
24 pool other funds.
25 Is $25,000 significant in that
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2 neighborhood? No. But the way that money is
3 structured is significant because it could be
4 used for the risk and because it represents
5 almost 15 percent of the total net income on
6 that project.
7 I think that those kinds of
8 guidelines in looking at the notion of making
9 an investment in a community versus just
10 lending products to a community could make a
11 dramatic difference in how the $6 billion
12 increases.
13 Thank you very much.
14 MR. LONEY: Thank you.
15 Mr. McDonald.
16 MR. MCDONALD: Thank you for the
17 opportunity to testify this morning. I gladly
18 volunteered to testify before you today
19 regarding the many years of support that
20 Citibank has offered The Doe Fund, which I am
21 the president and founder of, and the
22 confidence I have that Citibank will continue
23 its commitment to our work well after the
24 merger with Travelers.
25 The mission of The Doe Fund is to
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2 empower formerly homeless individuals to work
3 and to realize their potential to live as
4 responsible, productive and self-sufficient
5 individuals.
6 In 1990, The Doe Fund launch Ready,
7 Willing & Able, an innovative work and job
8 skills training program which provides homeless
9 participants with meals, housing, social
10 services, basic education training and above
11 all, paid work opportunities. Since its
12 inception, the program has helped over 500
13 individuals to secure full-time employment and
14 permanent housing and to achieve lives of
15 productivity and independence.
16 The Doe Fund's original Ready,
17 willing & Able residence is located in Bedford
18 Stuyvesant, Brooklyn.
19 In 1996, The Doe Fund expanded the
20 program to the formerly city-operated Harlem
21 Men's Shelter, and on May 4th of this year, The
22 Doe Fund launched a Ready, Willing & Able
23 program in Jersey City, New Jersey. We also
24 operate the same program in Washington D.C.
25 Today The Doe Fund serves over 800
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2 formerly homeless member and women annually and
3 Ready Willing & Able stands as a model welfare
4 to work program for homeless service providers
5 nationwide.
6 The success and expansion of Ready
7 Willing & Able as has been experienced over the
8 years would not have been possible without the
9 support and guidance of Citibank. In 1991,
10 shortly after The Doe Fund opened the doors of
11 its first Ready Willing & Able residence, vice
12 president and director of corporate
13 contributions, Mr. Paul Ostergard, and several
14 Citibank colleagues, visited the program.
15 Impressed by the program's work-based
16 philosophy and recognizing the great need and
17 potential among our city's homeless population,
18 Citibank awarded The Doe Fund a grant of $5,000
19 and expressed a sincere interest in developing
20 a relationship with what was then a fledgling
21 organization.
22 Since that first visit, Citibank has
23 provided The Doe Fund with annual grants in
24 support of our work in excess of $50,000.
25 Citibank employees also frequently make
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2 matching gifts to support our work, and one
3 employee, Ms. Peggy Cohen, a vice president of
4 private banking, has served on The Doe Fund's
5 board of directors since 1995. Ms. Cohen, who
6 served as chairperson of our board from 1996 to
7 1997, has tirelessly given of her time and
8 energy in support of our work.
9 In addition to financial support over
10 the years, Citibank has generously provided
11 banquet rooms in its corporate headquarters for
12 community and board of director's meetings.
13 Last spring Citibank hosted a community
14 breakfast for prospective individuals and
15 foundation donors which resulted in a grant of
16 $75,000 from a local family foundation.
17 Most recently, the Citicorp
18 Foundation has awarded The Doe Fund a grant of
19 $10,000 in support of a revenue-generating shoe
20 making business, Harlem Shoemakers, Inc. With
21 the help of internationally renowned shoe
22 designer, Joe Famolare, The Doe Fund is working
23 to open a shoe factory in Harlem. Harlem
24 Shoemakers will employ low-income Harlem
25 residents, graduates and trainees of the Ready
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2 Willing & Able program.
3 Citibank is currently considering a
4 $500,000 line of credit for that business. I
5 might add parenthetically on lines of credit,
6 we're a small not-for-profit. We do about $12
7 million a year now and have about 150 employees
8 from none in 1990. So we grew during a period
9 of time that was -- we could call it a
10 depression in the northeast. And it is very
11 difficult to get banks to give lines of credit
12 to not-for-profits. I went to every bank in
13 New York City, and the only bank that would
14 give us the line of credit was Citibank.
15 Given that relationship, I feel
16 confident that they will continue to support
17 our work and grassroots organizations like our
18 own after they merge with Travelers.
19 Now, I might say, and I know it is
20 the not the subject of the hearing today, but
21 Travelers has been very supportive of our work.
22 Travelers is a terrific philanthropic company.
23 We only see good things coming about, as the
24 merger of these two great companies make for
25 greater support for our organization.
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2 Thank you for the opportunity to
3 testify.
4 MR. LONEY: Thank you, Mr. McDonald.
5 Mr. Espaillat. Is that how you say
6 that?
7 MR. ESPAILLAT: Yes.
8 Good morning, ladies and gentlemen,
9 my name is Freddy Espaillat and I am a graduate
10 of the Academy of Finance at Brandeis High
11 School in New York City.
12 Last summer I had what I felt was the
13 opportunity of a lifetime --
14 MR. LONEY: Could you put the mike
15 closer to you, please.
16 MR. ESPAILLAT: I applied to Salomon
17 Smith Barney for a summer internship they
18 sponsor as part of the Academy of Finance
19 program. I sent in my resume, was interviewed
20 for the position and was placed in the high net
21 worth department at Salomon Smith Barney.
22 This was my first job in the real
23 world and everyone at Salomon Smith Barney made
24 me feel like I was part of the organization.
25 My supervisor, Tina Monahan, took me out to
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2 lunch at least once a week and give me many
3 responsibilities.
4 I worked on the computer inputting
5 data into the database. I updated client
6 portfolios, and I was included in daily
7 department meetings. My internship at Salomon
8 Smith Barney taught me the value of teamwork,
9 punctuality, and gave me the ability to network
10 with coworkers. I feel all of these things
11 will help me build a better future.
12 In addition, I feel that my
13 internship greatly advanced my computer skills
14 which will help me when I go either to Barouch
15 College or DeVry Institute where I plan to
16 study computer programming and business
17 management.
18 I don't believe that I would have had
19 the opportunity to do any of these things if
20 Sandy Weill and the Travelers Group did not
21 create these opportunities for the students in
22 the Academy of Finance.
23 In conclusion, I would like to say
24 that I believe that the expansion of the
25 Travelers Group will make even more internship
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2 opportunities for many more students in the
3 Academy of Finance.
4 Thank you very much for the chance to
5 speak to you today.
6 MR. LONEY: Thank you very much.
7 I can't see that far.
8 MS. CHIN: My name is Margaret chin.
9 MR. LONEY: You are speaking for
10 Mr. Galan?
11 MS. CHIN: I am speaking on behalf of
12 Mr. Julie Colon.
13 Good morning. My name is Margaret
14 Chin. I am the executive director of the Asian
15 Americans for Equality Fair Housing Center.
16 I'm also speaking on behalf of our affiliates,
17 Asian Americans for Equality and Renaissance
18 Economic Development Corporation.
19 AAFE is a community-based nonprofit
20 organization founded in 1974 to advocate for
21 equal opportunities for minorities. We are
22 located in Chinatown, Lower East Side and
23 Flushing, Queens. Serving an estimated 20,000
24 people annually, AAFE's programs and services
25 include housing development, home ownership,
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2 housing rights, entitlement services
3 counseling, citizenship counseling, civil
4 rights, economic development and technical
5 assistance. AAFE has been actively advocating
6 for greater community reinvestment by banks
7 since its inception in the '70s.
8 The AAFE Fair Housing Center conducts
9 education and outreach, testing and assists in
10 the filing of complaints in the areas of fair
11 housing and fair lending to Asian American
12 communities in all five boroughs. The
13 Renaissance Economic Development Corporation is
14 a federally certified Community Development
15 Financial Institution, with a loan pool of
16 approximately $1 million to conduct lending
17 throughout the five boroughs in concentrated
18 areas of Asian and Latino immigrant
19 communities.
20 Today I would like to make you more
21 aware of the specific needs of the Asian
22 community generated by cultural and linguistic
23 differences, the impact of the Community
24 Reinvestment Act on the Asian-American
25 community, specific ways in which CRA can be
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2 strengthened to benefit low-income and minority
3 communities and the recommendation to Citibank
4 in light of this merger.
5 Asian-Americans are the fastest
6 growing population in both the United States
7 and New York City. The number of
8 Asian-Americans in New York City has doubled
9 from 1980 to 1990 from 3 percent to 7 percent
10 of the city's population, accounting for nearly
11 half a million people. By the year 2,000,
12 Asians are expected to compose over 10 percent
13 of the New York City's population.
14 Today, the diversity of the Asian
15 community is represented by over two dozen
16 nationalities, each with its distinct language,
17 religion and culture, its distinct challenges
18 and potential. Two out of three of us were
19 born in our native countries, and the majority
20 of those who chose to come here have difficulty
21 with language and its dominant culture.
22 The staggering four-fold growth in
23 the past 20 years of the Asian population has
24 spawned many challenges in its wake. The Asian
25 community lives in one of the most densely
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2 populated areas in the nation. In New York
3 City's Chinatown, there are 189 persons per
4 acre. Other areas of the city have only 37 per
5 acre. This density is accurately reflected in
6 the fact that in Chinatown, two or three
7 families often live together in a single
8 apartment. 95 percent of the housing stock in
9 Chinatown predates 1939, exacerbating the lack
10 of services and investment by the larger
11 community.
12 The Asian community is a savers
13 community. The increased population brought
14 tremendous deposits into banks operating in
15 Asian-concentrated enclaves. In Chinatown
16 alone, the deposits total $4 billion. But most
17 banks do not have mortgage officers who speak
18 Asian languages. Also, Chinatown landlords are
19 unable to access affordable financing for
20 building improvements. This lack of capital
21 allows for extensive housing deterioration,
22 causing dangerous conditions that leads to
23 fires, deaths and homelessness. Chinatown's
24 housing stock is among New York City's oldest
25 and has some of the most run-down conditions.
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2 According to a letter published by
3 Ming Pao Daily News, this was in 1997, this was
4 the rate of home ownership, and the Asian was
5 rated among the lowest in terms of home
6 ownership rate. Nationally among whites is
7 70.8 percent; women at 49.5 percent;
8 African-American at 44 percent; Latinos at
9 43.9; and Asian at 42 percent.
10 AAFE has found that home ownership
11 rate is an important vehicle for the Asian
12 community to enter the mainstream society and
13 to improve local communities. The lack of
14 Asian home ownership is caused by a dire lack
15 of information about home ownership and access
16 to credit and its related benefits available to
17 the local communities.
18 To overcome these obstacles, AAFE has
19 led a multipronged effort to meet the
20 challenges of the Asian community. Our work to
21 meet the challenges of the language and
22 cultural barriers has resulted in unprecedented
23 success, accounting for more awareness and
24 access to mainstream services.
25 In 1984, AAFE developed the first
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2 ever housing development project to utilize the
3 federal Low Income Housing Tax Credit program,
4 launching a public/private partnership that
5 continues to gain steam today. In the past ten
6 years, AAFE has raised over $40 million to
7 develop 400 units of affordable housing. Also
8 working with public and private partnership, we
9 counsel and access over $5 million of
10 affordable mortgages for over 500 families.
11 AAFE has a long history of
12 partnership with Citibank. Citibank holds the
13 largest proportion of AAFE's financial
14 businesses. AAFE is one of Citibank's Partners
15 In Progress, which contributes to AAFE's
16 housing development on the lower east side. We
17 have seen Citibank take a leadership position
18 in serving the Asian-American community in the
19 delivery of retail products, but we encourage
20 Citibank to deeper its commitment to economic
21 and community development to the Asian-American
22 community in the New York metropolitan area and
23 in Citibank's other major service areas.
24 AAFE looks to continue to work with
25 Citibank to deepen their investments and
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2 activities with the Asian-American and other
3 immigrant and minority communities.
4 We recommend, one, focusing on
5 partnering to provide long-term credit, 30
6 years versus the typical 10-year term, for
7 investment in new construction, such as new
8 in-fill housing throughout on the Lower East
9 Side. Today AAFE needs over 10 million in
10 long-term equity to continue our rate of
11 development. More would be needed to meet the
12 needs, or to spur greater activities on a
13 national level.
14 Partnership to spur community
15 development and home ownership initiatives with
16 the Asian-American community on a national
17 level. Cosponsoring national economic
18 development summits for the Asian-American
19 community. Cosponsoring technical assistance
20 workshops to increase the development capacity
21 of community groups.
22 Partnership with other organizations
23 and AAFE to create a community advisory group
24 to provide input directly to Citibank on local
25 and national issues that affects low and
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2 moderate and minority communities.
3 Provide more multiyear capacity
4 building grants to stabilize and expand the
5 work of nonprofit partners who have been forced
6 to fill the void of shrinking government
7 resources to spur economic growth in our
8 communities.
9 In this time of mega-merger, we
10 expect Citibank to expand its role in providing
11 financial services and spurring economic and
12 community development within the communities
13 they serve, especially the low and moderate
14 income, immigrant and minority communities. It
15 will be a big challenge but continuing to work
16 with community groups who understand the needs
17 can make the difference.
18 Thank you for the opportunity to
19 speak today.
20 MR. LONEY: Thank you. I might ask
21 you, Ms. Chin, have you asked Citibank about
22 that? You presented that list of your requests
23 to them. Have you gotten a response?
24 MS. CHIN: We've been having
25 discussions with Citibank. The executive
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2 director is not here for AAFE, but we do have a
3 long-working relationship with them, and I know
4 they support many of our projects, and I think
5 one of their vice presidents, Wendy Takhaja,
6 she is on the board of the Fair Housing Center.
7 So we will be discussing some of this, but we
8 would like to make the proposal in public.
9 MR. LONEY: Any questions?
10 MR. ALVAREZ: I had a question for
11 Ms. Nahikian. You spoke of the importance of
12 having both equity investments as well as
13 credit available for starting small businesses
14 and revitalizing communities. If you start
15 from the premise that banks have very limited
16 ability to make equity investments, their legal
17 authority is very limited in that area so they
18 are primarily lenders, and you look at
19 Citibank's commitment, or commitments of other
20 banks that have made similar kinds of
21 commitments to make CRA kind of lending, what
22 would, in your view, be the most effective way
23 that the banks could use their credit abilities
24 in order to help revitalize the community?
25 What kind of partnerships are available to
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2 bring equity into serve as a base for that kind
3 of bank credit?
4 MS. NAHIKIAN: I raise the issue of
5 equity or investment because I think the
6 opportunity with Travelers presents some of
7 that, perhaps for the first time. Banks, of
8 course, do loan money. That is their function.
9 I think there are three or four different ways
10 that credit issues could be addressed.
11 One is the notion that you have to
12 view underwriting of small businesses and what
13 brings value and what can be used as collateral
14 or equity in a lending situation. I think that
15 has to be looked at differently. I think that
16 you do have to look at things like family
17 equity, labor, some of the things that may not
18 traditionally be on the chart when you try to
19 value enough equity into a business to support
20 a loan.
21 I think another critically important
22 thing is the creation or working maybe in a
23 pool-risk situation to create some secondary
24 markets for small business loans. I think
25 everyone recognizes that on one hand small
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2 businesses have a high failure rate. On the
3 other hand, they are the fastest growing source
4 of employment in our country. I think it is
5 particularly true with minority and women
6 owners, that because of leadership from some of
7 our financial institutions and CRA, we are
8 seeing a number of new businesses and the
9 business owners get loans.
10 What we found is that the second loan
11 is even higher because it falls in a much more
12 traditional hole of do you have enough equity,
13 do you have enough operation. Particularly
14 women business owners seem to have a very hard
15 time getting the second line, the expansion,
16 the growth loan. Those are some of the
17 recommendations I would make.
18 I certainly think that AAFE has made
19 some excellent suggestions, because I think
20 that having direct input through an advisory
21 group will make a big difference. I'm not sure
22 that any of us know exactly what these products
23 look like. We just know that the risk analysis
24 doesn't work, but these are strong economic
25 institutions in our community that need
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2 support.
3 MR. LONEY: Thank you.
4 Any other questions? If not, I will
5 thank the panel.
6 (Continued on next page)
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2 MR. LONEY: I have to adjust the
3 schedule a little bit. Our next group will be
4 comprised of a couple of folks scheduled from
5 panel 18, and one from panel 19. I would ask
6 Jerry Weber and Jane Canner, and Dr. Francois
7 de Cassagnol to come forward please.
8 MS. WEBER: I'd like to thank you for
9 inviting me here. I am working, and I am the
10 director of branch management for The New York
11 Association for new Americans which is the
12 largest resettlement agency, refugee
13 resettlement agency in the country basically.
14 We have a fifty-year history and we started off
15 with the resettlement of holocaust survivors
16 coming from Europe.
17 We have a really new relationship
18 with Citibank. It's approximately two years
19 old, and I must say that it's a good
20 relationship because it's a relationship backed
21 with commitment.
22 We resettle roughly anywhere between
23 ten and 15,000 people a year. Most of the
24 folks now coming from the former Soviet Union.
25 We also have settled folks from Vietnam, from
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2 Tibet, from Liberia, et cetera.
3 We also have a very large citizenship
4 program helping folks who become citizens and
5 provide legal assistance in that area. Most of
6 our costs are absorbed through foundations,
7 public and private support and some small fees
8 to cover costs that the INS has in fact asked
9 to be collected, so we do that.
10 We are located right down here in
11 Battery Place, but we work in four of the five
12 boroughs. The only borough we do not work in
13 at this moment is Staten Island.
14 What Citibank has offered us in terms
15 of commitment is two things. One is a vision
16 of a real commitment to work together to
17 revitalize the areas and to put some resources
18 into some parts of Brooklyn where we have a
19 large number of folks from the former Soviet
20 Union living, and that's a part of South
21 Brooklyn.
22 The other thing that Citibank has
23 done already, and Mr. McDonough from the Doe
24 Foundation talked about, you know lines of
25 credit and so on. They have been very good
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2 about that, and, in fact, have lowered some of
3 the costs to almost nil, so that we could move
4 money and work with money, because we do
5 provide assistance for the first four months
6 for our clients to keep them off public
7 assistance. So it's not only monetary
8 assistance from the philanthropic community but
9 we also work very hard to move clients into the
10 area of self-sufficiency, and, you know I just
11 need a very quick anecdote here, is that when I
12 deal with folks who come from the former Soviet
13 Union, a lot of them their first job is their
14 last job, and it's a whole different mind set
15 coming to this country. It is not your first
16 job is necessarily your last job. It's your
17 beginning.
18 But where Citibank has been extremely
19 helpful right now, we are working with them in
20 the micro enterprise program where we got some
21 OR grant to do some micro enterprise. They
22 have a member one of their vice presidents
23 sitting on our panel, they are providing
24 technical assistance for us and you know I very
25 quickly run that through.
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2 The other place they are is matching
3 up some of our creative folks with SBA loans
4 giving them technical assistance in how to do
5 that working through that with them and helping
6 them any way they can. Our clients come from
7 folks who have limited, limited, limited
8 education, not the folks who are computer
9 literate to the nth degree, but their whole
10 computer literacy is main frame, okay, so there
11 is a transaction there that goes on, I can't
12 get into the technical end, because you'll see
13 how computer illiterate I am.
14 MR. HODGETTS: I probably wouldn't
15 notice.
16 MS. WEBER: But that in fact is where
17 we can now nurture some of our people to start
18 as entrepreneurs into moving up the ladder of
19 success.
20 The other area that Citibank is
21 working with us on is the whole thing of
22 planning towards the future and working with us
23 to do some community revitalization, some
24 economic development, both from a housing point
25 of view and from a small business point of view
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2 so that that community becomes self sufficient
3 as a whole and becomes dependent upon itself to
4 survive and I think that's extremely important.
5 Lastly, their branch in Sheepshead
6 Bay has a number of folks who are bilingual,
7 trilingual, we'll name it, who have worked with
8 our folks in teaching them the banking system,
9 in helping them through that system, because
10 one of the things we've done, since we do cash
11 assistance in the first four months, is we have
12 used the ATM systems so that checks and money
13 do not move along, and they have been very
14 helpful in moving our clients through the steps
15 and educating them in the whole banking system.
16 So I thank you for your time.
17 MR. LONEY: We thank you.
18 Ms. Canner.
19 MS. CANNER: On behalf of Classroom
20 Inc., New York City nonprofit organization,
21 where I'm director of programs, I am pleased to
22 be here to support Citibank in the work
23 accomplished through their foundation to
24 improve communities across the country.
25 Classroom Inc., has a two-fold
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2 mission to engage students in productive
3 learning experiences that will help them in
4 their transition to the world beyond school and
5 to provide teachers with the tools and support
6 they need to enhance their effectiveness.
7 To accomplish our mission we create
8 computer-based simulations of real life
9 experiences for use by students in middle and
10 high schools and we provide ongoing
11 professional development opportunities and
12 support for educators participating in our
13 program.
14 Classroom Inc., is committed to
15 serving those young people who most need to
16 believe in a world beyond the school where they
17 can indeed achieve, and who sadly often have
18 the fewest resources available to them.
19 Participating students are afforded an
20 opportunity too seldom available to our
21 financially and socially disadvantaged
22 children, access to technology, and not mere
23 access, but constructive access through
24 effective software.
25 Through our relationship with
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2 Citibank we have been able to create
3 simulations and offer these learning tools to
4 thousands of teachers and students across the
5 country.
6 In 1994, Citibank provided support
7 for our first banking simulation Chelsea Bank
8 and subsequently fully funded the development
9 production of a financial services stimulation,
10 a course with a community bank which was
11 completed in 1996.
12 These banking simulations served to
13 bring students to a level of financial literacy
14 and to help them understand the role of the
15 bank in their community. They are introduced
16 to a variety of concepts such as profit and
17 loss, interest rate, credit worthiness,
18 mortgages and loans.
19 The simulations are also designed to
20 encourage these students to competency that I
21 have identified by the US Department of Labor
22 Secretary's Commission on Achieving Necessary
23 Skills or SCAN competencies, things such that
24 they will need in the world of work such as the
25 effective use of resources, the ability to work
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2 collaboratively with others and proficiency
3 with technology.
4 External resources that has been done
5 on our work today and on the simulations
6 provides evidence that they are effective.
7 Indiana University has been studying students
8 use of the Chelsea Bank, and has found that
9 students using it are effectively in the SCAN
10 skills, and the case studies show that the
11 students have learned about banking customers
12 and awareness of the world of work.
13 At another more recent research study
14 at the University of Pittsburgh Learning
15 Research and Development Center has been
16 studying our financial services simulation
17 because we're a community bank and they have
18 reported that it's one of the best simulations
19 available to use in schools to work programs in
20 schools, and that it provides many
21 opportunities for the students to learn and use
22 a variety of SCAN skills and our own internal
23 research has corroborated this.
24 Citibank and the Citicorp Foundation
25 have helped us position our simulations in a
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2 variety of school districts across the country.
3 With Citibank taking the lead, we have been
4 introduced into school districts of Las Vegas,
5 Nevada and Sioux Falls, South Dakota where we
6 are serving hundreds of middle and high stool
7 students.
8 We began our work in Sioux Falls in
9 1997 and are expanding it there this year and
10 in Sioux Falls our work has now been embraced
11 at the state level, and with Citibank's support
12 we would hope to be expanding there.
13 We have also begun to look at
14 partnerships in the States of Florida and
15 Georgia where Citibank is an active community
16 member. In addition, our simulations are used
17 in areas where Citibank is not our primary
18 partner, such as in New York City, Philadelphia
19 the State of West Virginia, Houston and other
20 places across the country.
21 We deeply value our relationship with
22 Citibank and Citicorp Citibank leaders share
23 our goal for improving teaching and learning in
24 schools so that students may look forward to a
25 stable and productive future.
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2 We have confidence that Citibank will
3 continue to play an important role as a
4 community development financial leader and that
5 its support will continue as a corporate value
6 after the proposed merger.
7 Thank you.
8 MR. LONEY: Did I understand you to
9 say Citibank is not your primary partner in New
10 York City? Is that what you said?
11 MS. CANNER: No, I'm sorry, I said
12 they have been the lead role for bringing us
13 into Sioux Falls and Las Vegas. They help us
14 produce the simulations which are in widespread
15 use in New York City.
16 MR. LONEY: Dr. de Cassagnol.
17 DR. de CASSAGNOL: Thank you. I have
18 provided some information for you all.
19 I am Dr. Cassagnol. I'm the founder
20 and chairman of Dr. Cassagnol Cyber Banking
21 Group, and Dr. Cassagnol Foundation. Certified
22 minority fully centered by the state and some
23 of the government. Dr. Cassagnol Foundation is
24 non-profit, tax exempt, and I have to make it
25 very clear that we do not seek the contribution
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2 of organization or contribution from anybody,
3 that we doing everything by ourself. And what
4 I would like to see, make it very clear that I
5 support the merger.
6 I had a long talk with Matthew Lee
7 yesterday. I tried to convince him to give me
8 his blessings, and he had done that. I could
9 not convince him to wear the Travelers logo,
10 but he understands and knows our procedure and
11 the message we send to these people.
12 We want to pay for the communities
13 and some of them do it in a different way. In
14 my role as a community person, Matthew Lee is
15 my neighbor and friend, and I'm very happy that
16 he understands my position that I support the
17 merger. He tried to convince me to not to say
18 that I support Citicorp, because for some
19 reason he doesn't care that much for Citicorp.
20 (Laughter)
21 And I don't know why, but, anyhow, I
22 told him I support Travelers because I had a
23 lot of good contact with Travelers. I have sat
24 with them, and they have pledged that they work
25 together with me. With all fairness to
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2 Citicorp, I have never tried to get in contact
3 with Citicorp, because of the reason that I
4 have had a lot of contact with other banks and
5 I have gone nowhere with them, so I try to save
6 them the aggravation by not being in contact
7 with them.
8 The Travelers, I have presented a
9 huge project to them. This is one of the
10 projects to, the vice-president in charge of
11 property casualty, and that project
12 incorporates the development of the cyber
13 village. In the cyber village we have
14 everything in it from cyber university on line,
15 a greeting cards, everything you can find,
16 cyber view, cyber banking, everything you can
17 find in a village, but electronically.
18 I have presented a huge package like
19 that to them, and we have set up the mechanics
20 to start working together. One of the promise
21 I had to make to Matthew Lee yesterday that if
22 for any reason that Travelers decided not to
23 work together with me, to give him a call, and
24 we'll get our volunteers and go to the
25 building.
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2 I do not plan to do that because
3 Travelers seems to be, you know, very receptive
4 to me, to my organization and I plan to work
5 together with them, and in that way I support
6 Citicorp.
7 This is the 21st century project and
8 I totally believe we have to spend a lot of
9 time and money in developing that project.
10 This is the 21st century project, and this is
11 another opportunity for an organization like
12 the Travelers to work together, to create the
13 kind of economic development that probably will
14 not find people like myself to work with.
15 This is a unique experience, and what
16 I would like to happen is to work with me and
17 create about two thousand jobs, you know, for
18 the next five, ten years, and I strongly
19 believe that we can do it, because I only use
20 commercial hack library and that hack library
21 can be converted to an unlimited amount of
22 products, and all we have to do is have people
23 working together with us to help people like
24 the people of my Inner City, to make them a
25 little bit happier, because the frustration and
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2 aggravation with them is people are not
3 listening.
4 And as you can see the way they take
5 all the umbrellas yesterday was to catch the
6 attention of people really making the decision.
7 Again, that I want to make it very clear that I
8 support the merger. Based on my talk with
9 Matthew Lee yesterday, I don't think because of
10 me, I don't think he will want me to deal in my
11 project, and not create the jobs that was
12 promised to create in the Bronx, so he supports
13 me and I will ask the Fed in their
14 consideration not to deny the merger, to give
15 Travelers and Citibank an opportunity to people
16 like myself, and create the kind of
17 opportunities that people like Inner City are
18 looking for.
19 And, again, I'm extremely happy to
20 support the merger. And then I hope that
21 anything I can do to help to support those
22 activities to prevent any delays, because I do
23 understand people like myself create a lot of
24 aggravation for some of those people with
25 Matthew Lee, and I do not want that to happen,
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2 the same thing that happened with the state
3 merger.
4 We just want to go on and start doing
5 the work that we need for the community. Thank
6 you.
7 MR. LONEY: Thank you. Any questions
8 of these folks?
9 MR. ALVAREZ: I have a question for
10 Mr. Weber. In dealing with immigrants -- in
11 fact, any of the three may want to answer -- do
12 you deal with a bunch of immigrants in
13 particular that come from cash based economies,
14 and they're coming here and beginning to
15 navigate around the financial system in the
16 United States, the bank-serving economy, is
17 there much resistance or difficulty in folks
18 getting adjusted to a different kind of system?
19 MS. WEBER: Yes, especially at the
20 beginning. One of the issues is trust of the
21 institution. They come from a place where very
22 honestly without a cash economy they don't
23 survive. That's the way they've done business.
24 That's the way they've done business for
25 generations, and it's something that we have to
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2 work with, and explain and we do a whole thing
3 on acculturation, and part of that is to move
4 along and to teach people gradually the system
5 and how it works for them, and that they can
6 trust the system.
7 And, remember, you got folks who came
8 off the plane. You know, years ago you'd come
9 off the boat. But now you got folks coming off
10 the plane with the same fears. They don't know
11 how to get from the airport to where they're
12 going, and they don't know how to get on the R
13 or the N. So, you know, we start at that
14 point. We meet them at the airport.
15 And, you know, I would say two months
16 of or three months of trauma, you know,
17 depression. You know, they've left an
18 environment they're very comfortable with.
19 Many of them have been forced to leave and
20 they're coming here.
21 Now, it's a little better there
22 because there are relatives here now that take
23 them in, but it takes a lot of getting used to.
24 And, you know, if you come to our offices from
25 the first to the fourth month you will see it
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2 in the dress, how they dress when they first
3 come here and how they slowly become Americans
4 in their dress and some of their gestures even
5 within that short period of time, but, yes, it
6 is an issue.
7 MR. HODGETTS: I have a question of
8 Dr. Cassagnol. You believe that the merger
9 will result in increased community development
10 activity in the South Bronx?
11 DR. de CASSAGNOL: The only way the
12 merger can resolve in increased economic
13 activities in the Bronx is for people like the
14 Travelers and Citicorp to work with people like
15 myself.
16 MR. HODGETTS: More than they do
17 today?
18 DR. de CASSAGNOL: Well, I don't
19 want, I look at Travelers as a friend, and I do
20 not want to say anything to challenge them or
21 to challenge Citicorp, but what I would like to
22 see or what people like Matthew Lee and other
23 community activists would like to see, is for
24 us to get involved in creating things for
25 ourself creating jobs.
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2 We do not need $5,000, you know,
3 contribution a year for the community. We
4 don't need that. We need to create the
5 mechanism to develop jobs in the community and
6 people like myself can be a link between these
7 people and Travelers or Citibank, but it is, as
8 I indicated in some of my writings, it is
9 impossible to be in a community like New York
10 City, almost 57 percent minorities and not
11 doing anything for this group, and saying that
12 we're doing something for the community.
13 You don't have to be a rocket
14 scientist to understand that. You cannot
15 increase community activities by not getting
16 people like myself and other people get
17 involved in creating those jobs.
18 I have a huge amount of resources
19 that I can help creating those jobs. It has
20 been impossible for some of the banks to work
21 together with me for one reason or the other.
22 They will say, well, these affairs, you know,
23 we cannot do this, we cannot do that, and we
24 are hurting people. Like these people
25 yesterday with the red umbrellas, they are
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2 hurting. Their aggravation is to trying to
3 catch people's attention and I think in my
4 position the resources that we have we can
5 create that link between them and Travelers.
6 If Travelers work with me, continue
7 working, because it pays to work with me, with
8 all fairness to Citicorp, I have never get in
9 contact with them, so I cannot give, but if
10 they put their heads together, work together
11 with me, I have provided information to
12 Citicorp people, some of the vice presidents --
13 Ms. Pamela is here? She is there.
14 I provided information to her. I
15 provided information to them. I provided thick
16 package like that to the Travelers' people.
17 All they have to do is find the mechanism to
18 work together with me and create those jobs and
19 we can only develop an activity, but it is not
20 going to happen if you don't work with people
21 like myself, it's not going to happen.
22 It's just like a dream, and that will
23 have to be fulfilled myself or people like
24 myself.
25 MR. HODGETTS: Thank you.
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2 MR. LONEY: Thank you very much.
3 I understand from panel 19 scheduled
4 for 9 o'clock we have Robert Sanchez, Carmelo
5 Loran and Truda Cleeves Jewett. Would you come
6 up, please.
7 MR. LONEY: Mr. Sanchez, will you
8 begin with the panel, please?
9 MR. SANCHEZ: I'm Robert Sanchez and
10 I own United Business Forms, we're printers in
11 Long Island City. I'm also vice-chairman of
12 the National Hispanic Business Group.
13 Now, part of our mission at the
14 National Hispanic Business Group is we seek to
15 expand opportunities to our members by
16 fostering a dialogue in economic exchanges with
17 corporate America, about a year ago we reached
18 out to the Travelers Group, and found them
19 very, very accommodating. They met with us.
20 As a matter of fact, they nominated someone
21 from our Hispanic Corporate Achiever Award and
22 then they, most importantly, facilitated a
23 luncheon meeting with an executive from their
24 purchasing department with some of our
25 executive committee members.
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2 So the point of my testimony this
3 morning was that we found the Travelers Group
4 to be on the right page as far as fostering
5 economic development in the Hispanic community.
6 The national Hispanic business group feels all
7 we need is an opportunity to open the door a
8 little bit and we'll do our job and get
9 business in corporate America.
10 That's the basis of my testimony this
11 morning.
12 MR. LONEY: Thank you Mr. Sanchez.
13 Mr. Loran.
14 MS. LORAN: Thank you. Good morning.
15 I represent the Occupation Training
16 Institution. We are a non-profit organization
17 based in the Bronx. We provide vocational and
18 educational training to adults and youth,
19 specifically youths from the Bronx where I
20 live.
21 The reason I'm here today is to
22 really testify in favor of the merger between
23 Travelers group and Citicorp. We've been
24 involved with Citicorp in expanding our
25 operation. The Citicorp services our parent
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1
2 company, and two years ago became its own
3 entity to the division and the entrepreneurship
4 of the executive director and the board of ESS.
5 We identify Citicorp Bank as one of
6 our bankers to be able to help us expand our
7 program. Due to the fact that we provide
8 vocation training in the auto mechanic field
9 which is a very diverse field, and a very
10 lucrative field for those individuals who have
11 a mechanical aptitude.
12 Citibank through its effort to the
13 Community Revitalization Act came to us and
14 provided us with assistance to assist us in how
15 best to serve our need, and reinforce our
16 philosophy of strengthening the community.
17 As some of our panelists have spoken
18 in the past in terms of revitalizing the
19 community, I think Citibank has a sensitivity
20 that needs to be, I think, recognized here
21 today that they help in strengthening the
22 infrastructure. How can a bank or any other
23 entity provide services if individuals are
24 unemployed?
25 They see that as a first step in
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2 trying to provide help to the community. We
3 provide the vocational training and the job
4 placement. Then the Citibank helps them of
5 course with the banking services of course and
6 maybe they are now available to take out loans.
7 Citibank has been working with me to
8 provide us help with the business plan and
9 other areas. We are in a 24 month process to
10 purchase city land and build a structure
11 multicertification in academic training within
12 the central Bronx, which is the industrial
13 park. Right now we're located in the annex
14 area and we are also expanding part of the
15 operations into the Hub and 129th Street.
16 I know questions were asked of one
17 other panelist. I will say that Citibank has
18 been sensitive to the community needs
19 specifically in the Bronx. We provide services
20 to residents in all five boroughs. I look
21 forward to working with Citibank. I have not
22 worked with Travelers Group, but I know in the
23 marriage between Citigroup and Travelers if
24 Citigroup educates Travelers in some of the
25 needs to the community and be more sensitive to
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2 the need I believe that the merger will help
3 not only these businesses, but also the
4 community. Thank you very much.
5 MR. LONEY: Yes, Ms. Jewett.
6 MS. JEWETT: Thank you. Thank you
7 for asking me to testify today. I am Truda
8 Jewett, the assistant executive director of the
9 Childrens Aid Society here in New York City.
10 Childrens Aid is one of the oldest
11 and largest social service agency in this city.
12 It's been here for 145 years. It serves more
13 than 120,000 children and their families each
14 year with a budget of about $45 million this
15 year.
16 We could not survive without
17 government help, without individual help,
18 without corporate and foundation help. We've
19 been fortunate, I think in that we've had the
20 good fortune to be involved in what is now all
21 the Travelers Group. We've had less, really
22 less involvement with Citicorp, but between
23 Travelers starting with Primerica, Salomon,
24 Smith Barney and Citicorp, I think in the last
25 few years those organizations have contributed
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2 more than $500,000 to Childrens Aid Society.
3 That money had gone specifically for
4 child care and for education. Interesting, all
5 of them have been particularly interested in
6 these two very important issues here in the
7 city.
8 Perhaps as important, if not even
9 more important than the financial support is
10 the leadership that this represents, and by
11 that I mean physically the leadership from
12 Mr. Weil and his wife, Mr. Diamond and his
13 wife, Mr. Denim from Salomon and his wife, and
14 Mr. Coleman and his wife from Smith Barney.
15 Between those individuals, their
16 friends and employees, they have contributed
17 more than $1.5 million in the last two years to
18 the Childrens Aid Society.
19 This leadership by example I think is
20 something that's very important in the
21 community, and while we haven't had the close
22 involvement with Citicorp, I can only hope that
23 that would increase with this merger so that I
24 support it.
25 MR. LONEY: Thank you, Ms. Jewett.
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2 Do we have any questions of this panel?
3 MR. HODGETTS: Mr. Loran, does
4 Citibank have a lending or investment
5 relationship with your organization or with
6 your graduates?
7 MS. LORAN: The parent agency that's
8 referred to currently has their business bank,
9 business account with Citibank, and we haven't
10 reached the next level because of the fact that
11 as I said before, we've just begun the creating
12 of OCI, and we're looking more into eventually
13 in trying to receive more funding.
14 What I hope to do is we are in
15 October of this year starting a program for
16 youth in the Bronx, and to incorporate banking
17 and budgeting, that hopefully the Citibank will
18 help us in terms of that. Thank you.
19 MR. HODGETTS: Thank you.
20 MR. LONEY: Are there any other
21 questions? If not, I will thank the panel for
22 coming.
23 Let me just ask the audience, Lloyd
24 Williams, Cary Sanchez, or John Defano? Are
25 any of them in the audience? If not, we're
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2 scheduled for a break, and we're early for that
3 break, but since the folks who were scheduled
4 to testify aren't here, I think we have no real
5 choice but to take the break. We'll come back
6 at the next panel scheduled for 9:40.
7 (Recess) up low piece?
8 My name is Lillian Rodriguez Lopez
9 and I serve as the acting president of the
10 Hispanic Federation, a membership organization
11 representing the Latino human services sector
12 in New York, and New Jersey.
13 I am pleased to have been given this
14 opportunity to address you about the proposed
15 merger. I can speak with authority about the
16 philanthropic activities of Citibank, and its
17 impact in the Hispanic community as well as
18 Citibank's commitment to economic development
19 in New York City neighborhoods.
20 Citibank was one of our first
21 supporters and has remained a supporter since
22 our inception in 1990. Our partnership has
23 resolved around the collection and analysis of
24 data on Latinos that serves to promote a
25 greater understanding of our social, economic,
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2 and political roles in the city. They have
3 helped us to share with the larger community,
4 our dreams, our aspirations, and our reality.
5 Citibank has supported the publication of
6 Hispano-Stats, one of our yearly publications
7 for the past three years.
8 With Citibank assistance, we
9 distributed over ten thousand copies of our
10 first Hispano-Stats, which presented a
11 demographic and economic profile of Latino New
12 Yorkers. We still receive requests for the
13 inaugural Hispano-Stats from elected officials,
14 funders, students and many of our member
15 agencies.
16 Our second edition of Hispano-Stats
17 helped interpret the political strength and
18 potential of the Hispanic community in 29 New
19 York City neighborhoods, and the third one
20 which we'll be issuing shortly will profile
21 Hispanic institutions providing services to
22 communities throughout the State of New York.
23 This I say just to illustrate
24 Citibank's commitment to a better understanding
25 of the Hispanic community in New York.
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2 Citibank has also been committed to
3 strengthening the economic fiber of the Latino
4 community. Three years ago, Hispanics in
5 northern Manhattan joined together to create an
6 economic development institution dedicated to
7 growing neighborhoods and assisting Hispanic
8 and Dominican with small business.
9 Citibank has been a partner in this
10 enterprise and today, the Audubon Partnership
11 for Economic Development grows stronger. Just
12 one month ago the empowerment zone awarded to
13 the Audubon Partnership, a three quarter
14 million dollar grant to help Dominican
15 merchants in this area.
16 This is a fine accomplishment for
17 such a young nonprofit organization. I could
18 share much more with you about Citibank, but my
19 time is limited. I just want to say that they
20 have been a very strong supporter of the
21 Hispanic community.
22 MR. LONEY: Thank you.
23 (Continued on next page)
24
25
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2 MR. LONEY: Thank you. I would just
3 say to the panel, if you have written testimony
4 and you want to make sure it all gets in, leave
5 a copy with the registration desk in the front;
6 the entire statement will be put in the record.
7 Ms. Middleton.
8 MS. MIDDLETON: Good morning and
9 thank you for affording me this opportunity to
10 speak before this panel. My name is Shirley
11 Middleton, and I am the founder of WLM Bridge
12 the Gap Family Day Care, which was established
13 to provide professional, educational, and
14 affordable childcare services in a safe and
15 motivating environment.
16 As for our children and their
17 families, our broad range and comprehensive
18 program addresses these changing needs that
19 help our clients to maintain human dignity to
20 be functional and productive members of
21 society. We provide job training development
22 and offer entrepreneurial training to the
23 family day care providers and new small
24 business operators and home businesses.
25 Bridge the Gap Family Day Care
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2 network has established a relationship and a
3 commitment with Citibank to support our
4 community entrepreneurial and economic training
5 program. They have supported these programs
6 and others through grants, and they have been
7 mainstays of our board of directors.
8 Citibank has been servicing our
9 community through a joint effort for the past
10 two years, for the past two-and-a-half years.
11 We have trained approximately 60 family day
12 care providers in developing their business as
13 a professional business, who now have had
14 access to opening up a business account with
15 the proper credentials.
16 The staff of Citibank assists with
17 the training of the providers, helping the
18 providers to develop business plans; also, in
19 terms of how to report their quarterly taxes;
20 setting up payrolls; and, also, assisting them
21 in opening up the business account that will
22 suit their business; also, they have training
23 in PC Banking; and, also, they have helped with
24 the credit plans of these providers; and they
25 have had seminars on mortgages and commercial
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2 buying.
3 Bridge the Gap supports the merger of
4 Citicorp and Travelers Insurance to become one.
5 We, the members of the Bridge the
6 Gap, hope for the merger because change must
7 come within all our lives. We do not agree
8 with their past servicing, servicing of the
9 minority communities across this land. We will
10 not quote statistics because it is all in the
11 record.
12 To go forward, we believe history is
13 a lesson we all must learn from. History keep
14 us from making the same errors over and over.
15 History has posed to us many opportunities;
16 some have been partially implemented and some
17 have not been acknowledged. We all have a
18 history, but we were not a part -- it was not a
19 part of our lives. Many changes came about by
20 war, enslavement and cheating. No matter what
21 the methods used, history remains on the
22 record.
23 Today and the future is what we are
24 addressing going into the new millennium.
25 Although we support the merger of these two
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2 financial institutions, we put before you this
3 day the following proposal:
4 Let us begin by developing a
5 community business consultant group that will
6 be directly involved with the local community
7 small businesses and home businesses; also, to
8 have staff or members from this financial group
9 to be able to be a part of the small business
10 not-for-profit board, in terms of helping them
11 in managing their business for the first five
12 years of operation, because doing business in
13 the first five years, for one who does
14 not-for-profit business development -- to have
15 the team review with the businesses, and
16 seminars, how to maintain good records, tax
17 reporting, business accounts, reviewing their
18 books every three months -- this will provide
19 the kind of support for the business to go on
20 and not become a failing business and here we
21 are again in trouble.
22 Instead of always giving us loans to
23 start up a business, provide many startup
24 business grants instead of loans, as I said
25 before. Because this creates problems; we
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2 start out with a loan and we end up in a hole.
3 We also would like partnerships to be
4 developed with the various programs of our
5 community, educational programs, between
6 Citibank, also, economic development programs
7 within our community.
8 The other thing, instead of giving
9 students loans all the time, let us develop
10 some kind of grant or scholarship for students,
11 at least for the first two years, so when they
12 graduate from college they will owe 25,000 and
13 30,000 before they get a job.
14 As we outlined in this partial
15 proposal, we challenge you to be committed to
16 all of the minority communities across the
17 land. Once again we get into classifying
18 minorities, Afro-American women, and who knows
19 better but myself and as a single parent.
20 Thank you for allowing me this
21 opportunity.
22 MR. LONEY: Thank you, Ms. Middleton.
23 Ms. Johnson-Claxton.
24 MS. JOHNSON-CLAXTON: Good morning.
25 My name is Grace Johnson-Claxton. I am the
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2 president of Johnson Home Care Services. We
3 are a nursing agency that places nurses in the
4 home.
5 Citibank has been very instrumental
6 in assisting us in our payroll and also in
7 helping us to acquire larger headquarters.
8 They also have assisted us in making available
9 different opportunities for our employees, like
10 direct deposit, and give an offering to our
11 employees, mortgages at a lower rate, and car
12 loans.
13 I enjoy a very positive relationship
14 with my bank, bank manager -- her name is Kathy
15 Wheeler -- and also with my personal banker
16 whom made the request for me to be here today,
17 Gus Patraco. I am very grateful to the support
18 and help that the bank had given to me.
19 My credit line they have increased,
20 and, as I said, that assisted me very much with
21 my payroll because many a nights before the
22 credit line -- and the business keep, you know,
23 burning up on the cash flow -- we had to divest
24 to meet our payroll. That has really afforded
25 me to have good sleep at night. It has given
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2 me that assurance, because the payroll, it's
3 very much a headache for a small business.
4 One of the things that I appreciate
5 that Citibank have done, many banks have been
6 known to not want to deal with minority women
7 owned. The true testimony, this has not been
8 the case. Many banks have been known to
9 redline. We are located in East Flatbush,
10 which is a predominantly immigrant population,
11 and it is the new headquarters that, with the
12 help of Citibank through SB loan, we got it at
13 the lower rate with that assistance. That
14 really is a true testimony that they have met
15 that criteria, which is a need in the
16 neighborhood that we have, by lending to
17 minority, by lending to a woman and by lending
18 also in the East Flatbush minority-owned
19 neighborhood. The loan that we had, it was at
20 a lower interest rate, which really helped us
21 also.
22 Once again, I am giving my support to
23 this merger because I believe that it would be,
24 much more programs would be beneficial to our
25 community, and I support this merger, and I
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2 also support the help that they are giving me
3 and also thanking my bank manager and my
4 personal banker.
5 Thank you.
6 MR. LONEY: Thank you very much.
7 It is good to sleep at night, isn't
8 it?
9 MS. JOHNSON-CLAXTON: That was a big
10 problem for me.
11 MR. LONEY: Mr. Gotto.
12 MR. GOTTO: Thank you, Governor Loney
13 and panel. I am pleased to be here today to be
14 able to address this public meeting concerning
15 the proposed Travelers/Citicorp merger. My
16 name is Alberto Gotto. I am the Provost for
17 Federal Affairs at Cornell University and the
18 dean of the Joan and Sanford I. Weill Medical
19 College in New York City.
20 Here as the dean of the medical
21 college in New York City, practicing physician
22 and medical educator, I have no special
23 credentials in business economic matters, but I
24 do want to speak about an area in which I do
25 have special and particular knowledge, and that
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2 concerns the excellent corporate citizenship of
3 the Travelers Group and its chairman and CEO
4 Sanford I. Weill.
5 Mr. Weill received his bachelors of
6 arts degree from Cornell University in 1955
7 and, of course, as we all know, he's had a
8 remarkably successful career in business since
9 then. But just as remarkable as his business
10 success has been the extraordinary degree to
11 which Mr. Weill has volunteered his time,
12 effort, his vision and his financial resources
13 to support educational, civic and cultural
14 organizations that make meaningful
15 contributions to our society as a whole.
16 Mr. Weill's been on the Board of
17 Overseers in the medical college since 1982,
18 and we have been especially fortunate to
19 witness the depth of his dedication and
20 commitment to enable Cornell State the
21 cutting-edge of medical education, research and
22 patient care.
23 In 1995 he became the chairman of the
24 Board of Overseers. I'd like to just give a
25 few examples to illustrate Mr. Weill's
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2 commitment.
3 He and Mrs. Weill endowed the Joan
4 and Sanford Weill Medical Education Center
5 which made it possible for us to introduce a
6 problem-based learning curriculum. This has
7 been extraordinarily popular with our students
8 and the faculty. Cornell has currently over
9 7,000 applicants. We accept 100 medical
10 students each year. And, we wouldn't be able
11 to do this program without this new educational
12 center which provides one computer for every
13 two students and really has state-of-the-art
14 educational facilities.
15 We are in the process of implementing
16 a strategic plan. We are expanding our
17 research space by 25 percent and are increasing
18 the size of our research faculty by recruiting
19 30 new faculty in three areas -- structural
20 biology, neuroscience, gene therapy and genetic
21 medicine. These are all going to be very
22 important areas of research going into the 21st
23 century. It will enable us, we believe, to
24 make New York more competitive in regaining our
25 share of federal grants.
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2 Mrs. Weill, on April, the 30th,
3 announced a commitment, personal commitment of
4 $100 million to fund this strategic research
5 effort of the medical college.
6 We for 30 years, Cornell Medical
7 College, has had a Summer Minority Research
8 Fellowship. This has been highly successful.
9 The program enrolls college juniors and seniors
10 and gives an intensive summer experience. Each
11 student receives a stipend and housing, as well
12 as travel expenses.
13 From 1969 to 1983, we supported this
14 with federal grants. And in 1985, under
15 Mr. Weill's leadership, the Travelers Group has
16 stepped forward and provided an endowment to
17 ensure the continuation of this program.
18 Since 1969, more than 700 minority
19 students have participated in this program, and
20 an extraordinary number, over 90 percent of
21 them, have gained admission to U.S. medical
22 schools; over 100 of them have come to Cornell
23 Medical School. Cornell has one of the best
24 records in the country in underrepresented
25 minority students, one of the highest
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2 proportion of underrepresented minorities of
3 any medical school in the country. We accept
4 students on a needs basis, and 43 percent of
5 the tuition is discounted with either grants or
6 loans.
7 We renamed the medical college in
8 honor of Mr. and Mrs. Weill's extraordinary
9 support of the medical college over the years
10 and it is now the Joan and Sanford I. Weill
11 Medical College of Cornell University.
12 Mr. Weill, since 1991, has served as
13 the chairman of Carnegie Hall's board of
14 trustees. He cochaired the steering committee
15 to raise $60 million for Carnegie Hall, and in
16 1997 was honored by New York State with the
17 Governor's Arts Award.
18 Just one final example, with regard
19 to one of the comments of the earlier speakers
20 about grants for minority businesses. On July,
21 the 15th, Mr. Weill and the Reverend Jessie
22 Jackson will cochair a meeting under the
23 sponsorship of the Rainbow Coalition to be held
24 at Cornell Medical College. Represented there
25 will be corporations with $3 trillion of assets
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2 and pension funds and the stated goal of this
3 program is to provide money for minority
4 businesses.
5 I think Mr. Weill is amply dedicated
6 or demonstrated his dedication both personally
7 and through his leadership with Travelers and I
8 am confident with this merger there will be a
9 continuing and ongoing support of the community
10 and civic activities throughout New York.
11 Thank you.
12 MR. LONEY: Thank you, Mr. Gotto.
13 Are there any questions?
14 MR. ALVAREZ: I had a question for
15 Ms. Middleton.
16 You suggested at the end of your
17 remarks a list of things that you thought could
18 be improvements. I was wondering, you also at
19 the beginning of your remarks mentioned a few
20 of those same things that you thought City was
21 doing now, some of the services, the lending
22 programs, technical assistance and training. I
23 was wondering if you could differentiate a
24 little bit for us or clarify a little bit for
25 us the areas you thought City was stronger and
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2 the areas you were pointing out where they
3 could improve more.
4 MS. MIDDLETON: The area in which
5 they were strong, in terms of providing the
6 technical assistance to help to educate us, in
7 terms of what kinds of banking accounts that we
8 should open as a small not-for-profit business
9 or as a for-profit business; also, the
10 introduction to us about the PC Banking, which
11 I was one of those that they are teaching;
12 also, the area in terms of how to keep our
13 records, how to pay our taxes. They were very
14 strong in the whole business area of
15 developing, to help us to go forward and to be
16 a part of the board so that we can continue on
17 so we will not have, within two years, failed
18 as we have done.
19 The other areas I have mentioned, in
20 terms of grants to small businesses, if you
21 give us a loan and we have no capital, etc.,
22 what happens? You are giving us a loan for
23 $70,000. If our businesses fail or we begin to
24 go under or we cannot keep the business going
25 because we lack that continuity to keep going
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2 forward, that would only mean that our business
3 is going to fold, and what has happened in the
4 Harlem community, many businesses have folded
5 because of this, and then we end up paying the
6 money back or we end up going to court because
7 they are forcing us to pay the money back which
8 we don't have. So it has to come out our
9 personal needs.
10 So instead of giving us loans to
11 start us out with, which is starting us out at
12 a handicap, start us out at a mini-grant which
13 we will then be able to develop and go forward
14 from there. That is our major problem, to be
15 able to continue to go forward. That is where
16 at this point we need that kind of assistance
17 and we are not getting it at this particular
18 point.
19 MR. ALVAREZ: Thank you.
20 MR. LONEY: Any other questions? If
21 not, I thank you, our panel, very much.
22 We are going to combine Panel
23 Twenty-one and Twenty-two. Could I ask Edward
24 Sheeran, Vicki Hurewitz, April Tyler, Greg Todd
25 and Florence Rice to come up, please.
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2 Mr. Sheeran, will you begin for us,
3 please.
4 MR. SHEERAN: Thank you. Good
5 morning. I am Edward Sheeran. I am special
6 assistant to the Mayor of the City of Yonkers,
7 Westchester County. I am also the executive
8 director of the Yonkers Industrial Development
9 Agency.
10 The City of Yonkers is the largest
11 city in Westchester County and the fourth
12 largest in the State of New York with
13 approximately 190,000 residents. Yonkers has
14 the largest number of high poverty level census
15 tracts in the County of Westchester. For over
16 a decade the New York State Financial Control
17 Board has been overseeing the city's financial
18 activities.
19 Citibank, one of the nation's largest
20 banking institutions, serves the residents of
21 the County of Westchester with 18 full service
22 branch banking facilities. The areas Citibank
23 has elected to service within Westchester
24 County are affluent upscale areas. These areas
25 are as follows:
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2 Armonk, Bedford, Bronxville,
3 Chappaqua, Eastchester, Harrison, Hastings,
4 Larchmont, Mamaroneck, Mount Kisco, New
5 Rochelle, Ossining, Pelham Manor, Rye,
6 Scarsdale, Somers and two branches in White
7 Plains.
8 Last year Citibank opted to close its
9 only manned branch in the City of Yonkers.
10 Accordingly, Citibank has no manned facilities
11 to provide day-to-day banking services to the
12 190,000 residents of the largest city in the
13 County of Westchester.
14 Recently I spoke with Citibank's
15 Westchester County senior management regarding
16 Citibank's redlining of the City of Yonkers. I
17 was advised that it was Citibank's strategy to
18 provide banking services to its customers
19 through technology rather than bricks and
20 mortar and that Citibank would not be adding
21 additional branch facilities to its network.
22 This statement was contradicted
23 following a Craines June 15, 1998 publication
24 when it reported that Citibank had branches
25 under construction in the State of New Jersey
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1
2 and, in particular, in Fort Lee and Englewood.
3 Clearly, Citibank's strategy is to
4 provide day-to-day personal banking services to
5 affluent upscale communities and to ignore the
6 day-to-day banking needs of the less affluent
7 communities. We believe its Westchester
8 network of branches is an orchestrated example
9 of this and proves that the 190,000 residents
10 of the City of Yonkers are not being given the
11 same banking convenience that are provided by
12 Citibank to towns, villages, and hamlets within
13 the County of Westchester.
14 We, in the City of Yonkers believe in
15 addition to providing day-to-day banking
16 services, large financial institutions such as
17 Travelers Group and Citicorp should be obliged
18 as good citizens to participate in the economic
19 revitalization of cities, such as the City of
20 Yonkers. We believe they should utilize their
21 vast resources, both financial and otherwise,
22 to promote, encourage and finance economic
23 development. By doing this, they will be
24 contributing to the creation of jobs and
25 increasing the quality of life for all our
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2 citizens.
3 Citibank's activities to date have
4 been to the contrary. The future must be based
5 on past performance. Frankly, we are not
6 satisfied with the manner in which our city has
7 been ignored and our citizens treated by the
8 powerful Citibank.
9 Should the acquisition be approved,
10 Citibank will be the largest and most powerful
11 institution in the country. This may be very
12 good for the affluent upscale areas, but if
13 Citibank's past is any indication of the
14 future, then our 190,000 residents in the
15 largest city of Westchester County can expect
16 more of the same from the nation's most
17 powerful financial institution.
18 I am here today on behalf of the
19 citizens of Yonkers to request that the
20 approval of the acquisition of Citicorp by
21 Travelers Group be denied until such time as
22 Citibank institutes and delivers programs that
23 provide services to the citizens of the City of
24 Yonkers equal to the services they provide to
25 the citizens of the 18 affluent upscale
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2 communities in the County of Westchester.
3 Thank you.
4 MR. LONEY: Thank you, Mr. Sheeran.
5 Ms. Hurewitz.
6 MS. HUREWITZ: Good morning
7 distinguished members of the Federal Reserve
8 Board. Thank you for giving me this
9 opportunity to express my opinion about the
10 Citicorp/Travelers merger. My name is Vicki
11 Hurewitz, and I am here representing the
12 organization SENSES, which stands for the
13 Statewide Emergency Network for Social and
14 Economic Security.
15 We work on a variety of public policy
16 issues which affect low-income people here in
17 New York State. SENSES is a member of the
18 National Community Reinvestment Coalition.
19 As I thought and read about the
20 Citicorp/Travelers merger and HR10, the
21 financial modernization bill that would allow
22 the merger if passed, I decided there were
23 three questions I wanted to address in my
24 testimony.
25 First, if this were a standard
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2 mega-merger like so many we have seen lately,
3 how are these two institutions doing in terms
4 of their fair lending and community
5 reinvestment obligations under current law? A
6 merger can be denied if either party has not
7 met these obligations.
8 Second, I am puzzled as to how this
9 merger can occur since HR10, the financial
10 modernization bill, is still making its way
11 through Congress.
12 Third, what are the most important
13 issues around HR10 that should be addressed
14 before the law passes?
15 How are the institutions doing under
16 the mortgage law? The Home Mortgage Disclosure
17 Act requires Citicorp and all its lending
18 subsidiaries and affiliates to report out
19 detailed information on every home purchase,
20 home improvement, and refinance application
21 taken.
22 Using 1996 HMDA data, I performed a
23 limited analysis on Citibank's lending in all
24 the metropolitan areas of New York State. I
25 only examined those markets where an individual
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1
2 institution took more than 30 applications,
3 statisticians considering this an ample sample
4 size.
5 I compared the market penetration of
6 Citicorp entities among black borrowers to all
7 categories of borrowers. I also compared the
8 bank's loan denial rate to black versus white
9 applicants to the same rate for all lenders in
10 the individual markets. The reason I only
11 looked at these particular indicators is that I
12 am still in the process of database
13 development. In the future I will able to look
14 at many more indicators of bank lending
15 performance around the state.
16 Three Citibank entities, Citibank New
17 York State, Citibank Mortgage and Citibank NA
18 accepted applications for home purchase loans
19 in 1996. Citibank NA is minimally active in
20 two markets upstate, Buffalo and Rochester.
21 The other two lenders are primarily downstate
22 in the New York City and Long Island areas.
23 With the exception of Citibank New
24 York State in the two upstate markets, all the
25 Citibank entities had a lower market share of
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2 black applications than of all applications.
3 In all areas for all the Citibank entities, the
4 loan denial rates to black versus white
5 borrowers were higher than the rates for all
6 lenders in the markets. In Rochester, for
7 example, blacks were denied at over nine times
8 the rate of whites compared to 1.8 times as
9 often for the aggregate lenders.
10 These same patterns occurred in
11 Citibank's Home Improvement and Refinance
12 applications. Again, with home improvement
13 applications Citibank New York State was active
14 upstate and Citibank NA downstate. And in all
15 cases market penetration was lower than among
16 black borrowers than white. With the exception
17 of Citibank NA in the Long Island area, loans
18 were denied to blacks at slightly higher rates
19 than to whites, although the differences are
20 not as marked as they were with home purchase
21 loans. The same thing was true with the
22 refinance application.
23 Travelers Insurance Company unlike
24 Citibank is not required to report under HMDA
25 nor is it covered by the Community Reinvestment
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1
2 Act. It is, however, covered by the Fair
3 Housing Act of 1968.
4 Currently HUD is investigating a Fair
5 Housing complaint brought by the Fair Housing
6 Council of Washington D.C. The complaint
7 alleges that the company's policies have a
8 discriminatory impact on African-American and
9 Latino policy seekers and neighborhoods. In
10 the D.C. area, Travelers has a policy whereby
11 the minimum house value that it will insure is
12 $250,000. This automatically excludes from
13 coverage 90 percent of homes in
14 African-American and Latino neighborhoods.
15 Travelers also -- is my time up?
16 Travelers also has a policy of
17 limiting coverage to homes which are less than
18 45 years old. This has the impact of excluding
19 almost twice as many homes in minority
20 neighborhoods as in white neighborhoods.
21 Interestingly, Washington D.C. is one
22 of the four cities that has been in Travelers
23 Urban Availability of Insurance program, a
24 program which was founded 1994 to improve the
25 availability of insurance in urban areas. I
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2 wonder what the company's policy would be in
3 Washington D.C. without this program.
4 Given that Travelers has this suit
5 pending against it and given my HMDA findings
6 on Citibank, I am convinced that even if this
7 were a standard mega-merger, it should not be
8 allowed until these fair lending issues are
9 addressed.
10 Regarding Citibank, I am well aware
11 that the Community Reinvestment Act is mostly
12 about making credit available in low- and
13 moderate-income areas. However, it is stated
14 in the legislation that "in arriving at an
15 institution's (CRA) rating, the agencies
16 consider whether there is evidence of
17 discrimination in violation of the Fair Housing
18 Act or the Equal Credit Opportunity Act or
19 evidence of other illegal credit activities."
20 I am also aware that HMDA has never
21 been used to prove discrimination; however, as
22 my analysis shows, the data can point to
23 patterns that need further investigation.
24 Before going on with this merger, I
25 request that HUD investigate Travelers'
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2 underwriting criteria in other urban areas
3 where it writes policies to determine if there
4 are possible hidden discriminatory patterns
5 that prevent protected classes from getting
6 property insurance. I also request that the
7 Federal Reserve look at Citicorp entities
8 underwriting criteria for the three HMDA
9 reportable loan types to see what is
10 responsible for the bank's poor showing among
11 black borrowers across New York State.
12 How could this merger occur -- time
13 is up.
14 MR. LONEY: If you want to wrap up.
15 MS. HUREWITZ: I will continue.
16 I just want to say, I am opposed to
17 the merger for three reasons: The fair lending
18 records of the two applicants, the illegality
19 of the merger, and the potential power of HR10
20 to destabilize the American economy.
21 Thank you very much.
22 MR. LONEY: Thank you.
23 If you want to put your full
24 statement in, it will get into the record if
25 you will leave a copy with the registration
.
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2 desk up front.
3 MS. HUREWITZ: Thank you.
4 MR. LONEY: Ms. Tyler.
5 MS. TYLER: Good morning. My name is
6 April Tyler and I am a democratic leader in the
7 West Harlem community. On behalf of myself, my
8 coleader Joseph Aplin and the residents of
9 Harlem's 70th Assembly District, I thank you
10 for the opportunity to testify and present
11 information on Citibank's record in the Harlem
12 community and to register my objection to this
13 proposed merger.
14 I will focus on the core lending
15 record in Harlem, but I'd like to reiterate a
16 few points that have been covered in prior
17 testimony by many of my colleagues and many of
18 Citicorp Travelers Watch.
19 This transaction is illegal, as the
20 prior testifier just stated. The public's
21 privacy rights may be trampled on. Both
22 institutions have not been forthcoming with
23 information that's been requested numerous
24 times, and we feel the danger of creating such
25 a large international financial entity, a
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1
2 portion of which is protected by U.S.
3 taxpayers' dollars, may be deemed too big to
4 fail.
5 The companies' individual records
6 with regard to inner city neighborhoods leaves
7 much to be desired. Travelers has virtually no
8 brokers in low- and moderate-income
9 neighborhoods, and Citicorp has few branches
10 and does almost no lending. This hardly bodes
11 well to a more promising future with the
12 proposed new entity.
13 On the prior panel, one of the
14 panelists stated that we must look to the
15 future, but we must also not ignore the
16 history. So let's take a look at Citibank's
17 history in the Harlem community and other
18 communities of color.
19 The loan rejection rates are more
20 than doubled that of whites given comparable
21 circumstances. In the Harlem community, which
22 is Community Boards 9 and 10, which are bounded
23 by 110th Street, 155th Street from Riverside
24 Drive to Fifth Avenue, there are only two
25 branches. One branch is on 111th Street and
.
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1
2 Broadway and another branch is on 152nd Street
3 and Amsterdam Avenue. No branches are north of
4 125th Street where the majority of the
5 African-American and Latino population lives.
6 One might think that this area was
7 excluded from Citibank's service area, but it
8 is not. In the two branches, that are
9 inconveniently placed for the majority of the
10 populations in these two community boards,
11 there are $233 million on deposit; there is no
12 direct lending for multifamily housing at all
13 by Citibank; and, as we all know, the majority
14 of New York City's housing stock is that type.
15 But what lending do they do? One- to
16 four-family mortgages, co-op and condo loans.
17 In Community Board 9, which is Central Harlem,
18 there were only three loans originated in 1996.
19 Community Board 9 did a little better: 27
20 loans were originated. That sounds really
21 good, but the majority of those loans were
22 originated in the area south of 125th Street,
23 right around Columbia University where the
24 majority of the population is white. Only six
25 loans of the 27 were to African-Americans or
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1
2 Latinos; one was to a Latino. So so much for
3 the prior panelist's statement about empowering
4 Latinos.
5 The banks that exist have high-fee
6 structures for banking services. The brochures
7 say that you can experience less expensive and
8 more convenient banking. Not so if you live in
9 the Harlem community. Given this record, it is
10 amazing that Citibank has received an
11 outstanding CRA rating.
12 The proposed new entity made a
13 commitment of $115 billion, but not to improve
14 in the areas stated above. There is no
15 guarantee that any of the money will be
16 targeted and invested in New York City or in
17 low-income neighborhoods.
18 More than half of that $115 billion
19 commitment is for consumer loans, student
20 loans, credit cards and such. The portion for
21 small business lending isn't targeted to
22 low-income areas.
23 We urge you to reject this
24 application and demand immediate improvement in
25 their performance right now, not some nebulous
.
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1
2 promise for the future.
3 Thank you.
4 MR. LONEY: Thank you, Ms. Tyler.
5 Mr. Todd.
6 MR. TODD: Good morning. My name is
7 Greg Todd. I am the marketing director with
8 BEC New Communities. I would like to thank the
9 Federal Reserve Bank of New York for sponsoring
10 this hearing today. I very much appreciate the
11 opportunity to speak on behalf of BEC New
12 Communities.
13 BEC is a 14-year-old community-based
14 nonprofit housing group. To date we have
15 developed about 900 units of housing from
16 city-owned properties. In so doing, we have
17 invested almost $100 million in the communities
18 of Bedford Stuyvesant, Crown Heights and Sunset
19 Park. In addition, we have sold over 200 units
20 of ownership housing, including both
21 condominiums and two- and three-family homes.
22 BEC also sponsors a community-based credit
23 union with over 2,000 members and $2.2 million
24 in assets.
25 Our organization grew out of an
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1
2 interdenominational organizing effort. BEC
3 stands for "Brooklyn Ecumenical Cooperatives."
4 I personally came to Brooklyn about
5 20 years ago from Michigan. Before coming
6 here, I completed a masters in business
7 administration degree and worked briefly in a
8 bank. I had heard much of Citibank. I knew it
9 to be a leader in the area of consumer banking,
10 having been one of the first banks in the
11 nation to issue credit cards and one of the
12 first to make extensive use of automatic teller
13 machines.
14 I, in fact, had such faith in
15 Citibank that it is where I opened my checking
16 and savings account and where I currently have
17 a home mortgage.
18 Unfortunately, in recent years I feel
19 Citibank's vision has become less focused on
20 its home here in New York and more directed to
21 a national and international audience. For
22 example, the branch I used to keep my accounts
23 at on 13th Street and Fifth Avenue near Sunset
24 Park was sold to Home Savings Bank -- now a
25 part of Greenpoint Bank -- about 15 years ago.
.
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1
2 Shortly thereafter, Citibank expanded
3 the number of ATMs at its branch in Park Slope,
4 a more affluent area. This pattern appears
5 typical of what it is doing throughout the City
6 of New York.
7 Citibank maintained in 1996 20
8 branches in Brooklyn. That number,
9 incidentally, is now down to 15, of which only
10 12 are full service. The total amount of
11 deposits on these branches in 1996 was $2.1
12 billion.
13 According to the Home Mortgage
14 Disclosure Act provided by the RTK Foundation,
15 during 1996 Citibank received 1,228
16 applications from Brooklyn residents. Of
17 these, they actually approved 547 or about 44.5
18 percent of the applications taken. By
19 comparison, in 1996 among banks in Brooklyn
20 that took in at least ten applications, the
21 overall approval rate was 52 percent, 7.5
22 percentage points above Citibank's approval
23 rate.
24 Assuming an average loan amount of
25 $150,000, Citibank returned to its communities
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1
2 in Brooklyn about $82 million in mortgages in
3 1996. This amounts to about 3.9 cents in
4 lending for each dollar deposited by Brooklyn
5 residents.
6 I must add that of the over 200
7 mortgages or about $12 million in home mortgage
8 lending given to purchasers of BEC developed
9 homes none were granted by Citibank.
10 Similarly, of the $100 million in
11 construction lending used by BEC for
12 residential development in Brooklyn, none was
13 from Citibank.
14 As a leading community group in
15 Brooklyn, BEC feels that Citibank needs to do
16 better. Rather than reaching out to lend in
17 the developing countries around the globe, why
18 not lend in the developing neighborhoods in
19 Brooklyn, for many residents are immigrants who
20 left just those developing countries that
21 Citibank appears so eager to lend to.
22 We feel it is time that Citibank
23 returned to its role as an innovative leader
24 right here in New York. If Citibank wants to
25 take deposits of Brooklyn residents, we feel it
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1
2 should be willing to give back its fair share
3 in loans to the Brooklyn community.
4 Thank you for your consideration.
5 MR. LONEY: Thank you, Mr. Todd.
6 Ms. Rice.
7 MS. RICE: Yes. Good morning, and I
8 am glad to be here, and thank you for giving me
9 this opportunity.
10 I am Florence M. Rice, president of
11 the Harlem Consumer Education Council. I must
12 say I oppose -- I am opposed to the merger of
13 Citicorp Group and the Travelers Insurance
14 because of their practice of racism through
15 redlining and refusal to loan to
16 African-Americans.
17 I am very concerned with Citigroup
18 and the Citicorp and Travelers merger. I want
19 to see a better world, but we can't see a
20 better world with racism running rampant like
21 it still does.
22 Living in New York State all my life,
23 and at my age of 79, I understand very well
24 institutional and economic racism, as I have
25 experienced it in this country all my life,
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1
2 along with my brothers and sisters.
3 As slaves, African-Americans were
4 forced to build the wealth of this country for
5 the benefit of white Americans. Today I'm
6 going to speak to you about the three robbers
7 of African-Americans, and I think I would like
8 to say the speakers of City Watch are the ones
9 that has said many of the things that I have
10 said, so there is no sense in repeating it.
11 What I wanted to do, I wanted to do
12 something different. I call it the three
13 robbers of African-Americans; they are racism,
14 power and control.
15 The belief is that race is the
16 primary determiner of human traits and capacity
17 and that racial difference produced an inherent
18 superiority of a particular race. Many white
19 people practice racism in the corporate
20 world -- antagonism toward African-Americans,
21 especially as a result of the racist belief, a
22 belief in the superiority of the white race,
23 prejudice based on this, and the theory,
24 ability, to determine by these races in our
25 society.
.
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1
2 Race riot is caused by racial
3 dissension and hatred -- which is many times
4 perpetrated by the corporate world -- power,
5 and the ability to produce a result, possession
6 to control authority and influence others,
7 having such power of controlling groups, that's
8 what happens in today's world.
9 I would like to speak third on
10 control, the power of direct command under the
11 corporate CEOs and the board of directors,
12 because that is where much of this racism stems
13 from, the power of restraining, the power or
14 authority to manage the regulation of economic
15 activity, especially by the corporate world
16 direct, one that controls a means of
17 determining the policy of a business.
18 The records of Citicorp and certainly
19 Travelers speak for themselves. I'm deeply
20 concerned. Like someone here said, if we're
21 talking these large companies, I'm concerned it
22 carries this race, economic racism, and this
23 racism within their companies travelling the
24 world.
25 I'm looking to make this a better
.
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1
2 world. I am not looking to make it the kind of
3 world that I have grown up in and that I know
4 of. So, therefore, I would say I have spoken
5 quite differently, but I am speaking this way
6 because many of my colleagues here have really
7 expressed my feeling.
8 I just want to thank you that I could
9 be here. I will put this -- I can send it in.
10 Again, I will say I am very glad to be here. I
11 am 79. I haven't changed my opinion on the
12 banks and the redlining and Travelers, which
13 never dealt with our black community. So I
14 again am supporting some of the other speakers
15 that this merger -- because mergers don't help
16 community people, poor people, because they are
17 always looking to make the executives and make
18 themselves a trillion dollar bankroll, that
19 they can go off and live better than anyone
20 else.
21 Thank you, and I am a little angry.
22 MR. LONEY: Thank you, Ms. Rice. You
23 don't look angry.
24 I have a couple of questions.
25 Mr. Sheeran, could you describe for
.
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1
2 me -- and you probably did and I may have just
3 didn't quite understand it -- the demographics
4 of Yonkers. I am not familiar with Yonkers.
5 Is it a low-income community largely?
6 MR. SHEERAN: We have, the southwest
7 part of Yonkers is the low income. There are,
8 I think, six census tracts that are poverty
9 level. The city of is made up of about 40
10 percent African-Americans, 45 percent white,
11 and the rest others.
12 MR. LONEY: Are there any middle,
13 upper-income neighborhoods?
14 MR. SHEERAN: Yes, there are. In the
15 northeast part of Yonkers, yes.
16 MR. LONEY: Did I understand you to
17 say there are no Citicorp branches.
18 MR. SHEERAN: No Citicorp branches.
19 The only manned branch that they had they
20 closed last year and there is an automatic
21 teller machine in its place. We don't regard
22 that as a facility that they can transact their
23 business.
24 MR. ALVAREZ: You mentioned that when
25 City closed the branch in Yonkers it said it
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1
2 would replace it with technology; is that the
3 ATM?
4 MR. SHEERAN: That is correct.
5 MR. ALVAREZ: It is a single ATM, no
6 other ATMs in Yonkers?
7 MR. SHEERAN: They have no other ATMs
8 in the community, right. As I pointed out, all
9 the areas in Westchester County are all upscale
10 areas, Bronxville, Rye, all upscale areas.
11 MR. LONEY: Apparently in Yonkers
12 there are some upscale areas as well.
13 MR. SHEERAN: Yes, but they are not
14 as upscale as the Bronxvilles of the world.
15 MR. ALVAREZ: When City proposed to
16 close the branch, did you talk with them about
17 why they were closing?
18 MR. SHEERAN: I was not in this
19 position at that time, so I am not quite sure.
20 MR. LONEY: So upscale is in the eye
21 of the beholder.
22 MR. SHEERAN: Maybe.
23 MR. LONEY: That is interesting.
24 Ms. Hurewitz, I know you wanted to
25 talk about your views on the illegality of this
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1
2 merger. Do you want to expound on that?
3 MS. HUREWITZ: I'm concerned because
4 currently there is a bill going through
5 Congress, as we all know, the HR10, the
6 financial modernization bill, which would allow
7 this merger. Under the current law, my
8 understanding is that if Travelers and Citicorp
9 were to merge, one of the other would have
10 to -- Travelers would have to divest itself of
11 its nonbanking activities within two to five
12 years, or Citicorp would have to give up its
13 banking charter and become part of Travelers
14 Savings & Loan.
15 My concern is that if the merger goes
16 through that the waiver will be given, the
17 five-year waiver will be given, and in the
18 interim Citicorp and Travelers will continue to
19 lobby Congress to pass HR10, because it is not
20 quite clear whether the bill will go through
21 now. There is a lot of controversy about it.
22 So currently these two entities as
23 they sit are not legally allowed to merge as
24 they both are. One or both of them have to
25 make changes. That is my concern.
.
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1
2 MR. LONEY: Thank you.
3 Ms. Tyler, I am sorry, I am not that
4 good with the geography here. You explained
5 that there were, I think the implication of
6 what you said was there were two branches, was
7 that in Harlem, on the edge of Harlem? I
8 wasn't quite clear on that.
9 MS. TYLER: Depending on who you
10 speak with, the boundaries of Harlem are
11 different. Some people would say that it
12 starts at 110th Street, and if you look at
13 documents from way past, it did. Currently,
14 it's always been considered historically the
15 African-American community in the north of
16 Manhattan. The majority of the
17 African-Americans, and at this point
18 increasingly the Latino population, are north
19 of 125th Street. South of 125th Street you
20 have to include Columbia University, where even
21 though it is in the -- a community district
22 which includes Harlem, it is higher income and
23 the population is white, primarily. North of
24 125th Street, the majority of the population is
25 African-American and Latino.
.
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1
2 MR. LONEY: And the branches are?
3 MS. TYLER: The branches are all
4 south of 115th Street. If you travel further
5 north, you will find another branch at, I
6 think, 169th Street, right by Columbia
7 Presbyterian Hospital. So the population, the
8 Latino and African-American population has been
9 skipped over in both instances.
10 MR. LONEY: So the 169th Street, is
11 that still Harlem?
12 MS. TYLER: No. That is considered
13 Washington Heights.
14 MR. ALVAREZ: Ms. Tyler, you
15 mentioned that there were, I think you said
16 $233 million worth of deposits.
17 MS. TYLER: Right.
18 MR. ALVAREZ: I didn't quite catch,
19 are those -- who are those deposits from; where
20 are those deposits?
21 MS. TYLER: We don't have access to
22 the zip code information, so we can't tell
23 where the deposits originate from. In those
24 two branches, the Data Book, which is published
25 by the Federal Deposit Insurance Corporation,
.
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1
2 gives you the figures branch by branch of the
3 deposits. But we all know that when people
4 don't have the convenience of a branch in their
5 neighborhood, they usually bank where they
6 work.
7 Even though these are inconvenient
8 branches, there are $233 million in deposits.
9 A portion of that, we suspect, is from
10 residents of the Harlem community. And if you
11 look at the branches in midtown Manhattan or
12 downtown, I would be willing to bet if we got a
13 zip-coded analysis that a portion, maybe a
14 large portion, would be from the 25, 27, 35, 39
15 zip codes that comprise Harlem.
16 MR. LONEY: Do we have any other
17 questions of the panel? If not, I will thank
18 you very much for coming in and talking to us.
19 Mark Winston Griffith, who was
20 scheduled to testify in Panel Twenty-two, is
21 now here.
22 Do you want to come up, Mr. Griffith.
23 (Continued on next page)
24
25
.
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1
2 MR. LONEY: Mr. Griffith, please
3 proceed.
4 MR. GRIFFITH: Good morning. Sorry
5 for being late.
6 MR. LONEY: You'll stay after school.
7 MR. GRIFFITH: Okay. I get all the
8 special attention. I appreciate that.
9 Good morning. My name is Mark
10 Winston Griffith, and I'm the founding
11 executive director of the Central Brooklyn
12 Partnership and was the founding chairman of
13 the Board of the Central Brooklyn Federal
14 Credit Union.
15 The Partnership serves the
16 neighborhoods of Ft. Greene, Clinton Hill,
17 Bedford Stuyvesant, Crown Heights, Brownsville,
18 Prospect Heights, East Flatbush and Flatbush.
19 I have a confession to make. When I
20 first learned of these hearings I was planning
21 to be out of town, out of reach, or just plain
22 out. As I saw it, I would have to be out of my
23 mind to show up today and testify. No matter
24 what stance I take on what is probably the most
25 important merger prospect within the financial
.
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1
2 industry since CRA was enacted me and my
3 organization are sure to be dragged through the
4 mud one way or the other as a result of this
5 testimony.
6 To go on record against this proposed
7 merger would be perceived as dismissing and
8 betraying the efforts of one of the strongest
9 supporters of my organization, and of the
10 community development credit union industry
11 which of course is Citibank.
12 To advocate for the merger could risk
13 ignoring some glaring threats to consumer
14 interests, and more specifically to my
15 community, an area that has endured its own
16 history of betrayal and dismissal.
17 But, ultimately, staying home while
18 the future of financial services as we know it
19 is to be discussed would be a disservice to my
20 colleagues at Citibank and the people of
21 Central Brooklyn.
22 Simply put, too much is at stake and
23 as one of the few organizations in Central
24 Brooklyn that has and explicit mandate to serve
25 as community reinvestment advocate and watch
.
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1
2 dog, staying home, no matter how convenient,
3 would be irresponsible and ultimately
4 unconscionable.
5 I'm sure I don't have to tell you
6 that Central Brooklyn has been a long-standing
7 victim of bank redlining, discrimination and
8 disregard.
9 In the nation's largest black
10 community in the last ten years alone we have
11 seen twice as many bank branches close as we
12 have seen open. Nationally there is one bank
13 branch for every five thousand people. In
14 Central Brooklyn there is one bank branch for
15 every 23,000 people.
16 A now somewhat outdated study of bank
17 lending showed that for every dollar deposited
18 in local banks, less than one penny was
19 reinvested back into the community.
20 Check cashing operations inevitably
21 step in. And in Central Brooklyn there are
22 twice as many cash checking operations as there
23 are bank branches.
24 Into this environment came the
25 Central Brooklyn Partner in 1991. The
.
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1
2 Partnership provides education and training on
3 financial literacy issues and organizers and
4 advocates around community reinvestment issues.
5 The Partnership runs the youth empowerment
6 program, a leadership development and financial
7 education program for young people, the Sisters
8 Lending Circle, a financial self-sufficiency
9 support group for people who receive public
10 assistance, and an economic justice program
11 which conducts research on local financial
12 patterns, and, as I mentioned earlier, serves
13 as a CRA watch dog.
14 In 1993 the Partnership created the
15 Central Brooklyn Federal Credit Union a
16 financial cooperative that serves more than
17 five thousand people who live, work, worship
18 and do business in Central Brooklyn has almost
19 five million in assets and has made millions of
20 dollars of loans over the past five years.
21 And yet the credit union, while one
22 of the largest community development financial
23 institutions in all of New York City struggles
24 on many levels to remain healthy and robust in
25 a credit parched area.
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1
2 Since the beginning, Citibank has
3 been there for us. As one of our first
4 nonmember investors, Citibank helped capitalize
5 the credit union and enabled us to make low
6 interest personal and small business loans to
7 our membership almost immediately upon the
8 credit unions opening with a zero interest
9 deposit of $100,000 dollars.
10 Eager to support us in our early
11 growth period, Citibank made a grant of
12 $10,000.
13 Over the years we have also received
14 several grants for our youth program,
15 participated in a Citibank technical assistance
16 program for not-for-profit community developers
17 and have turned to people like Janet Thompson
18 for advice.
19 As you know from the testimony of the
20 National Federation of Community Development
21 Credit Unions, Citibank has made a sizable
22 development in community development credit
23 unions nationwide and Central Brooklyn is
24 scheduled to soon receive a $55,000 equity
25 grant through Federation.
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1
2 Depending upon how Citibank responds
3 to the rest of my testimony, I plan to make
4 additional requests for grants for the
5 Partnership and deposits for the credit union.
6 Unequivocally, Citibank has been a
7 full partner in our organizational efforts to
8 rebuild the economy of Central Brooklyn, but
9 although my organization quickly turned
10 Citibank investments into the Partnership into
11 an instrument that vastly improved the quality
12 of peoples' lives, it would be arrogant and
13 narrow minded to conclude that meeting
14 organizational needs fulfills a financial
15 institutions obligation to the people of low
16 and moderate income neighborhoods.
17 Let's be real. Community
18 reinvestment and the consideration of mergers
19 are not just about measuring a bank's support
20 of neighborhood-based community efforts, no
21 matter how impressive.
22 It's also more importantly about the
23 quality accessibility and affordability of a
24 bank's financial product and what the sum of
25 this proposed mergers parts mean for the future
.
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1
2 survivability of my community.
3 On that count I have deep-seated
4 fears and reservations. I am concerned that
5 Citibank's record of mortgage lending, once the
6 best in Central Brooklyn, has fallen
7 precipitously over the last ten years. I am
8 concerned with Citibank's growing complacency
9 in my neighborhood and its most recent failure
10 to participate in a fund raising consortium to
11 support the credit union, because it's based
12 more value on it's rivalry with Chase then the
13 future of my institution and the people we
14 serve.
15 I am concerned with Citibank's
16 prohibitively high fees for its consumer retail
17 services such as checking, where there is no
18 low to mid range pricing between life-line and
19 ridiculously expensive no-fee checking.
20 I am concerned that Citibank's
21 increasing global banking strategy is coming at
22 the expense of communities like Central
23 Brooklyn and that this merger will make them
24 even less focused on our needs.
25 I am deeply suspicious of any
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1
2 community reinvestment pledge, 115 billion, or
3 otherwise made while a merger is being
4 considered and I am disgusted at the way this
5 proposed merger, which at this moment in time
6 is illegal, has been treated as a foregone
7 conclusion probably turning the hearing into a
8 cynical exercise, yet again watching the
9 restless natives jump up and down and shout
10 ugga-bugga.
11 I think that ACORN had the right idea
12 yesterday when they came in here, shut the
13 place down for a moment, and made us consider
14 whether we even have the slightest bit of power
15 to direct the effects of this monumental
16 decision.
17 I for one am not going to go home and
18 passively sit by to a deal cut in the corporate
19 hallway.
20 I again acknowledge Citibank's
21 financial support of Central Brooklyn through
22 my two organizations, one of which makes loans
23 to people that every other lender has now
24 abandoned. This is a testament to Citibank's
25 reinvestment record and I'm here to bear
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1
2 witness to that.
3 God knows I hope the support
4 continues, and that Citibank approves the
5 deposit request that I plan to submit next
6 week.
7 (Laughter)
8 But at the risk of sounding
9 ungrateful, that is simply not enough. My
10 recommendations are simple and broad.
11 I challenge Citibank to either be a
12 more aggressive supporter of community
13 development, make more mortgage and small
14 business loans in my neighborhood, and provide
15 products that can be more widely used by people
16 of low and moderate income or give up its
17 merger plan.
18 I know you have the power, Citibank,
19 and resources. Use them. I challenge the
20 Federal Reserve to enforce this, set higher
21 standards for the consummation of this merger
22 proposal and not be seduced or rolled over by
23 the seeming inevitability of this deal. Don't
24 sacrifice my neighborhood for the sake of
25 making financial history.
.
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1
2 Thank you.
3 MR. LONEY: Thank you, Mr. Griffith.
4 Any questions from the panel?
5 MR. ALVAREZ: I have a question,
6 Mr. Griffith, do you think that the Citi is
7 learning at all from its Partnership with you
8 about how better to meet the needs of Brooklyn
9 directly?
10 MR. GRIFFITH: I think so. I mean
11 one of the advantages to working with us is
12 that we sort of cover all bases. Not only do
13 we do financial literacy and advocacy, but we
14 also include a financial organization itself,
15 so we are in the business of making loans and
16 provide financial services, and so not only are
17 powerless but there are ways in which we can
18 empathize with each other, and ways in which
19 they can learn and we can learn from them.
20 So I think that the relationship has
21 been very beneficial. I think the relationship
22 that they have established with the National
23 Federation of Community Development Credit
24 Unions has been very helpful as well.
25 Again, my fear is that they have
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1
2 rested on that, and they, I think, recently
3 over the past few years, have not really gone
4 beyond that and, again, I don't want to dismiss
5 or discount those efforts, because it's a lot
6 more than what most banks are doing to be quite
7 frank, but, again, to work through
8 intermediaries and organizations like ours,
9 it's just, it's not enough.
10 It's easy to say that you're doing
11 things when you have middle class people who
12 run these organizations coming up here and
13 testifying and saying thank you for those
14 contributions, but it does not necessarily,
15 does not necessarily mean that those services
16 are being translated into better product and
17 community investment efforts for the people
18 who, the low and moderate income people, who
19 live and work there.
20 MR. LONEY: Any other questions?
21 MR. ALVAREZ: Thank you very much.
22 MR. LONEY: I will wish you luck on
23 your grant request.
24 MR. GRIFFITH: Thank you.
25 (Laughter)
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2 MR. LONEY: I'd like to call panel
3 23, Carlisle Towery, Anne C. Robinson, Rhonda
4 Kotelchuck, Samuel C. Hamilton, Steven
5 Alexander, Audi Abernathy and Rev. Floyd Flake.
6 Rev. Flake, you were scheduled
7 earlier today so we will begin with you, and I
8 can claim the prerogative of the chair, I will
9 tell you that the one time I had the, shall we
10 say, pleasure of testifying in Congress, you
11 were on this side of the gavel and I was on
12 that side of the gavel.
13 REV. FLAKE: I hope I treated you
14 fairly.
15 (Laughter)
16 MR. LONEY: It was more bloody in the
17 contemplation than in the doing, I will tell
18 you.
19 REV. FLAKE: I thank you very much.
20 MR. LONEY: I appreciate you coming
21 and if you will begin the panel, I appreciate
22 it.
23 REV. FLAKE: Thank you very much, and
24 thank you for allowing this privilege to speak
25 first. Obviously, my schedule has gotten
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1
2 backed up, since I'm doing a group of seminars
3 up at Harvard for ministers from around the
4 country and I flew in to do this hearing,
5 because I think it is so critical.
6 In 1986 I was elected to the US House
7 of Representatives and assigned to the House
8 Banking Committee. During the first few years
9 of my tenure there I was assigned to a task
10 force headed by Doug Maynard from Georgia with
11 the responsibility of trying to determine how
12 we might best inform the financial service
13 industry.
14 One of the discoveries we made was
15 that America at that time did not have a single
16 bank in the top 25 in the world, and,
17 therefore, part of our challenge was trying to
18 repeal Glass-Stegall in a way that would allow
19 for modernization process that would open doors
20 for banks and other industries like them to be
21 able to work together in trying to give the
22 best service to the American citizenry, and to
23 the citizenry of the world, realizing that the
24 world now has become much smaller, particularly
25 in relationship to how we do our financial
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1
2 business.
3 Today as we come, having served as
4 Chairman of the Committee on Oversight
5 Investigation for one term, and recently
6 retired in December as the ranking member of
7 the Committee on Domestic and International
8 Monetary Policy, I realize that we are still
9 facing a major crisis as it relates to the
10 place of the American banking community in the
11 world at large.
12 Other systems have seen fit to open
13 doors of possibility so that other industries
14 could function in ways that would allow for the
15 best means of delivering services to the
16 majority of people.
17 As we have it currently in America,
18 one has to make decisions about where to invest
19 their money, to another place to decide where
20 to buy their insurance, another place to be
21 able to make other decisions relative to their
22 financial well being. It is my contention
23 after years of looking at this problem that it
24 is in the best interests of this nation to
25 create the best mechanism possible for these
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1
2 entities to be able to work together.
3 I realize that the Congress has been
4 slow in making a decision in relationship to
5 bank modernization, but I don't think we can
6 afford to wait for the Congress.
7 As you know, the Congress moves based
8 on political will. The political will has not
9 been there to make the decision that I think is
10 appropriate for the banking industry.
11 Therefore, Citi and Travelers have made the
12 decision that I think must be honored. It must
13 be honored because it represents to us a major
14 step in trying to move forward at a process
15 that has for years lied dormant.
16 The reality is our practices relative
17 particularly to the Glass-Stegal Act have been
18 those that were put in place over 50 years ago.
19 They are not the most modern as it relates to
20 our ability to function in a competitive
21 environment and therefore are critical to the
22 survival of the industry.
23 Someone argued that the problem is
24 that bigger is not always better. I would
25 suggest that that may well be true, but the
.
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1
2 alternative is even worse. Those banks that
3 could not compete in this environment would
4 generally not be able to provide the level of
5 services that we can anticipate from banks that
6 have the capability of delivering a wide range
7 of services that constituents feel a necessity
8 of going to.
9 Our challenge becomes to understand
10 not only the industry, but to understand the
11 fullness of this responsibility, and a part of
12 that responsibility is obviously to ensure that
13 there are fair practices on the part of the
14 bank.
15 HMDA data clearly indicates and has
16 indicated over the last twenty or thirty years
17 that the Boston Study, particularly since the
18 Boston Study of 1987 negates that there have
19 been some practices on the part of the banking
20 community in general in relationship to
21 redlining and other practices that have
22 mitigated against the possibility of the
23 development of many communities in this nation,
24 particularly urban communities where there is a
25 need for access to capital for the rebuilding
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1
2 of commercial strips that have deteriorated,
3 the building of homes so that people can begin
4 the process of building the necessary equity to
5 become a full participant in American society;
6 beyond that to share in the American dream,
7 which is everyone's desire.
8 It is my hope that as this merger
9 moves forward there will be some prophecy by
10 which Citi will evaluate it's overall role in
11 community development, it's role in allowing
12 institutions in those communities that have
13 been underserved and overlooked to become full
14 partners in the process of development.
15 Clearly, the weak link has been
16 capital. I must say Citibank in participating
17 in a 15 million dollar loan to my church
18 recently in the recent development of our
19 church with another seven banks joining with
20 them, show the model that could be emulated
21 throughout this nation, a model whereby banks
22 who do not want to take the major risk of
23 putting their capital on the line for an
24 institution, may do so through participation
25 with other banks.
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1
2 Citi has also demonstrated some
3 capability in its funding of many of the
4 financial institutions in urban communities
5 that would have otherwise gone out of business
6 by now. I would urge them to continue in that
7 participation.
8 I would ask the Fed that you be
9 vigilant in your pursuit of insuring that the
10 mandates are fully met, but I do believe that
11 you have the capability to do it. I know you
12 have the capability of doing it. Mr. Greenspan
13 has testified numerous times before committees
14 that I have sat on, and I believe that it is
15 the will of the Fed to participate in the
16 process of building a great and stronger
17 nation.
18 Indeed, I've worked with many of the
19 members of the Governors, traveled with the
20 Governors several years ago when we were
21 looking at how the Fed might become more
22 involved in our community development
23 processes, and believe that at the heart of the
24 Fed there are those that have an interest in
25 trying to assure this development take place
.
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1
2 because they realize it is in the long term
3 interests of America.
4 So I conclude by merely suggesting
5 that this body would move forward in voting in
6 support of the merger of Travelers and
7 Citicorp.
8 I believe that these two entities
9 together represents for us a very strong
10 financial institution. Its reach will not only
11 be limited to the borders of this nation, but
12 indeed, place this bank and this insurance
13 group in a category where they will be able to
14 participate with the largest banks in the
15 world.
16 We cannot do any less if we expect to
17 remain competitive. We must do this in order
18 to assure that not only does Citi continue to
19 grow in its ability and it's reach, but also to
20 assure that this merger demonstrates to the
21 Congress that it is time for them to not
22 continue to allow politics to dictate the
23 direction of this nation as it relates to
24 financial policy, but, indeed, to move forward
25 with bank modernization, which I think is
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1
2 critical for our overall and long-term
3 survival.
4 To that end, I yield the balance of
5 my time. Oh, I'm not in the House any more.
6 (Laughter)
7 I yield my time, which the young lady
8 says has expired anyway.
9 (Laughter)
10 MR. LONEY: Thank you very much.
11 Mr. Towery.
12 MR. TOWERY: Thank you. I'm from
13 Greater Jamaica Development Corporation which
14 is a private not-for-profit local development
15 organization whose mission is to encourage and
16 facilitate the economic recovery and
17 revitalization of downtown Jamaica and it's
18 environs.
19 We're formed in 1967 by business,
20 civic and community leaders, including
21 commercial banks, and have worked since that
22 time in close partnership with all sectors to
23 carry out the plan to transfer Jamaica's older
24 downtown into a modern center of business,
25 commercial and industrial employment, higher
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1
2 education, the arts, transportation and housing
3 improvement.
4 This plan was prepared by Regional
5 Plan associates, city government and local
6 leaders to service to some half million
7 residents who live in twenty-one neighborhoods
8 around this downtown.
9 We appreciate this opportunity. We
10 are after all end-users of financial
11 institution products and our communities are
12 the beneficiaries when those products are
13 shaped and tailored and prioritized to enable
14 community development and to capacitate its
15 practitioners.
16 My comments are emphasizing the
17 involvement and support we have received from
18 Citibank over the thirty-one years of our
19 economic development and community reinvestment
20 work in Jamaica.
21 This community, working to recover
22 from a ten-year period, 1975 to 1985 of severe
23 economic trauma, uncertainty and a general loss
24 of public confidence, has benefited
25 significantly from Citibank good works. It's
.
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1
2 not an overstatement to characterize the good
3 works of this good corporate citizen as
4 exemplary.
5 Jamaica has progressed from a
6 characterization at least as a low and moderate
7 income community to what is now clearly a
8 moderate to middle income emerging area.
9 Citibank aggressive proactive lending
10 programs in that area account I believe for
11 increased home ownership, business growth, and
12 other economic activities.
13 They have a very active branch in
14 Jamaica center, and their headquarter units and
15 the community development units are very
16 responsive to us. They have provided strong
17 and ongoing leadership for Greater Jamaica
18 Development Corporation's efforts, serving
19 consistently on our board with able senior
20 representation which has been exceptionally
21 active and involved.
22 Citibank's contributions to our
23 board's activities have included a high level
24 of intelligence and interest in our general
25 governance, sponsorship of retreats, meetings
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1
2 and special events, chairs of committees,
3 provision of in-kind services, including a
4 loaned executive for two years who helped us
5 establish a special revolving loan fund,
6 advocacy with government, and financial
7 contributions at leadership levels toward our
8 general operations and for special projects.
9 Citibank has participated in the
10 provision of local small business loans through
11 our revolving loan plan which is capitalized by
12 the US Economic Development Administration, New
13 York State Empire State Development and the
14 City of New York Department of Business
15 Services using CDBG funds, federal community
16 block grants funds.
17 Citibank provided us with a mortgage
18 loan for improving and refinancing our
19 headquarter office building, provided operating
20 support along with board and other leadership
21 for three of our associated and affiliated
22 organizations, Jamaica Arts Center, King Manor
23 Museum and Jamaica Business Resource Center,
24 that we helped establish back in the '70s,
25 which Congressman Flake helped us with the SBA
.
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1
2 loan and now is an independent and wonderful
3 entity.
4 Through Citibank pioneering Culture
5 Builds Community Program and participation in
6 something called the Arts Forward Fund,
7 Citibank helped launch an arts initiative in
8 Jamaica called Culture Collaboration Jamaica
9 and continues to support it. Their leadership
10 and support for York College, another key
11 project in Jamaica for which we were somewhat
12 instrumental.
13 Working with Citibank people is
14 inevitably a productive process for us. They
15 are thorough and eager to facilitate results to
16 get things done.
17 Their corporate and personal
18 involvement in Jamaica I believe has been
19 material in the success of this community
20 revitalization.
21 As a long-term practitioner of local
22 economic development working in the trenches
23 and on the front line, if you will, let me
24 respectfully raise some matters for the new
25 Citigroup's consideration.
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2 In our three decades of work in
3 Jamaica very challenging endeavors which are
4 high in public purpose, only modest involvement
5 have come from insurance companies and the
6 investment banking community to date. We
7 enjoyed the services of a loan executive from
8 Met Life for a key project. Equitable has
9 provided us with two mortgages that were key
10 projects. Merrill Lynch Foundation has enabled
11 the startup and investor retention effort over
12 that thirty years, but our experience suggests
13 that the interest of the investment banking and
14 insurance communities typically appear to be
15 elsewhere, only slightly related to urban
16 economic or community development.
17 Thus, we're keen to know whether this
18 acquisition will unleash the skills, the no how
19 and the resources of Travelers and Salomon and
20 Smith Barney in community development, and, if
21 so, how?
22 One, will any of the products of the
23 Travelers Group be tailored and focused on
24 community development objectives? For example,
25 we'd welcome a long view of insurers in
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1
2 financing small real estate projects that are
3 admittedly small for them, and it would be very
4 helpful for Jamaica's local economy if our
5 community small contractors were enabled to
6 participate in the major construction projects
7 under way in Jamaica through a prequalification
8 and special bonding method so that they can
9 compete.
10 Two. Will Salomon Smith Barney
11 devote its entrepreneurial know-how to places
12 like Jamaica bringing its professional skills
13 to bear on the community development?
14 Many of our companies, perhaps most
15 of our companies are simply outside corporate
16 America's mainstream, often small and not well
17 capitalized minority and women-owned, but they
18 are often energetic and with significant
19 potential.
20 We welcome a partnership with an
21 investment bank to identify and nurture the
22 special opportunities in Jamaica, and
23 opportunities are being missed, we believe, to
24 create markets there, literally creates markets
25 there and the products to serve them.
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1
2 There should be ways and means to
3 make these companies eligible for the capital
4 markets.
5 For us, these are intriguing and
6 proper questions for the new Citigroup given
7 the special capacities it will have from
8 combined commercial banking, insurance and
9 investment banking and we support this
10 acquisition with some enthusiasm.
11 Thank you.
12 MR. LONEY: Thank you Mr. Towery.
13 Ms. Robinson.
14 MS. ROBINSON: Good morning. I am
15 executive director of both Bridgeport
16 Neighborhood Fund and Bridgeport Neighborhood
17 Trust, which are located in Bridgeport,
18 Connecticut. For those of you not familiar
19 with Bridgeport, it's located in Fairfield
20 county in Connecticut, one of the nation's most
21 affluent counties. Bridgeport unfortunately
22 hasn't shared in that affluence very much. It
23 not only is Fairfield County's poorest city,
24 it's one of the two poorest cities in
25 Connecticut, and would be a poor city I think
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1
2 in any state.
3 That said, Bridgeport Neighborhood
4 Fund's mission is as a community developing
5 bank to make loans to rehabilitate substandard
6 rental housing. We get funds from six
7 participating banks, Citibank being one of
8 those banks, which lends funds to us, so that
9 we can relend them for our rehab activities.
10 My other organization, Bridgeport
11 Neighborhood Trust, is a community organization
12 which tries to support the efforts of residents
13 to improve the quality of their lives. We have
14 a number of programs, and Citibank has been a
15 long-time supporter of those, both financial
16 contributions and also people sitting on both
17 my boards, both the fund and the trust boards.
18 Interestingly, I can honestly say
19 that Citibank CRA officer Ellen Power is the
20 only CRA officer who ever calls me up and asked
21 me what Citibank can do for us. Usually I'm
22 knocking on other people's doors asking them to
23 do things for me. Also Citibank is the only
24 bank which has asked if they can lend us more
25 money and, again, it's usually the reverse.
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1
2 All of this has been done by Citibank
3 despite the fact that they do not have a branch
4 in Bridgeport. The nearest branch is in the
5 adjacent town of Fairfield, so I do believe
6 that their commitment to our organizations and
7 to Bridgeport is truly to improve the community
8 as opposed to being really driven only by CRA
9 concern, not taking deposits in Bridgeport.
10 I am hopeful that the merger will be
11 beneficial and I am here to support it.
12 Travelers in the past has been
13 contributor to another neighborhood
14 organization in Bridgeport, Neighborhood
15 Housing Services. Right now it's actually
16 easier in Bridgeport to get a loan than it is
17 insurance, so, I can say that Travelers is a
18 company which writes a fair amount of insurance
19 in Bridgeport, but I'm hoping that the merger
20 will result in more business being done in
21 Bridgeport, certainly if they pick up
22 Citibank's philanthropic bent I think that will
23 be the case.
24 Salomon Smith Barney obviously
25 doesn't have much of a presence in the city but
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1
2 I'm encouraged by seeing the types of programs
3 that they are starting to enact in other area
4 of the country, and I'm hopeful that that, too,
5 will have a beneficial effect in Bridgeport.
6 So on the whole I'm hopeful about the
7 merger, and I think that it should have good
8 impact on the city life of Bridgeport because
9 it should bring more resources into the
10 community such as ours. Thank you.
11 MR. LONEY: Thank you. Ms.
12 Kotelchuck.
13 MS. KOTELCHUCK: Thank you. My name
14 is Rhonda Kotelchuck. I'm the executive
15 director of the Primary Care Development
16 Corporation.
17 Thank you for this opportunity to
18 testify with regard to the work that we have
19 done over the last several years with the
20 community development group at Citibank.
21 The Primary Care Development
22 Corporation is a not-for-profit corporation
23 created to assure access to quality primary
24 health care in medically underserved
25 communities of New York City. We do this by
.
569
1
2 providing financing and technical assistance to
3 nonprofit community health centers, hospitals
4 and primary care providers to build new or
5 expanded facilities in these communities.
6 Among our most important tools is a
7 24 million dollar loan fund created for the
8 financing of smaller facilities. Citibank has
9 not only been instrumental to the structuring
10 of the loan fund, but has also committed five
11 million dollars to the loan fund. Citibank has
12 also made it clear that it's interested in
13 expanding its relationship with Primary Care
14 Development Corporation and has offered
15 financing as well as its time and best thinking
16 to help us further our mission.
17 In the course of the coming year we
18 will work with Citibank in exploring several
19 new arenas, including different sources of
20 credit enhancement, the potential for creating
21 a similar loan vehicle in underserved areas
22 upstate and the expansion of our technical
23 assistance programs for project sponsors in
24 financial operations.
25 To date we have financed 15
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1
2 facilities that collectively will provide basic
3 preventive and primary health care to some
4 220,000 New Yorkers living in all five boroughs
5 of New York City. Ten of these facilities are
6 now operating. We also have an active pipeline
7 of some dozen additional facilities in earlier
8 stages of development.
9 This record of achievement clearly
10 would have been impossible without the active
11 and creative involvement of the Citibank
12 community development group. We look forward
13 to a continued partnership in meeting the
14 health care needs of New York City's
15 underserved community.
16 Thank you.
17 MR. LONEY: Thank you, Ms.
18 Kotelchuck.
19 Mr. Hamilton.
20 MR. HAMILTON: Good morning. I'm
21 executive director of the Hartford Economic
22 Development Corporation and the Greater
23 Hartford Business Development Center of
24 Hartford, Connecticut.
25 These companies provide technical
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1
2 assistance, loan packaging and subordinate debt
3 financing for small and medium-sized businesses
4 in Hartford and the surrounding region.
5 Both organizations have provided loan
6 assistance for business startup and expansion
7 projects located in low and moderate-income
8 neighborhoods. Since 1983, we provided more
9 than 19 and a half million dollars in loan
10 assistance resulting in the retention of almost
11 1700 jobs and the creation of another nine
12 hundred new jobs in those areas.
13 Since we are often considered a
14 lender of last resort, these much-needed funds
15 help to create jobs in companies and in
16 communities that can provide goods and services
17 that ordinarily would not be accessible to the
18 residents of these communities.
19 Of the four hundred fifty clients
20 that we serve annually, more than 60 percent of
21 our loans are given to minority and women-owned
22 businesses. The ability of the Economic
23 Development Corporation in the business
24 development center to provide services at no
25 charge for more than twenty years is directly
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1
2 related to the support of outstanding corporate
3 citizens like the Travelers.
4 In our early years Travelers donated
5 management and technical resources to our firm.
6 Travelers also provides a million dollars in
7 funds and loan pool targeted for women and
8 minority-owned businesses, certainly a group
9 which has and continues to have in many cases
10 access to capital.
11 Travelers has consistently been
12 represented on our board of directors and has
13 helped share our growth in contributions to the
14 community. On January 1 of 1997, Travelers
15 converted its original low interest loan of one
16 million dollars to a grant. This generosity
17 will enable our organization to continue to
18 resolve this loan pool for a considerable
19 period of time.
20 As you might expect, Travelers'
21 involvement in our community has not been
22 limited just to the companies I represent. A
23 $100,000 grant in 1986 to the Connecticut Small
24 Business Development Center, and funding for
25 the Womens Business Enterprise Specialist
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1
2 Program have enabled these organizations to
3 flourish and become the entrepreneurial center
4 at the Hartford College for Women.
5 This program has become a national
6 model for helping women entrepreneurs gain
7 self-sufficiency. The center continues to be a
8 collaborative effort between corporate, public
9 and private entities.
10 In 1997 the Travelers Foundation gave
11 the Entrepreneurial Center a $75,000 grant to
12 help provide small business loans for women.
13 Lastly, as chairman of the board of
14 the United Way of the Capital Area, I have seen
15 firsthand Travelers' commitment to assuring
16 that those with the greatest needs and the
17 least resources are served by the United Way
18 agencies in our community.
19 In the last four years alone,
20 Travelers' employees have contributed more than
21 three million dollars to the community
22 campaign. As to the Travelers' corporate gift,
23 that total ballooned to more than 4.2 million
24 dollars.
25 Travelers corporate concerns is
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1
2 consistently positive in most, if not all,
3 areas of concern in Hartford and the region.
4 It is for these reasons and others too numerous
5 to mention in the time allotted that I speak in
6 favor of combining Citicorp and the Travelers.
7 I am certain that the new entity will do even
8 greater good than is being done in the
9 communities they currently serve.
10 Thank you.
11 MR. LONEY: Thank you, Mr. Hamilton.
12 Ms. Abernathy.
13 MS. ABERNATHY: Good morning. Thank
14 you for this opportunity to speak on behalf of
15 Elaine Edmond, executive director of the Harlem
16 YMCA.
17 I'd like to say that there is a new
18 Citibank branch opening on 134th Street and
19 Eighth Avenue in Harlem.
20 Citibank has been and active
21 supporter of the Harlem YMCA since the 1971
22 inception of our National Salute to Black
23 Achievers in Industry Awards Dinner. They have
24 been our leading sponsor, generally donating
25 annually towards our various youth programs.
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1
2 Recently as a corporate sponsor they
3 contributed considerably in support of the
4 Jackie Robinson Youth Center. They stay in
5 constant contact with us, seeking additional
6 ways to collaborate with the Harlem YMCA, to
7 continue to support our youth programs and the
8 community.
9 Citicorp Citibank and the Harlem YMCA
10 have had and continue to have one of the most
11 positive relationships in the Harlem community.
12 Citibank is one of the very few large
13 institutions that has remained consistent in
14 their support of our community needs.
15 Their financial support has enabled
16 the Harlem YMCA to offer, in addition to our
17 youth programs, a wide variety of innovative
18 programs for the YMCA families we assist. We
19 have been able to increase and expand our
20 outreach services to a larger portion of our
21 community.
22 In recent years the population of
23 Harlem has changed to a multicultural,
24 multiracial diverse population with different
25 challenges. With Citibank as a staunch
.
576
1
2 supporter we are able to meet some of these
3 challenges. We provide full-day services to
4 preschool children ranging in ages from 2.9 to
5 5 years old. Our after-school activities also
6 assist parents who need child care until 7 p.m.
7 for students ages 16 to 17 who require a safe,
8 secure structured environment.
9 Citibank recognized our increased
10 need of services when welfare reform required
11 custodial parents to join the work force.
12 Citibank approached us with ideas and financial
13 assistance to fulfill this new demand from our
14 community.
15 I came today to give testimony so
16 people can be made aware of the vital
17 assistance the Harlem YMCA receives from
18 Citicorp Citibank. The needs of the Harlem
19 community continue to increase, and so does the
20 need for financial support.
21 It is comforting for us at the Harlem
22 YMCA to know our collaboration with Citibank is
23 still a supporting one.
24 Thank you.
25 MR. LONEY: Thank you, Ms. Abernathy.
.
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1
2 I have a couple of questions. First
3 of all, Mr. Towery, I'm not sure if I am clear
4 totally. I understand that you were testifying
5 that there are a number of things that Citicorp
6 has done for you, loan access programs and such
7 as that, but either I missed it, or you didn't
8 say whether they have actually made loans to
9 your organization or through your organization.
10 MR. TOWERY: Yes, they have. The
11 mortgage on our building, our headquarter
12 building is with Citibank, one million six I
13 think it is. They've made several small
14 business loans through our revolving loan fund
15 that we participate and usually fill gaps, the
16 banks help the banks and with blended rates and
17 participated in several of those, and then I
18 think I mentioned that their expertise helped
19 us actually start that revolving loan fund.
20 MR. LONEY: Okay, thank you. Anybody
21 have any questions of the panel?
22 MS. KENT: I have. Ms. Abernathy, is
23 that a full-service bank?
24 MS. ABERNATHY: Yes, the new one
25 that's opening. As a matter of fact,
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1
2 ironically the vice-president and two of the
3 managers came to visit me yesterday. They came
4 to look at the branch, the Harlem YMCA offices
5 and their services there, because being that
6 they were new in the community they wanted to
7 familiarize themselves with us, and I had the
8 opportunity of meeting them then. They will be
9 on the corner of 134th and Seventh Avenue in
10 Harlem. I didn't bring my notes from the
11 meeting, but I believe they are opening in
12 August.
13 MS. KENT: That's what I'm trying to
14 ask, are they opening a full-service branch,
15 not just a --
16 MS. ABERNATHY: No, it's a
17 full-service bank in Harlem.
18 MR. LONEY: I have a question of
19 Mr. Flake.
20 Don't you miss Washington?
21 (Laughter)
22 That's not really my question, but I
23 thought I'd ask it anyway.
24 REV. FLAKE: Actually, there is
25 something wrong with me, I haven't even had
.
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2 withdrawal from that.
3 MR. LONEY: One of the things that is
4 interesting from your perspective, given your
5 distinguished career in Congress, a number of
6 folks have come in and argued the illegality of
7 this transaction saying that the law as it
8 presently stands is against this transaction
9 being approved.
10 One might anticipate that one with
11 your perspective of having spent sometime in
12 Congress might share that, and it's interesting
13 to me that you don't seem to, and I wonder if
14 you could talk to me about that a bit.
15 REV. FLAKE: Well, one of the things
16 I learned in my 11 years in Congress is that
17 the wheels of progress there generally turn
18 relatively slow.
19 Most progressive moves in this nation
20 have been made outside of the political
21 process, with the political process ultimately
22 catching up and then jumping in front, and
23 doing what is necessary to clear the way.
24 I would argue that to wait, I'd
25 rather see us move forward, and if there are
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2 going to be legal challenges, allow those
3 challenges to move through the Court process,
4 even if it goes all the way to the Supreme
5 Court, to make some determinations that I think
6 are in the best long term interests, not only
7 of the industry in general, but in the
8 long-term interests of America.
9 I don't think we can afford to
10 continue in what I call the substandard state
11 relative to other countries of the world
12 waiting for Congress to act. I think it is
13 imperative that there can be a process that
14 people can at least have an opportunity to
15 evaluate, gather some data from, and I think
16 this may wind up being the model for future
17 mergers and will serve as a major impetus to
18 put forward the process that I think is very
19 archaic and outdated.
20 So I think history of our nation has
21 always been, regardless of what the law is in
22 the pure sense of the word, there are other
23 interpretations of the spirit of that law, as
24 has been evidenced by other changes that have
25 taken place in the financial services industry
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2 and those changes have taken place in spite of
3 the limitations of the Congress.
4 MR. ALVAREZ: We've been privileged
5 with this panel and other panels in the last
6 day and a half to hear from community groups,
7 organizations that are doing real work in the
8 trenches and helping a variety, a diverse
9 variety of needs and one of the points that you
10 made today, and others have made is that banks'
11 support of your program is very important and
12 allows you to do what you are doing.
13 Others have suggested that there is
14 room for banks to do, to support these groups
15 and to direct activities themselves and perhaps
16 banks are relying too much on organizations
17 such as yours and funding organizations such as
18 yours and retreating from doing direct
19 activity, direct lending, direct investment
20 which really competes with your organization,
21 but would be other means to the community.
22 My question is, do you have that
23 sense? Do you have the sense that banks are
24 relying too much on other intermediaries or
25 organizations that are in the trenches of the
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2 community and are withdrawing their own direct
3 involvement in the community?
4 MS. ABERNATHY: I would --
5 MS. ROBINSON: I'd like to address
6 that, because Bridgeport Neighborhood Fund is a
7 community development bank, and so we are
8 making loans.
9 What I find with the type of lending
10 that we do, it's such a very peculiar niche and
11 you have to have a great deal of knowledge, not
12 only about the community, but also typically
13 about the borrower. Lots of times you're not
14 just looking at financial information about
15 that borrower, but you really need to know
16 something about either the individual or the
17 not-for-profit background and you're making a
18 loan as much on that as you are on any
19 financial information that you're getting.
20 I think it would be very difficult
21 for a conventional bank to have the type of
22 knowledge that we have and that we need to make
23 the kind of loans that we're making, and I
24 think that's one of the reasons that the six
25 banks support us because they recognize that we
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2 are better capable of making those loans.
3 Also, we make small loans. Our
4 typical loans are between $200,000, the
5 transaction cost for any banks to try to handle
6 a loan of that size would just be prohibitive,
7 so either the borrower would be getting charged
8 more fees or we'd really be costing the bank a
9 lot of money to do those types of loans, and,
10 actually, we'll do loans down to thirty
11 thousand dollars, so I just don't think it
12 would be make sense that a bank would put in
13 resources and try to make the type of loans
14 that we do.
15 MR. LONEY: Ms. Abernathy?
16 MS. ABERNATHY: Yes. I think the
17 fact that the familiarity of the population of
18 our communities with us is easier for them to
19 approach us than it would be directly going to
20 the large institution. I think being
21 intermediaries your supportive of the community
22 needs in that respect.
23 MR. HAMILTON: I would just like to
24 add one point to that. One of the things that
25 we're seeing in our community, perhaps the
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2 intermediaries, that the bank have used us
3 somewhat as a research or laboratory in a sense
4 and we're now seeing a tremendous amount of
5 activity in marketing, if you will, to the
6 small business segment by a number of the banks
7 in our community.
8 So I do believe that they have made
9 an amazing discovery that you can lend in these
10 markets to this type of business, and have it
11 be profitable. I think there will always be
12 the niche that is spoken of here that you need
13 some specialized type of expertise and time and
14 effort with, but you do see more, at least in
15 our marketplace, more involvement of the area
16 banks as they get more into small business
17 centers, small business lending, and marketing,
18 specifically, the small minority-women-owned
19 businesses as they continue to emerge as a
20 major force in the economy.
21 MR. TOWERY: You may I say that I
22 understand the appeal of wholesaling products
23 and services that larger banks have, but my
24 caveat would be that there is a risk of getting
25 out of the retailing of their products if those
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2 intermediaries are really large in terms of
3 geographic interest. Community intermediaries,
4 our little resolving loan fund a big loan for
5 us $150,000, but I do think community-scale
6 intermediaries, national regional
7 intermediaries, I'm sure there is a wonderful
8 function for them and requirement there, but I
9 think relying on just large scale
10 intermediaries at the experience of retailing
11 their products and dealing directly with local
12 communities is not a very good idea.
13 I haven't seen that huge trend in any
14 way, but I do think it's a risk worth watching.
15 REV. FLAKE: As a community developer
16 is what I do more so than what I was doing in
17 politics, I think it is critical for us to
18 understand that the actual loan of the bank
19 requires that they have a system by which they
20 can measure some standards and some
21 accountability.
22 I think the worst thing would be to
23 listen to some of those who basically would
24 draw us back into a process that would be
25 nothing but a replication of what happened with
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1
2 Model Cities and some of the other programs,
3 and that is that there would be dumping of
4 monies into communities through other kinds of
5 intermediaries and those monies would not be
6 accountable, and I don't think you would get a
7 product.
8 I think the way that the system works
9 now is in the best interests of most
10 communities in that the banks have identified
11 the most accountable, most capable
12 organizations for the delivery of their
13 product, and I think it has worked extremely
14 well, and to spread that out to interests that
15 are not necessarily concerned about that kind
16 of development, but are concerned about the
17 ongoing survival of the organization, or
18 concerned about having a voice, the reality is
19 that is not the bank's function, and,
20 therefore, we have to be very careful in making
21 sure that we do not demand of a bank that which
22 jeopardize its ability to be able to do what it
23 is in fact certified and organized to do, and I
24 would just urge that to have that caution as we
25 move forward.
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2
3 MS. KOTELCHUCK: Speaking from our
4 perspective, this is the first time that we're
5 aware of banks such as Citibank embracing
6 primary care as and integral part of community
7 development, which we believe it to be, and as
8 such, primary care is really a developing area.
9 It's a direction that the health system is
10 moving in.
11 It is a new area for lending and for
12 development, and it's been our experience that
13 an enormous amount of work is needed and an
14 enormous amount of expertise is needed in terms
15 of what will work in a particular community,
16 what a group needs to be successful in this
17 area, and Citibank has been quite supportive in
18 terms of the development of that expertise on
19 the part of our group, and I hope that this is
20 useful to others in terms of breaking into the
21 area of primary care from lending and other
22 communities.
23 MR. LONEY: Thank you. Any other
24 questions of this panel? If not, I thank you
25 all very much.
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2 MR. LONEY: Let me call the last
3 scheduled panel that we have, Panel
4 Twenty-four.
5 Nancy Roberts, Abdul Rahmaan
6 Muhammad, Joanne Oplustil, Dennis Kremer,
7 Robert Davenport and Jennifer Adolph Blum.
8 Thank you all for coming. We will
9 start with you, Ms. Roberts.
10 MS. ROBERTS: Good morning. I am
11 Nancy Roberts, president of the Coordinating
12 Council for Foundations, a regional association
13 of more than 80 corporate foundations,
14 corporate giving programs, independent
15 foundations, community foundations and
16 federated funds serving Connecticut. The
17 Council's mission is to promote and support
18 effective philanthropy for the public good in
19 Connecticut.
20 As head of the organization that
21 supports and provides data on and information
22 about the organized grant-making community in
23 Connecticut, I am in a position to observe and
24 comment on the corporate social investment of
25 Travelers as well as other corporate entities
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1
2 in the state.
3 Travelers has historically been an
4 important contributor to organizations in the
5 Hartford area that heal, educate, entertain and
6 inspire -- and its support has been steadfast.
7 The headquarters community usually
8 receives the greatest corporate support.
9 However, after the merger of Travelers and
10 Primerica, greater Hartford was still the
11 beneficiary of sizable support from Travelers.
12 Most recently, within the past four
13 years, Travelers has provided significant
14 support through its foundation in the area of
15 education, from early childhood through college
16 years.
17 Let me give you a few examples.
18 Following the merger with Primerica,
19 Travelers quickly brought to Hartford the
20 academy program which had been successfully
21 provided in other parts of the country. The
22 Academy of Finance at Weaver High School not
23 only became a success story in its own right,
24 but it provided the model and design that
25 stimulated the development of other academy
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1
2 programs supported by other corporations and
3 the State of Connecticut in the two other high
4 schools in the City of Hartford.
5 A three-year commitment to the
6 Hartford public schools for instrument repair,
7 replacement and music instruction provided much
8 needed support to a neglected program for the
9 cultural enrichment of children in Hartford.
10 In January 1998, Travelers donated
11 30,000 square feet of space in their Education
12 Center to the University of Connecticut for
13 three years to support business education. In
14 addition, they will provide a scholarship fund
15 and paid internships for high school and
16 college level students. This effort
17 exemplifies Travelers' efforts to link
18 educational opportunities for students to job
19 opportunities.
20 In addition to the above-mentioned
21 commitments to public education, the Travelers
22 Foundation contributes to community-based
23 tutoring, mentoring programs for children and
24 youth, to cultural and arts programs, to health
25 programs, totalling more than $1.4 million in
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1
2 1997 going into the Hartford community.
3 Matching gifts to educational
4 institutions has been replaced with a program
5 which both encourages and rewards employees who
6 contribute volunteer time to their community.
7 With all of the downsizing of the number of
8 employees which has happened in the greater
9 Hartford area, one of the least discussed but
10 most strongly felt effects has been the loss of
11 volunteers to both boards of directors and
12 direct service in nonprofit organizations. In
13 many corporations, employees have not been
14 encouraged to participate outside of their
15 workplace.
16 But Travelers Volunteer Incentive
17 Program provides a strong message that it is
18 not only OK to volunteer, but it is important
19 to give back to the community. Employees may
20 request up to $1500 on behalf of the charitable
21 organizations for which they volunteer, and the
22 amount received further encourages
23 participation since grants are based on the
24 longevity with the organization as well as the
25 hours of service. In 1997 over 60 employees
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1
2 took advantage of this program with an
3 additional $30,000 contributed to charitable
4 organizations.
5 The nonprofit community has also
6 benefitted from Travelers' generous in-kind
7 support, including opening its space in the
8 education center for conferences, programs and
9 events of community organizations. One recent
10 event for which Travelers provided space and
11 technical assistance and financial support was
12 the Greater Hartford Area Child Care
13 Collaborative's Quality Child Care Teacher
14 Award, which recognized and rewarded the best
15 early childhood teachers in greater Hartford.
16 The final area I would like to touch
17 on is Travelers' support for the civic
18 infrastructure of the greater Hartford
19 community.
20 Travelers has been a founder and key
21 player in important civic events, including the
22 Capital Region Growth Council, which was
23 developed to stimulate economic growth in the
24 greater Hartford region, and Riverfront
25 Recapture, an effort to reconnect the Hartford
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1
2 area towns and cities to the Connecticut River.
3 Along with the grants from its foundation, the
4 in-kind and human resources and the civic
5 efforts support to enhance the quality of life
6 in the greater Hartford area.
7 In closing, I would like to reiterate
8 that in my opinion Travelers has exhibited
9 ongoing strong commitment to greater Hartford,
10 and I expect that commitment will continue.
11 Thank you.
12 MR. LONEY: Thank you, Ms. Roberts.
13 Mr. Muhammad.
14 MR. MUHAMMAD: Yes. My name is Abdul
15 Rahmaan Muhammad, and I am here in my role as
16 the senior vice president for Community Support
17 Services and diversity manager for the Village
18 for Families and Children.
19 I am pleased to have this opportunity
20 to participate on this panel, to provide
21 information relating to factors the Board is
22 required to consider under the Bank Holding
23 Company Act.
24 I appear before you on behalf of the
25 Village for Families and Children, Inc.,
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594
1
2 located in Hartford, Connecticut, and its
3 president Mr. William A. Baker. I express my
4 appreciation for this opportunity to present
5 testimony pertaining to the convenience and
6 needs of the communities to be served. I will
7 also briefly address our long and beneficial
8 relationship with the Travelers.
9 As one of the oldest human service
10 agencies in the country, the Village for
11 Families and Children has been at the forefront
12 of the development and provision of quality
13 social and human services. The Village has
14 been a key leader in the process of meeting
15 human needs for more than 185 years.
16 With a cadre of trained, experienced
17 and diversity qualified professional and
18 para-professionals, the Village has been
19 influential in research, training and service
20 provision.
21 Our services range from programs for
22 infants to the elderly. We provide outpatient
23 behavioral and mental health counseling,
24 special needs adoption services, specialized
25 foster care services, extended day treatment
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1
2 and family preservation programs, family
3 reunification and residential teen transition
4 programs, teen pregnancy and family housing
5 alternative services, and advocacy on behalf of
6 those most needy in our community.
7 Within the past five years, we have
8 become increasingly family centered and child
9 focused. Working in collaboration with other
10 affiliations in the community, we have
11 successfully implemented several school-based
12 family resource centers.
13 These programs have become one-stop
14 shopping centers for comprehensively meeting
15 family needs and improving the quality of life
16 by developing community-based resources.
17 Our services and programs have
18 positively impacted the lives of thousands of
19 clients, consumers and customers statewide.
20 Such cost-effective programs have been made
21 possible in part due to partnership and support
22 from the private industry in general and the
23 Travelers Group in specific.
24 The Travelers involvement and support
25 to the Village has been long-standing and
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1
2 consistent. For many years they have made the
3 financial difference in our summer enrichment
4 programs, as a part of our extended day
5 treatment program. This program has provided
6 services to many children.
7 In the more recent involvement for
8 them, the Travelers has funded several projects
9 in our family resource centers. Such projects
10 include, but are not limited to, our computer
11 lab in the North Hartford Family Resource
12 Center, parent educator and parent specialist
13 services and recreational and other services
14 for children.
15 With support from Travelers, both
16 financial and human, we have been able to meet
17 the needs of children needing tutoring in the
18 sciences, teens needing mentors, mothers
19 needing supplies and living space, seniors
20 needing transportation to services, and
21 families needing food and gifts for their
22 children during special observances and holiday
23 seasons.
24 Volunteers from the Travelers have
25 been crucial in improving and enhancing the
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2 program sites for many of our community-based
3 services. Not only has the Travelers provided
4 services at our program sites, they have made
5 available space at their local offices for
6 training and community-based programs. During
7 a recent annual United Way-sponsored volunteer
8 program called A Day of Caring, several of the
9 Travelers volunteers provided a full day of
10 services to the human service organizations in
11 the community.
12 The past long-term partnership
13 between the Village for Families and Children
14 and the Travelers, which includes hundreds of
15 thousands of dollars and staff involvement,
16 lead us to believe that a bigger and better
17 Travelers would continue this high quality of
18 service and support that have been products and
19 outcomes of the previous years.
20 Therefore, the Village for Families
21 and Children would like to go on record as
22 positively supporting the merger with Citicorp,
23 possibly leading to the potential for greater
24 contributions of resources, both financial and
25 human. In our estimation, such a situation
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1
2 would only lead to the potential enhancement of
3 the human conditions throughout the greater
4 Hartford area, would lead to volunteer support,
5 quality service provision and continued
6 financial support.
7 Should you have questions, I would be
8 pleased to address them when they are
9 appropriately asked. On the other hand, we
10 thank you for this opportunity and we express
11 our appreciation to be here.
12 MR. LONEY: Thank you, Mr. Muhammad.
13 Ms. Oplustil.
14 MS. OPLUSTIL: My name is Joanne
15 Oplustil. I am the executive director of
16 CAMBA, a nonprofit agency in the Flatbush
17 section of Brooklyn, New York.
18 In 1985 when I took over the agency,
19 I was the sole employee. Today we have over
20 350 employees and we service over 14,000
21 individuals a year. The programs that we run
22 are employment programs, health and aids, youth
23 business development, microloans, civic
24 services, homeless and education programs.
25 We're opening a primary health care center in
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1
2 1999, day care center in 1999, and we are in
3 the process of developing housing for special
4 needs populations, specifically people who are
5 HIV positive.
6 Through those years when I started
7 out, Citibank was always there; and, quite
8 frankly, if they weren't with me -- certainly I
9 was by myself for a while -- encouraging and
10 also giving grants to the agency, we would not
11 be where we are today.
12 I think that the merger between
13 Travelers and Citibank will only benefit
14 communities such as ours. In addition to
15 banking services and assistance that we get --
16 for instance, we work with many people who are
17 either on public assistance or who are
18 immigrant refugees who are not always familiar
19 with the banking systems. They don't have
20 accounts. They want to cash some checks. They
21 don't have the fees. They are not able to pay
22 the fees that the banks charge. We've worked
23 out with Citibank where many of our low-income
24 clients are able to open banks or cash checks,
25 and fees had been either reduced or eliminated.
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1
2 And we plan to continue to work with Citibank
3 in this effort, particularly with New York
4 City's very strong push to get people from
5 welfare to work.
6 People who are now going to be
7 working are going to ultimately need to open
8 bank accounts. We are going to need
9 consumer-friendly bankers who are going to work
10 with marginal population or low-income who may
11 not have the resources to pay all the fees
12 immediately, to assist them with opening
13 accounts. That is good business, because
14 ultimately people who open a small account will
15 ultimately have larger accounts.
16 With regard to Travelers, we view
17 that as positive, because insurance is a very
18 important component, certainly in the Federal
19 Reserve. But in nonprofit agencies you
20 breathe. You have a new program, you need new
21 insurance. We hope that this merger will
22 assist us in our insurance needs, educating us
23 not only nonprofits, but also educating
24 community members on the needs of insurance,
25 what insurance is, what it is all about and how
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1
2 to access insurance, reduced fee insurance.
3 Our microloans -- you had asked
4 another question to the other panel about
5 having intermediaries. We do microloans. We
6 give out up to $5,000 loans. Banks can't
7 afford to give out $5,000 loans. We have been
8 very successful with working with populations
9 in giving $5,000 loans, combining them with
10 other intermediaries to make them either
11 $10,000 or $15,000 loans, where the businesses
12 have been turned down, and ultimately will then
13 go to a Citibank for a larger loan.
14 So other entities providing loans are
15 very important, because we are the ones that
16 will walk them through and ultimately they will
17 be able to access larger loans from Citibank,
18 and we have Citibank supporting our microloan
19 program and all of our other programs.
20 Thank you.
21 MR. LONEY: Thank you.
22 Mr. Davenport.
23 MR. DAVENPORT: Thank you for the
24 opportunity to speak. Like Mark Winston
25 Griffith earlier, I sort of looked at this
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1
2 opportunity as a no-win situation because our
3 constituency includes many of the
4 community-based organizations that have spoken
5 over the last two days, and some of our
6 constituency, some of the community-based
7 organizations have spoken in opposition to the
8 merger and some of them have spoken in favor of
9 it. So whatever I say I am going to make some
10 enemies as a result of it.
11 I, like Mark Winston Griffith,
12 thought it was a marvelous week to take a
13 vacation. But in spite of that, I want to
14 speak in favor of the proposed merger for two
15 reasons, and I will explain those in a second.
16 First of all, just a word about NDC,
17 our organization. We are one of the nation's
18 oldest not-for-profit organizations engaged in
19 community development and housing development.
20 We started in 1968. Our founder had worked for
21 Bobby Kennedy, and when Bobby was shot, he
22 organized the National Development Council,
23 founded with a Ford Foundation grant.
24 In a nutshell, we are finance people.
25 Our role is to channel capital into low-income
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1
2 areas in productive ways. In any given year,
3 we are working with 100 to 125 community-based
4 organizations, partnering with them to create
5 jobs and to stimulate investment, private
6 sector investment into the low-income
7 communities.
8 We own 2,000 units of low-income
9 housing nationwide. We have $250 million worth
10 of direct development experience. We're the
11 only nonprofit with what's called a small
12 business lending license from the SBA, which
13 entitles us to make SBA-guaranteed loans to
14 small businesses who invest into low- and
15 moderate-income areas.
16 As I said, I want to speak in favor
17 of the merger for two reasons, and they relate
18 very much to our experiences with Citibank, and
19 the first is really what I call attitude.
20 For 30 years our organization has
21 known that a major obstacle to the flow of
22 capital into low-income communities is not the
23 lack of investment opportunities but the
24 perception that there is a lack of investment
25 opportunities. Our experience has always been
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1
2 that there are a lot of good business
3 investment opportunities in low-income
4 neighborhoods and all we have to do is uncover
5 them and work to structure the deals.
6 No bank is perfect. Citibank is not
7 perfect. But our experience with them has been
8 that they do view their CRA responsibility and
9 investing in the low- and moderate-income
10 communities as an opportunity. It is good
11 business. It is an opportunity to employ
12 capital in a neighborhood. They are
13 sophisticated enough to know that it takes hard
14 underwriting and careful structuring of these
15 deals, but they don't view it as some burden or
16 some guilt money. They have the attitude this
17 is "can do," and with a little bit of hard work
18 we can make it work.
19 That makes them an excellent partner
20 for our type of development. They view low-
21 and moderate-income neighborhoods as equal
22 partners in the development process. Because
23 of this attitude, what they have done with us
24 is they have become the largest sponsor of our
25 nationally recognized training for
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1
2 community-based organizations, teaching them,
3 bringing the hard development and the hard
4 financial skills to the community-based
5 organizations so they have the capacity to do,
6 to catalyze, their own investments in their own
7 communities.
8 We are also funded by HUD and other
9 large state governments to do this, but
10 Citibank is the only bank and the largest bank
11 to support our training activities. In New
12 York City Citibank has underwritten directly
13 100 percent of the cost of bringing this
14 training to 200 neighborhood-based nonprofits.
15 Citibank has also engaged us to
16 survey the neighborhood organizations to
17 identify new investment opportunities for them,
18 and they booked a lot of new business as a
19 result of that.
20 They have been a major investor in
21 our $35 million low-income housing tax credit
22 fund that will, in fact, create $100 million
23 worth of new low-income housing.
24 They are the only bank that has
25 directed us to work with the low-income
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1
2 populations in Puerto Rico, which is one of the
3 neediest, and that really is the first reason
4 why we are in favor of it.
5 Second reason is we all know, as
6 Joanne has mentioned before, that while the
7 financial problems of low-income neighborhoods
8 goes far beyond the problems of commercial
9 banks and thrift institutions, it rests to
10 great degree also with insurance, the ability
11 to get insurance. It also rests with the
12 access to equity capital, which is almost
13 impossible in a low-income area.
14 We feel confident that a merged
15 Citicorp/Travelers will, in fact, create a new
16 generation of investment vehicles for community
17 development. For that reason, we are very much
18 in favor of the merger.
19 Thank you.
20 MR. LONEY: Thank you, Mr. Davenport.
21 Ms. Blum.
22 MS. BLUM: Good morning. I am the
23 director of government relations and
24 communications at the Brooklyn Chamber of
25 Commerce. On behalf of the Brooklyn Chamber of
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1
2 Commerce, I am pleased to offer this testimony
3 in support of Citibank and their pending merger
4 with Travelers.
5 The Brooklyn Chamber is a nonprofit
6 membership organization founded in 1918. This
7 is our 80th anniversary. Our mission is to
8 assist Brooklyn businesses in ways that promote
9 commerce, stimulate economic growth and improve
10 the quality of life throughout Brooklyn. We
11 serve a diverse borough-wide membership uniting
12 small and large businesses located throughout
13 Brooklyn and beyond, and we advocate on behalf
14 of Brooklyn's 35,000 businesses.
15 Citibank has been an active Chamber
16 member for almost half a century. Currently
17 two Citibank executives, Jill Kelly and Natalie
18 Abatemarco, are very active members of our
19 board of directors. In fact, almost ten years
20 ago Jill Kelly was the first woman elected to
21 our executive committee.
22 In our view, Brooklyn, New York City
23 and New York State would be hard-pressed to
24 find a more community-minded financial
25 institution. Citibank has an exemplary record
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1
2 of community outreach, customer service and
3 economic and small business development. The
4 bank, in our view, is a proven leader in
5 commercial revitalization and a respected
6 provider of technical assistance to small
7 businesses.
8 Citibank has funded several specific
9 innovative initiatives at the Brooklyn Chamber.
10 The bank was an active early and generous
11 supporter of a program that we called Good
12 Help. It is a free employment service created
13 to fill the needs of small businesses seeking
14 to hire and retain qualified employees. At the
15 same time, unemployed and underemployed
16 individuals are assisted in finding quality
17 employment which contributes to the overall
18 economic growth of Brooklyn. Good Help works
19 in conjunction with a citywide network of
20 nonprofit training and placement agencies to
21 produce a large pool of job-ready applicants.
22 We are not aware of any other employment
23 service or similar program in the city which
24 focuses on finding employees for small
25 businesses.
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1
2 Citibank has also created an exciting
3 new program run by the Chamber for the
4 commercial revitalization of failing retail
5 corridors. The approach of the Retail Strip
6 Revitalization initiative combines marketing
7 assistance, physical improvements and market
8 analysis to address the decline of traditional
9 shopping areas whose stores cater to the needs
10 of nearby residents.
11 Their decline disrupts the vitality
12 of otherwise stable and thriving neighborhoods.
13 Citibank recognizes that retail strips which
14 lack strong merchant associations, business
15 improvement districts, local development
16 corporations, organizations like CAMBA to
17 advocate on their behalf, coupled with
18 increased vacancy and increased foot traffic
19 need target development assistance. The
20 commercial industry of Nostrand Avenue between
21 Avenue W and Avenue Y in Sheepshead Bay is
22 serving as the pilot project for this
23 initiative.
24 Finally, Citibank is a strong
25 supporter of Brooklyn Goes Global, the
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2 Chamber's international trade service. The
3 program's mission is to help businesses create
4 jobs by increasing overseas sales of
5 Brooklyn-manufactured goods. The program helps
6 more than 90 Brooklyn manufacturers every month
7 to increase their capacity to export by
8 providing technical assistance, market research
9 and aggressive sales generation.
10 Overseas sales for Brooklyn
11 manufacturers result in increased product
12 demand, ensure more stable business growth and
13 add more needed blue-collar jobs to Brooklyn's
14 economy. Brooklyn Goes Global is considered a
15 model program across the country.
16 The Brooklyn Chamber supports
17 Citibank and the merger with Travelers. We
18 think the bank has an exemplary record as a
19 good corporate citizen and an unparalleled
20 commitment to community development. We
21 believe this commitment will continue and grow
22 if the proposed merger is finalized.
23 Thank you for your time.
24 MR. LONEY: Thank you, Ms. Blum.
25 Any questions of this group?
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2 MR. ALVAREZ: I have one question.
3 Ms. Blum, you mentioned the corridor
4 revitalization program and you said City was a
5 strong supporter. I assume you mean a strong
6 lender in the revitalization, they lend to
7 small businesses that are moving into the
8 corridor.
9 MS. BLUM: No. This is a program
10 that is just getting underway. They have
11 funded us, in conjunction with some government
12 funding, to hire a consultant to provide
13 targeted redevelopment assistance to -- we are
14 starting with one pilot project. It is not a
15 lending program. We have actually hired a
16 consultant who is going to go in and provide a
17 well-rounded approach to revitalizing one
18 certain retail corridor, with hopes that that
19 approach can be then replicated in other parts
20 of Brooklyn.
21 We target areas that don't have
22 existing merchant associations, businesses, at
23 least, or other groups to do that type of work.
24 MR. ALVAREZ: Thank you.
25 MR. LONEY: Barbara.
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2 MS. KENT: Did you choose that
3 Sheepshead Bay/Nostrand Avenue area or the bank
4 chose it?
5 MS. BLUM: It was really a joint
6 decision between the Brooklyn Chamber, Citibank
7 and the office of the Brooklyn Borough
8 President. We thought it provided a perfect
9 example of the kind of area we wanted to help,
10 that is, a corridor that was suffering from
11 increased vacancies, decreased foot traffic,
12 but yet was a vital shopping district for a
13 relatively large community of residents.
14 MR. LONEY: Well, thank you very much
15 for coming in.
16 We are going to take a ten-minute
17 break before we start the open session. Come
18 back at 10 after 12, please.
19 (Recess)
20 MR. LONEY: Before we start the open
21 session, I would like to again claim the
22 prerogative of the chair for just a brief
23 moment, and I would like to thank personally,
24 and I think on behalf of the panel, the folks
25 from the Federal Reserve Bank of New York who
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2 have made this two days, day and a half, such a
3 seemless effort.
4 When something goes off as well as
5 this, you know there has been a lot of hard
6 work put in and good work put in. As the lady
7 said before, it's good to be able to sleep.
8 Well, this has been a great aid to us and helps
9 me relax an awful lot over the last day and a
10 half of the work that's been done here and the
11 results of that work. So for those of you out
12 there and back here, thank you very much.
13 We have some people who have asked to
14 speak on the open mike. We have a panel of six
15 that we have put together; actually, one person
16 is here that was scheduled from an earlier
17 session and we have just added him to the
18 panel.
19 The people are Gerry Vazquez, Amos
20 Brown, Charles Siegel, Pam Martens, Galen
21 Sherwin and Carol Lin.
22 Since Ms. Martens, Ms. Sherwin and
23 Ms. Lin want to go together, why don't we start
24 with the other three, and you folks can have
25 the final three places, if that is OK.
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2 I will start with Mr. Vazquez.
3 MR. VAZQUEZ: Thank you. My name is
4 Gerry Vazquez and I am executive president of
5 New Visions for Public Schools. New Visions
6 appreciates the opportunity to state our
7 support for the proposed merger of Citibank and
8 the Travelers Group and, more specifically, can
9 inform you of the generous support both
10 corporations have provided to New Visions.
11 Citibank and the Travelers Group have
12 demonstrated sustained commitment to community
13 and educational initiatives. A merger of these
14 institutions will only fortify our capacity to
15 effect change.
16 Founded in 1989, New Visions for
17 Public Schools is a not-for-profit organization
18 that works with the New York City public school
19 system, the private sector and the community to
20 mobilize resources and develop programs and
21 policies that lead to significant, lasting
22 improvements in the achievement of all
23 children.
24 Since 1990, Citibank has contributed
25 a total of $214,000 to New Visions, supporting
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2 our efforts in a number of ways.
3 The Citibank Success Fund Awards
4 program recognized exemplary teachers and
5 principals with monetary awards for the winners
6 and the winners' schools. The Citibank Success
7 Fund Awards were presented in an impressive
8 award ceremony attended by invited guests that
9 included an array of major community and
10 education leaders. The awards consistently
11 received favorable and extensive press coverage
12 and brought to these educators an all-too-rare
13 public acknowledgement and appreciation of
14 their gifts and dedication.
15 Citibank helped to start a Tech Corps
16 of students who learned how to repair
17 technology and did so in schools as part of
18 their community service project. Currently,
19 Citibank is sponsoring the Citibank College
20 Bound Program, which provides a comprehensive
21 array of supports to disadvantaged city
22 students who want to go to college. These
23 students are often the first in their families
24 to finish high school.
25 Citibank's money enables students to
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2 learn about college appropriate to their career
3 plans and to visit them, to receive preparation
4 for the SATs and to get help with college
5 applications. This assistance is often what
6 makes a difference in the students' ability to
7 navigate the complex process of college
8 selection and admissions successfully and to
9 achieve access to higher education.
10 The Travelers Group has provided
11 $115,000 in major support for New Visions'
12 Early Childhood Initiative, a program that
13 combines in the same classroom children of all
14 abilities, including those with disabilities.
15 Operating in a range of city public schools
16 representing different family incomes and
17 backgrounds, this initiative is demonstrating
18 its viability as a model for diverse urban
19 communities by making it possible for students
20 of all abilities to successfully learn and
21 excel together.
22 The Travelers Group is to be
23 commended for its readiness to invest in the
24 Early Childhood Initiative. This highly
25 innovative program breaks new ground in
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2 bringing together diverse groups of children,
3 maximizing their strengths and unique
4 contributions and achieving great benefits for
5 each child.
6 Our relationships with Citibank and
7 the Travelers Group have been truly excellent.
8 They support public education in our work and
9 we believe this support will continue in the
10 years ahead. They have demonstrated that
11 excellence in public schools is a priority
12 among the city's private sector leaders.
13 In summary, we are strongly in favor
14 of the merger based on our own involvement with
15 Citibank and the Travelers Group and their
16 clear concern for serving the needs of our
17 communities, our children and our city's
18 future.
19 Thank you.
20 MR. LONEY: Thank you, Mr. Vazquez.
21 Perhaps I should repeat for those of
22 you who are here, and may not have been here
23 when I said it earlier in the day, the way we
24 are conducting this meeting is that each person
25 will be given five minutes to speak. The
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2 timekeeper is sitting in the front row in the
3 middle. We will give you a two-minute warning
4 and then we will indicate that the time is up.
5 If you have written material, for
6 example, whether or not you get to finish it,
7 if in fact you don't get to finish what you
8 brought to say, we would appreciate it if you
9 would give us a copy of your written material.
10 Leave it with the registration desk folks out
11 front and the entire thing will be put into the
12 record.
13 The transcripts will be available in
14 a few days from the Federal Reserve Bank of New
15 York and also the transcripts will be on the
16 Board's Internet web site.
17 With that, let me turn to Mr. Brown.
18 MR. BROWN: Thank you, Mr. Chair,
19 members of the panel. I am Amos Brown, pastor
20 of the Third Baptist Church of San Francisco
21 and also member of the board of supervisors.
22 I have come all the way across the
23 country today representing the National
24 Association for the Advancement for Colored
25 People of San Francisco and also for a
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1
2 resolution, because the board of supervisors of
3 San Francisco is expressing its concern, over
4 one particular piece of real estate that
5 Citicorp now has the mortgage for in San
6 Francisco that is now up for bidding and
7 ultimately for sale.
8 I come today to share a profound
9 reality of half of the American community in
10 San Francisco and a great measure of the
11 African-American community in this nation. I
12 would like to couch my statement in a vignette
13 from the life of the late Dr. Vernon Johns, the
14 predecessor of Martin Luther King, Jr., at
15 Dexter Church in Montgomery. He said one day
16 that if you want to see a real case of
17 perpetual motion, sell a Cadillac car to a
18 Negro and tell him to park it somewhere.
19 Real estate is something that we have
20 not been able to come by as a people,
21 particularly in San Francisco and in general in
22 this nation. And it is our considered judgment
23 that in great measure, though Citicorp has done
24 much good in terms of supporting educational
25 enterprises and other social action projects,
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1
2 but in terms of making loans available to
3 African-Americans to purchase a home, to do a
4 development in the city and county of San
5 Francisco, Citicorp has not given a mortgage to
6 one African-American development.
7 The development now under question,
8 the Fillmore Center that is up for bidding, for
9 sale. The previous owner was not
10 African-American. However, a minority group
11 representing an Asian and African-American
12 sought to get involved in the bidding process,
13 and the record reveals that the process was
14 problematic. It was not fair, in their
15 estimation, and these minorities were not given
16 an opportunity to get involved in the bidding
17 process, even though they had the money, they
18 had the financing, they had the sensible
19 support to consummate this purchase.
20 I feel that, though I repeat Citicorp
21 has done a lot of good, but in terms of making
22 loans available to black people so that they
23 may get out of this posture of perpetual motion
24 of buying a car and not having to park
25 anywhere, Citicorp has not contributed to our
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1
2 having a place to park and to lay our heads in
3 the city and county of San Francisco.
4 For that reason, we have great
5 reservations about this merger, for we do not
6 see the kind of track record in the city and
7 county of San Francisco that would suggest that
8 this bank is friendly toward African-Americans
9 and other minorities in the acquisition of
10 property through mortgages coming through the
11 bank.
12 Thank you very much.
13 MR. LONEY: Thank you, Mr. Brown.
14 Mr. Siegel.
15 MR. SIEGEL: I'm testifying on a
16 power of attorney for Mahesh Shah. I will
17 submit the original power of attorney when I
18 submit the papers inside. It is only eleven
19 lines, but I'd like you to listen carefully to
20 it because it is something that has been an
21 ongoing problem for a couple of years.
22 The letter is addressed to you,
23 Mr. Loney, concerning this meeting, and here
24 Mr. Shah has a question:
25 Will the proposed acquisition cause
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1
2 the managerial resources of Travelers to reform
3 and correct what appears to be Citibank's
4 obstruction of justice by failing from December
5 1995 through June 25, 1998, almost two and one
6 half years since my attorney -- speaking for
7 Mr. Shah -- and the attorneys for Citibank
8 North America, Zeichner Ellman & Krause, signed
9 on November 16, 1995 a contractual stipulation
10 settlement agreement to provide in lieu of the
11 information subpoena and to discontinue the
12 contempt of court action against a vice
13 president of Citibank, certain information.
14 Attached herewith is a copy of my attorney's
15 letter of May 28, 1996 and an updated copy of
16 same dated June 25, 1998 showing their failure
17 to furnish the contractually agreed information
18 despite the fact that subpoena duces tecums
19 were properly served in the courts with the
20 aforementioned agreement.
21 I have been unable to proceed to
22 collect my judgment of January 20, 1995 in the
23 amount of $11,241 because I have effectively
24 been denied the opportunity to recover my loss
25 because of Citibank's failure. Respectfully
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1
2 submitted, Mahesh Shah.
3 Thank you.
4 MR. LONEY: Thank you.
5 Ms. Martens.
6 MS. MARTENS: I'm Pamela Martens. I
7 am the lead plaintiff in the infamous "Boom
8 Boom Room" suit against Smith Barney.
9 It is amazing how soon we forget. It
10 was just 60 years ago that 4,835 of America's
11 banks went broke and closed their doors,
12 leaving shareholders and depositors destitute.
13 The underlying reason that this happened was
14 the lack of moral courage by our regulators and
15 elected representatives to just say no to
16 powerful money interests. Instead of just
17 saying no, Washington handed the banks the
18 equivalent of an ATM card to the Feds discount
19 window to speculate in stocks. At a time when
20 Japan, the second largest industrialized
21 nation, is reliving the 1930s in America,
22 complete with banking insolvency, it is amazing
23 and preposterous that we should be discussing
24 rolling back Glass-Steagll.
25 We also want to remember that the
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2 political dynamics that created the backdrop
3 for the banking meltdown in the '30s grew from
4 a corrupt cozy culture between Wall Street and
5 Washington. U.S. Supreme Court Justice William
6 O. Douglas, who knew a thing or two about the
7 matter, having just served as chairman of the
8 young, new SEC, before he went to the Supreme
9 Court, he called it what it was, chicanery and
10 corruption.
11 Frank Vanderlip, coincidentally, an
12 actual former president of National Citibank,
13 wrote in the Saturday Evening Post at the time
14 that lack separation of banking and securities
15 contributed to the stock market losing 90
16 percent -- I'd like to repeat that, 90
17 percent -- of its value from 1929 to 1933.
18 The public was so sickened by the
19 hubris and corruption that an entire generation
20 stayed away from the stock market. It was not
21 until 1954, 25 years later, that Wall Street
22 once again reached the level it had set in
23 1929.
24 There is a compelling body of
25 evidence that suggests a corrupt cozy culture
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1
2 has once again enveloped the brains of
3 Washington. We can hardly look to the
4 safekeepers of the public trust when they are
5 falling over themselves to reap campaign
6 windfalls from Wall Street.
7 Washington and regulators are quick
8 to criticize moral hazard when it is on foreign
9 shores. Let's look at the moral hazard
10 incubating at Travelers and Smith Barney.
11 In 1996, when the SEC and the Justice
12 Department found that Smith Barney was one of
13 24 firms fleecing their own customers through
14 six or more years of price fixing, no one went
15 to jail. Within the last two years when a
16 special prosecutor found that Smith Barney had
17 bribed the former U.S. agricultural secretary,
18 again, no one went to jail.
19 The firm is currently under
20 investigation by various municipalities for the
21 fraudulent markup of treasury securities, and
22 that, in fact, is enough to hold up this
23 merger, since a criminal charge against a
24 primary dealer of treasury securities would
25 lend its taint to one of America's major money
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1
2 center banks.
3 Finally, as an eleven-year employee
4 of Smith Barney and the lead plaintiff in the
5 "Boom Boom" lawsuit, I can personally attest
6 that the model espoused by Sanford Weill and
7 James Diamond is nothing we would want to
8 replicate at a money center bank or at a firm
9 employing 160,000 people.
10 As our suit lays out, women at Smith
11 Barney were called witches and whores; were
12 sexually and physically assaulted during the
13 workday on the premises of Smith Barney; we
14 were subjected to vulgar, bigoted and racist
15 language. These charges have come from
16 branches coast to coast.
17 Smith Barney's answer to this suit,
18 just as it answered the charges of price fixing
19 and bribing and yield burning is deny, deny,
20 and spend more money on political campaigns,
21 charitable contributions and TV ads to do spin
22 control.
23 Thank you.
24 MR. LONEY: Thank you.
25 Ms. Sherwin.
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2 MS. SHERWIN: Thank you. My name is
3 Galen Sherwin. I am the president of the New
4 York City Chapter of the National Organization
5 for Women.
6 Two years ago the National
7 Organization for Women named Smith Barney a
8 merchant of shame for its disgraceful
9 employment practices in hiring and promoting
10 women and minorities in disparate pay between
11 men and women employees and in its nonexistent
12 response to the hostile work environment and
13 retribution faced by those who brought sexual
14 harassment complaints.
15 The sexual harassment case Martens v.
16 Smith Barney gave notoriety for its "Boom Boom
17 Room," which you just heard some of the detail
18 from Pamela Martens. These were egregious
19 cases of sexual harassment, horrible conditions
20 across the country that employees of Smith
21 Barney were forced to work under. It has
22 grown, as she mentioned, to include plaintiffs
23 from eleven states across the country.
24 Now, you may say what does it matter,
25 all corporations face litigation during their
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2 regular business. I'm here to say that Martens
3 v. Smith Barney does matter. It matters
4 because it goes to the heart of our civil
5 rights under the Civil Rights Act, particularly
6 Title VII and the Equal Pay Act, it also goes
7 to the heart of the potential for growth and
8 success of women and minorities in the
9 workplace.
10 Now I'm speaking particularly about
11 an employment practice that is widespread in
12 the industry, mandatory arbitration. Mandatory
13 arbitration, as you probably knows, removes
14 from employees the possibility of going to the
15 courts and forces them instead, in employment
16 disputes or sexual harassment or discrimination
17 complaints, to go to an industry-wide
18 arbitration panel.
19 NOW believes that arbitration works
20 to the particular detriment of women and
21 minorities in the workplace, and we have taken
22 a very strong position, passing national
23 resolutions calling for an end to mandatory
24 arbitration and alternate dispute resolution
25 processes. We believe not only does it deprive
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1
2 women and minorities of the rights and
3 protections that they would enjoy under Title
4 VII of the Civil Rights Act and in our court
5 system, it also is a private system of justice
6 that is stacked in favor of the employer and
7 against the employer plaintiff.
8 Many of the members of these
9 panels -- most of the members of the panels are
10 picked from the industry itself. They are
11 people with long, established careers in the
12 industry, which means that they are necessarily
13 more often successful white men and none of
14 them have any particular expertise in hearing
15 Title VII claims or Equal Pay Act claims. They
16 are just not qualified to be deciding sexual
17 harassment and discrimination complaints.
18 These private systems of justice must
19 be abolished. It is a widespread practice, but
20 it is actually an evolving area of law and
21 policy right now. It is under statutory
22 reinterpretation by the courts across the
23 country, and it is leading to a significant
24 change in policies, in part because of outcry
25 from members of civil rights groups and
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1
2 feminist groups across the country.
3 Now this is evidenced by the SEC's
4 recent decision this week to approve the NASD
5 recommendation, which is supported by the EEOC,
6 that arbitration is not an appropriate forum
7 for resolution of sexual harassment and
8 discrimination cases, for the reasons I
9 mentioned before.
10 Now this is also a moment of
11 particular opportunity for us because of the
12 recent decision yesterday by Justice Constance
13 Baker Motley, who was presiding over the case
14 Martens v. Smith Barney. She has rejected the
15 settlement that was negotiated between class
16 counsel and the attorneys for Smith Barney and
17 she has raised concerns, some of which I
18 mentioned, about arbitration being the sole
19 remedy for plaintiffs and claimants in that
20 case. She's also raised serious concerns about
21 the diversity program, the effectiveness of the
22 diversity program that has been proposed by
23 Smith Barney.
24 Now this rejection of the settlement
25 gives us an opportunity to make some serious
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1
2 improvements, if there is going to be a
3 settlement in this case. I would like to read
4 those for the record. The recommendations that
5 NOW New York City is making are the following:
6 That Smith Barney/Travelers remove the
7 requirement that its employees take
8 discrimination and harassment complaints to
9 industry-wide arbitration; that no new
10 settlement be approved unless there is clear
11 provision that all claimants have a right to go
12 to the court or through arbitration; that there
13 be clear provision that all decisions rendered
14 through arbitration have the right to an appeal
15 in court; and that the court maintain
16 jurisdiction over any consent decree; that the
17 diversity program in question be improved and
18 expanded to include meaningful and ongoing new
19 initiatives without a time limit or cap; and
20 that funding be substantially increased to meet
21 the needs of such a large firm; and that
22 diversity training extend to include issues of
23 racisms impact on financing practices that act
24 to the detriment of African-Americans and other
25 minority groups; that procedural hurdles within
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1
2 any designated dispute resolution process, such
3 as limitations on powers of deposition or
4 subpoena, be removed and all due process
5 protections for complainants that would apply
6 in Title VII suits be respected; and, finally,
7 that the current structure of legal fees and
8 awards be reexamined to ensure both vigorous
9 prosecution and increased equity in
10 remuneration between attorneys and plaintiffs.
11 According to the standards accepted in the
12 industry, attorneys' fees should be capped at
13 no more than 33.3 percent of the total award.
14 (Continued on next page)
15
16
17
18
19
20
21
22
23
24
25
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2 Now from what I've heard about
3 Citicorp's practices, the merger between Smith
4 Barney, Travelers and Citicorp would amount to
5 a marriage of two isms, racism and sexism.
6 At a time of such opportunity and
7 change do we want a company that has reaffirmed
8 its commitment to mandatory arbitration for all
9 employees, and that invests on doing business
10 the old fashioned way, to begin and even, to
11 gain even more control over the direction of
12 employment policies and practices?
13 Do we want to allow a merchant of
14 shame to grow into a bloated corporate tyrant?
15 The answer is no.
16 This merger cannot be considered
17 until Smith Barney removes mandatory
18 arbitration requirements and resolves issues of
19 diversity, employment policies and work
20 environment satisfactorily. I strongly urge
21 you to reject this merger. To do any less,
22 would amount to and admission on the part of
23 the Federal Reserve Bank that it does not care
24 about the advancement of women and minorities
25 in the work place or the protections offered by
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2 our courts, and that the profit of corporate
3 giants outweighs civil rights. Thank you.
4 MR. LONEY: Thank you, Ms. Lin.
5 MS. LIN: Good afternoon. My name is
6 Karen Lin I'm here to represent State Senator
7 Catherine Abate who represents the 27th
8 District in New York which covers midtown
9 Manhattan, and most of lower Manhattan as well.
10 She has prepared a release which I
11 would like to read to you now briefly if I may.
12 In the wake of the federal judge's
13 decision to reject the settlement of Smith
14 Barney's sexual harassment suit, Senator Abate
15 joined with advocates to underscore the need to
16 ban mandatory predispute arbitration clauses in
17 employment contracts as a condition to
18 employment.
19 "All parties should use this
20 opportunity to create a dispute resolution
21 system that is fair for workers. Any system
22 that requires employees to give up their right
23 to a day in court as a condition of employment
24 is ultimately unfair and unconstitutional."
25 Senator Abate has found that the
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2 American Arbitration Association, the nation's
3 largest arbitration trade association, says
4 that companies they provide arbitration for
5 encompasses nearly four million employees.
6 About 40 percent of companies who use
7 arbitration force their employees to sign
8 mandatory arbitration contracts. This is
9 according to the federal General Accounting
10 Office. Also, according to the federal GAO,
11 more than half of all employees may be bound by
12 mandatory arbitration contracts by 2001.
13 Having saturated the securities
14 industry, mandatory arbitration is now
15 spreading rapidly into almost all other
16 occupations.
17 Senator Abate has introduced
18 legislation that will ban mandatory arbitration
19 in employment contracts as a condition to
20 employment.
21 "No New Yorker should have to check
22 his or her civil rights at the door in order to
23 get a job." This legislation, The Employee
24 Civil Rights Protection Act will end this
25 discriminatory practice and start to level the
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1
2 playing field between employer and employee.
3 Thank you.
4 MR. LONEY: Thank you. Do we have
5 any questions of this panel?
6 MR. ALVAREZ: Yes, I have a couple of
7 questions.
8 Mr. Brown, you made a couple of
9 statements that I'd like to ask you some
10 questions about.
11 One is you said Citi has not given
12 any mortgages to any housing development
13 programs in San Francisco. Did I understand
14 that correctly?
15 MR. BROWN: No, I said black and/or
16 minority.
17 MR. ALVAREZ: Was that statement
18 about single-family lending or multifamilly
19 lending? I wasn't sure what you meant by
20 housing.
21 MR. BROWN: Well, the record in
22 single-family dwellings is much to be desired,
23 but in terms of multifamily-dwellings the
24 record is zero.
25 MR. ALVAREZ: You mentioned that you
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1
2 were talking about property that Citicorp has
3 that apparently --
4 MR. BROWN: Citicorp was one of the
5 original banks that financed this development,
6 about 1100 units, town houses and towers. The
7 bonds were sold by the city to help this
8 development in 1980 when it was begun, but when
9 it had gone through two owners and it was put
10 on the market, the minority groups got together
11 with all of the needed financing to purchase,
12 and the bidding process was very unfair.
13 MR. ALVAREZ: It was unfair in what
14 respect?
15 MR. BROWN: In terms of number one,
16 they did not receive notice regarding the
17 process; number two, there was a lot of basic
18 information that they did not get, and number
19 three, is just the basic concern of the
20 community and in terms of the Community
21 Reinvestment Act, Citicorp should have had
22 serious conversations with this black minority
23 developer to purchase this property that's
24 right in the redevelopment area.
25 Also, the minority group has made the
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2 commitment to rent control, something that is
3 desperately needed in San Francisco, and you
4 look at the number of African-Americans who
5 lodge in that city is unconscionable. In 1970s
6 we lost over twenty thousand African-Americans
7 in the City of San Francisco. 1970, the
8 population was 30 percent and knocked down to
9 17 percent and this has happened principally
10 because of gentrification, blacks or
11 African-Americans have not been able to get
12 mortgages and they have not been able to do
13 developments to the needs of that community.
14 And that's where we are coming from.
15
16 Morally, if the bank is concerned
17 about helping communities, this is a golden
18 opportunity for it to help a minority
19 community, and while we appreciate free
20 enterprise system and we know that all
21 financial deals must be sound, but something is
22 wrong in Denmark when blacks and other
23 minorities step to the plate and they are not
24 given the opportunity to fulfill their dream
25 and their hopes of owning real estate.
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2 MR. ALVAREZ: Thank you very much.
3 Ms. Martens or Ms. Lin or Ms. Sherwin, any of
4 you, you've spoken about mandatory arbitration.
5 I'm not sure I understand the facts. Most
6 folks that have a sexual harassment or other
7 kind of claim can go to the EEOC and the courts
8 and have that claim heard.
9 You say that at Smith Barney and
10 other places there is a requirement as
11 precondition to employment that you waive the
12 right to go to court and that all things be
13 settled in arbitration?
14 MS. SHERWIN: That's correct.
15 MR. ALVAREZ: Then no appeal to the
16 Court after arbitration?
17 MS. SHERWIN: Yes, it's the sole
18 remedy. According to industry regulations many
19 people are forced to sign a form B4. It is
20 also industry-wide. There's also requirements
21 in individual corporations that are internal
22 documents, agreements that are signed as a
23 precondition of employment, and that is so at
24 Smith Barney, and Smith Barney even in light of
25 the recent developments of this case, this
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2 sexual harassment case, recently reaffirmed its
3 policy of having all employees sign an internal
4 document signing away their right to go to
5 court and making arbitration their sole remedy.
6 MR. LONEY: Do you know if that goes
7 beyond Smith Barney within the Travelers Group?
8 MS. MARTENS: Precisely. Travelers
9 had the identical policy and I just want to
10 comment on that we're not talking about a
11 mutual forum. We're not talking about a fair
12 forum. One of the cornerstones of this would
13 be one of the scariest things I'd ever want to
14 imagine in America is that as the money and
15 power has grown at Smith Barney and Travelers,
16 Sanford Weil and James Diamond truly believe
17 they are above the law, and they have passed
18 down this attitude to their teams of corporate
19 attorneys.
20 For example, recently in one of the
21 arbitrations it was Mendez v. Shearson, but it
22 was tried by Smith Barney's attorneys. The
23 appellate court in Texas overturned the
24 arbitration decision because they quoted from
25 Smith Barney's attorneys closing arguments. It
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2 was a wage discrimination -- I'm sorry -- a
3 failure to pay overtime case, and the attorney
4 told the arbitrators, "we are telling you that
5 this is a bad law and you are to ignore this
6 law."
7 Now, as outrageous as this sounds, I
8 beg you to get a copy of that appellate
9 decision and read the outrageous demands that
10 Smith Barney's attorneys were giving to the
11 arbitrators. Even more shocking, the
12 arbitrators followed the demand from Smith
13 Barney necessitating that this go to an
14 appellate court.
15 This type of language has actually
16 now been put into the mandatory arbitration
17 agreement that they have forced their employees
18 to sign, and sign a receipt that they
19 understood that they were waiving their Title
20 VII, their harassment, discrimination, wage,
21 ERISA, race claims, and that arbitrators would
22 not be allowed to follow other law, but would
23 be required to follow "Smith Barney's lawful
24 business judgment." Apparently, Smith Barney's
25 lawful business judgment is that it is above
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2 the laws of America.
3 MR. LONEY: Thank you. Any other
4 questions? If not, I will thank the panel for
5 coming.
6 We have one other person who was
7 scheduled to testify earlier who has requested
8 time in the open microphone session, Lloyd
9 Williams.
10 MR. WILLIAMS: Thank you very much,
11 Mr. Chairman. My name is Lloyd Williams. I
12 serve as the President of the Greater Harlem
13 Chamber of Commerce, a business, civic and
14 trade organization celebrating its 102d year of
15 existence in the City of New York.
16 I just wanted to make brief comments.
17 One, listening to the comments of the National
18 Organization of Women as it relates to the
19 Martin v. Smith Barney matter, I want to go on
20 record as being very much in support of the
21 position of NOW, and other interested parties
22 in condemning the charges against Smith Barney,
23 and further, that we believe that too many of
24 the charges are in fact with substance.
25 Moving to the next point, the
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2 relationship of the merger proposed between
3 Travelers and Citicorp, the Greater Harlem
4 Chamber of Commerce wishes to go on record as
5 being supportive of that merger. It is our
6 view that Citicorp, particularly over the past
7 five years, has become more in tune certainly
8 in New York City with the needs of the sectors
9 of New York that are too frequently called the
10 outer boroughs, the four boroughs outside of
11 Manhattan and certainly sections in Manhattan
12 that are not in the midtown area, including the
13 Greater Harlem area.
14 Over the past five years Citibank
15 which had not been a leader in development in
16 that area, has stepped to the plate, and has
17 been in the forefront of student loans,
18 mortgage loans, business loans.
19 I should also note that Citibank is
20 opening in the central Harlem area on the
21 Frederick Douglas Boulevard between West 134th
22 and West 135th Street, the first Citibank loan
23 office that will open in August of this year,
24 that will provide specific loan information,
25 technical assistance and, in fact, direct loans
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2 to medium and small business sectors as well as
3 to homeowners.
4 We're very pleased that this is
5 taking place. It is going to be a model
6 project that we hope will be emulated
7 throughout not only the city, but far beyond.
8 In addition, I wanted to further make
9 particular note that there are some
10 distinguished persons at Citibank that I would
11 like to have their names recorded because of
12 their leadership. Mr. Hector Ramirez, and
13 Mr. Capocasanda, Ms. Bonnie Walsh, Mr. Allen
14 Stevens, and Mr. Darryl Dodson. It's a group
15 of women and men, different ethnic backgrounds,
16 different nationalities, that have come
17 together to serve the interest of our community
18 and in my view of the city.
19 The goals and objectives of our
20 service area which includes investments,
21 development, loans, Citibank has been
22 supportive of, and we would hope that by this
23 merger Travelers will join with the leadership
24 that is coming out of Citibank.
25 So without delaying your time
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2 further, we wanted to make sure that we did go
3 on record in supporting this merger,
4 encouraging you to give it all due
5 consideration, and, lastly, to commend Citibank
6 for the leadership it has provided in the past
7 years, and to encourage Citibank and Travelers
8 that through this merger hopefully they will be
9 able to provide more for those who have, as
10 well as for those who do not. I'd like to
11 thank you.
12 MR. LONEY: Thank you, Mr. Williams.
13 MR. ALVAREZ: Sir, Mr. Williams,
14 could I ask you a question?
15 MR. WILLIAMS: You absolutely can.
16 MR. ALVAREZ: You mentioned a loan
17 office would be opening. Could you state again
18 the location of that?
19 MR. WILLIAMS: Yes, it's on Frederick
20 Douglas Boulevard which is Eighth Avenue. It's
21 between 134th Street and 135th Street in the
22 Central Harlem area by City College.
23 MR. ALVAREZ: Someone had testified
24 earlier about that being a full-service branch.
25 Do you know for --
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2 MR. WILLIAMS: No, there are two
3 things that are happening. That is not a
4 full-service bank, I know that absolutely for
5 sure, but in addition to that, directly across
6 the street there is a construction of a 170
7 unit condominium project 14 stories high with
8 48,000 square feet of commercial space and
9 underground parking for 140 automobiles.
10 Citibank is putting in a full-service
11 unit in that location across the street that
12 will be a combination of high tech as well as
13 persons directly servicing the interests of
14 that area, and, in addition, Citibank is the
15 lead financial bank for the construction of the
16 project.
17 MR. HODGETTS: Two separate
18 facilities across the street from each other?
19 MR. WILLIAMS: Right. And the new
20 construction would begin, I would believe,
21 September or October, and will take
22 approximately 18 to 20 months to finish, but
23 rather than wait for that to happen, Citibank
24 has opened this loan store across the street
25 and they will be in operation by August of this
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2 year.
3 MR. HODGETTS: Thank you.
4 MR. WILLIAMS: Thank you.
5 MR. LONEY: Did we have any more
6 people who have registered to testify? No
7 more. Does anybody else in the audience wish
8 to?
9 If not, we will adjourn these
10 proceedings.
11 Thank you very much.
12 (Adjourned)
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