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Public Meeting Regarding Citicorp and Travelers Group
Thursday, June 25, 1998
Transcript of Panel Eleven

  25               Panel Eleven is Claudino Otenez,


   2     Michelle Neugebauer, Cesiah Mullane, Jennifer

   3     Lee, Iris Itzkowitz and Michael Green.

   4               Ms. Neugebauer, am I killing that

   5     name?

   6               MS. NEUGEBAUER:  Cesiah is going to

   7     testify first.

   8               MR. LONEY:  I'm sorry?

   9               MS. NEUGEBAUER:  Cesiah is going to

  10     testify first.

  11               MR. LONEY:  I am sorry.

  12               Ms. Mullane.

  13               MS. MULLANE:  Good afternoon members

  14     of the Federal Reserve Bank.  My name is Cesiah

  15     Mullane and I am a member of the Reinvestment

  16     Committee of Cypress Hills and City Line.

  17               I have lived in Cypress Hills since

  18     1957 and I have spent a large part of those 41

  19     years contributing to my community in every way

  20     I can, working on issues such as education,

  21     affordable housing, the prosperity of our

  22     business community and the quality of life

  23     issues, all of which impact the stability of my

  24     neighborhood.

  25               I volunteer at the Cypress Hills LDC,


   2     our local Twelve Towns YMCA, and my church.  I

   3     am involved with our very young New Visions

   4     School, our Child Care Corporation, and the

   5     Cypress Hills Community Coalition, which

   6     succeeded in securing a zoning amendment to

   7     protect our blocks.

   8               I advocated for a new intermediate

   9     school for 20 years, and a new elementary

  10     school is being built right now to relieve the

  11     awful overcrowding.  And once a year on our We

  12     Love Cypress Hills Day, we hold a parade and

  13     street festival to celebrate our wealth of

  14     cultural and ethnic diversity and our

  15     successes, big and small.

  16               I am passionate about my

  17     neighborhood -- that is where I live, and

  18     improving it is my lifelong work.

  19               The Reinvestment Committee of Cypress

  20     Hills and City Line was organized in May 1992

  21     after Cypress Hills Local Development

  22     Corporation and the City Line Coalition

  23     published a joint housing plan for our

  24     communities that showed a deplorable lack of

  25     lending by our banks.


   2               For the past seven years, we have

   3     collected and analyzed HMDA data for the seven

   4     local lending institutions in our area, and met

   5     with representatives of these banks, including

   6     Citibank, to share our analyses and work

   7     cooperatively to increase lending.

   8               Cypress Hills and City Line are

   9     sister communities.  Their housing stock,

  10     populations and economic status are quite

  11     similar.

  12               According to the 1996 census, Cypress

  13     Hills and City Line are predominantly Hispanic

  14     communities, 63 percent and 53 percent

  15     respectively.  The residents of these two

  16     communities earn low to moderate incomes.  In

  17     1990, households earned median incomes of.

  18     $23,138 and $25,318 respectively compared to

  19     $29,832 for New York City as a whole.  Hence,

  20     Cypress Hills and City Line households have

  21     incomes that are 78 percent and 85 percent of

  22     the city's median.

  23               The Reinvestment Committee's

  24     membership consists of resident activists of

  25     Cypress Hills and City Line and staff and board


   2     members of the Cypress Hills LDC.  For the past

   3     seven years we have analyzed HMDA data for our

   4     census tracts, brought together the seven local

   5     lending institutions that serve Cypress Hills

   6     and City Line to discuss their performance and

   7     ways they should increase lending, and worked

   8     cooperatively with our banks to meet the credit

   9     needs of area residents and businesses.

  10               We have convened five community

  11     forums on bank lending activity in their

  12     communities where Home Mortgage Disclosure Act

  13     data was reviewed and the committee's concerns

  14     were discussed.  Our concerns included a lack

  15     of affordable mortgage products offered by the

  16     local banks, a laissez-faire attitude towards

  17     marketing and outreach, and a lack of

  18     educational home buyer counseling services to

  19     support first time home buyers.

  20               We requested that the smaller banks

  21     reinvest 1 percent of their deposits and that

  22     larger multinational lending institutions, e.g.

  23     Chemical pre1997, Chase and Citibank reinvest 5

  24     percent of the local deposit base in mortgage,

  25     refinancing and home improvement loans.


   2               We also demanded expanded home

   3     ownership counseling services, marketing of and

   4     participation in affordable housing programs,

   5     increased outreach in our area of support of

   6     the Cypress Hills LDC mortgage foreclosure

   7     prevention efforts.

   8               The Reinvestment Committee has slowly

   9     turned around the red lining of our

  10     communities.  Do I have more, or is my time up

  11     or do I have the minutes?

  12               MR. LONEY:  If you can briefly.

  13               MS. MULLANE:  Let me find my closing.

  14     Citibank in 1996 approved no home purchase

  15     loans, had 72 percent denial for home

  16     improvement and refinancing applications.  1997

  17     saw the least yet, eight loans for a total of

  18     $235,000.

  19               I call your attention to a chart just

  20     showing exactly what the activities in City

  21     Line and Cypress Hills have been.  '94 was a

  22     wonderful year that passed even our committee

  23     lending target, but after '94 it has not been.

  24               The red lining has been dismal,

  25     although Citibank has pledged to work on this


   2     through their lending commitment by their own

   3     admission this translates into an 8 to 10

   4     percent increase in lending for the New York

   5     City area.  In my community, this is less than

   6     one home mortgage loan.  In my community, you

   7     have to do better than that.

   8               Thank you.

   9               MR. LONEY:  Let me again state my

  10     considerable ignorance, and ask you where

  11     exactly is Cypress Hills?

  12               MS. MULLANE:  It's in the

  13     northeastern side of Brooklyn.  It's right next

  14     to Queens.  We're surrounded by 18, 20

  15     cemeteries.  Our next door neighbor is

  16     Woodhaven, Queens.

  17               MR. LONEY:  Okay, I have a sense of

  18     that.  Okay, thank you very much.

  19               We can take your statement and if you

  20     make sure that the folks out at the

  21     registration table get a copy of what you have

  22     there, the entire thing will go into the

  23     record.

  24               MS. MULLANE:  I gave them a copy.

  25               MR. LONEY:  Thank you.


   2               Ms. Neugebauer.

   3               MS. NEUGEBAUER:  Good afternoon.  My

   4     name is Michelle Neugebauer, and I'm the

   5     executive director of the Cypress Hills Local

   6     Development Corporation.  My not-for-profit

   7     community development organization was founded

   8     in May, 1983, with wonderful dedicated

   9     community residents like Cesiah Mullane.

  10               My organization runs approximately

  11     twenty different programs that are focused in

  12     the areas of housing preservation, economic

  13     development, and youth services, which are the

  14     three greatest needs of our community.

  15               We developed over 125 units of

  16     affordable housing, renovated 130 storefronts

  17     in our commercial strip, secured over a million

  18     dollars in home improvement loans for Cypress

  19     Hills small home owners, started a New Visions

  20     public elementary school and launched a very

  21     successful child care initiative that has

  22     created sixty jobs in our neighborhood, and now

  23     provides fair for 245 children.

  24               Seven years ago, as Cesiah has

  25     described, we came together with our sister


   2     community, City Line in Brooklyn, to form the

   3     Reinvestment Committee of Cypress Hills and

   4     City Line.  My testimony really relates to the

   5     Cypress Hills LDC's relationship with Citibank

   6     and some of our concerns about the merger.

   7               In general, Cypress Hills LDC has had

   8     a very positive relationship with Citibank.

   9     They've actively participated in the

  10     reinvestment effort in terms of sending

  11     representatives to our annual banking forums,

  12     trying to work out solutions to a rising

  13     mortgage foreclosure problem in our

  14     neighborhood, helping to establish a mortgage

  15     foreclosure action program, training our staff

  16     in underwriting and financial packaging and

  17     providing summer intern help to our

  18     organization.

  19               They collaborated very closely with a

  20     program that some of the other people have

  21     testified about Partners in Progress.  Citibank

  22     is giving us a $50,000 grant to build a

  23     minimall on our commercial strip in a very

  24     desolate section of Fulton Street where we hope

  25     to bring much needed retail activity and jobs


   2     to our neighborhood.

   3               Having said all that, we're still

   4     very deeply concerned about some of the current

   5     Citibank performance in terms of lending in our

   6     neighborhood, and the banking practices.

   7               We feel that, you know, Citibank

   8     could make a specific commitment to lending

   9     targets in our area, some of the targets that

  10     Cesiah has discussed, trying to reinvest at

  11     least 5 percent of the local deposits in

  12     mortgages, refinancing and home improvement

  13     loans.  We want Citibank to maintain their full

  14     service branch in City Line.

  15               That City Line branch is essential to

  16     the livelihood of the Liberty Avenue commercial

  17     strip.  That full-service branch services the

  18     entire populations of Cypress Hills and City

  19     Line, which is 48,000 people.  These

  20     communities, the communities in which I work,

  21     Cypress Hills, and City Line are both

  22     communities predominantly made up of immigrants

  23     and have substantial elderly population.

  24               We don't have a computer on every

  25     desk or in every home in our neighborhood.  We


   2     don't have access to technology, and many

   3     people don't feel comfortable with it.  As one

   4     person on our reinvestment committee recently

   5     said:  People in our neighborhood work so hard

   6     for their money, they want to feel it, they

   7     want to touch it, they want to talk to a human

   8     being when they do transactions related to

   9     their money.

  10               In 1995 Citibank closed a branch very

  11     close to our neighborhood in Starret City and

  12     that changeover was fought unsuccessfully by a

  13     local community board.  In anticipation of

  14     Citibank automating our branch, we got out

  15     there on the streets in the dead of winter and

  16     we collected a petition with over 300

  17     signatures asking Citibank not to automate our

  18     branch, and they listened to us and they didn't

  19     automate the branch, and we hope they continue

  20     to listen to us.

  21               The Reinvestment Committee believes

  22     that the fees and the minimum deposits required

  23     by Citibank really don't meet the credit needs

  24     of our low and moderate income communities.

  25     And we've attached to my testimony a comparison


   2     of the minimum deposits and fees required by

   3     the seven local lending institutions in Cypress

   4     Hills and City Line and Citibank really has the

   5     highest requirement.

   6               Our organization worked with people

   7     that are in danger of losing their homes to

   8     foreclosure.  Citibank has an on the ground

   9     team in New York City that assigns people to

  10     work with delinquent borrowers to try to, you

  11     know, work out forbearance agreements and other

  12     things that could prevent foreclosures.

  13               In summary, we feel that that on the

  14     ground team really needs to be empowered a

  15     little more.  They have to go through St.

  16     Louis, Missouri to get anything approved.

  17     People have to wait very long periods of time

  18     in order to get those work-out agreements and

  19     those are things we asked to be considered in

  20     this mega transaction that's going to be

  21     happening between Citibank and Travelers.

  22               We thank you for listening to our

  23     concerns.

  24               MR. LONEY:  Thank you.  Who did you

  25     say had to go to St. Louis?  I missed that.


   2               MS. NEUGEBAUER:  The people at

   3     Citibank that work with delinquent borrowers on

   4     forbearance agreements and other workouts.

   5               MR. LONEY:  Thank you.  Ms. Lee.

   6               MS. LEE:  Good afternoon.  My name is

   7     Jennifer Lee, and I work for the Cypress Hills

   8     Local Development Corporation.  In my role

   9     there I work with the Reinvestment Committee of

  10     Cypress Hills and City Line.  I worked with

  11     this committee for three years.  The

  12     Reinvestment Committee has joined with other

  13     individuals and groups throughout the city to

  14     form the Citibank Travelers Watch.

  15               As my colleagues have said, Cypress

  16     Hills Local Development Corporation and the

  17     City Line Coalition joined forces in 1992 to

  18     form the Reinvestment Committee of Cypress

  19     Hills and City Line to promote reinvestment in

  20     East New York, Brooklyn communities of Cypress

  21     Hills and City Line.

  22               I would like to take this opportunity

  23     to reiterate many of the concerns my colleagues

  24     have covered as well as some additional

  25     concerns.


   2               My professional training is in social

   3     work administration.  I'm not a lawyer.

   4     However, from the understanding I have of the

   5     Glass-Steagall and Bank Holding Company Act the

   6     application is not legal.  Glass-Steagall

   7     forbids a Federal Reserve member bank from

   8     affiliating with another company that deals in

   9     securities.  Travelers deals in securities, so

  10     does Salomon Smith Barney which now has plans

  11     to expand this activity by purchasing overseas

  12     investment company.

  13               The Bank Holding Company Act

  14     explicitly forbids the bank holding company,

  15     which is what Travelers is applying to become,

  16     of dealing in insurance activities.  Travelers

  17     is primarily an insurance company.

  18               If the law allows for two years to

  19     divest of these activities, where is the

  20     divestiture plan?  They seem to be in expansion

  21     rather than contraction mode.  If there is no

  22     plan, I cannot understand how they plan to

  23     divest such a large amount of business activity

  24     in such a short period of time.

  25               It seems they are banking on the law


   2     changing within the next two years.  I call on

   3     you as regulators to uphold the existing laws

   4     you were given jurisdiction over.

   5               In the event that my understanding of

   6     the law is flawed and you find the intent to be

   7     legal, I request that you consider the impact

   8     this may have.  I speak about Cypress Hills and

   9     City Line where I have worked for the past four

  10     years.

  11               Between 1995 and 1997, Citibank only

  12     originated 20 loans in Cypress Hills and City

  13     Line for a total of $1,509,000.  This is less

  14     than one third the amount lent in 1994.  In

  15     1996 no home purchase loans were approved for

  16     the 22 census tracts for Cypress Hills and City

  17     Line and 72 percent of the applicants for home

  18     improvement and refinancing loans were

  19     rejected.

  20               As Cesiah spoke of, the Reinvestment

  21     Committee has asked for the last several years

  22     that all major commercial banks in our

  23     communities reinvest 5 percent of their local

  24     deposits in affordable housing credit products.

  25               For Citibank this is equivalent of 5


   2     percent of 30 million dollars annually.

   3     Citibank has fallen short of its goal every

   4     year since 1995.

   5               Remarkably, the beginning of this

   6     decline in lending corresponds with Citibank's

   7     rash of downgrading the ATM centers and branch

   8     closings.  Given Citibank's penchant for

   9     closing branches and converting full service

  10     branches to technology centers, the

  11     Reinvestment Committee of Cypress Hills and

  12     City Line is wary of Citibank's assurances of

  13     maintaining services that will adequately meet

  14     the credit needs of our community.

  15               Many seniors, new immigrants and

  16     merchants use the branch located in City Line.

  17     These consumers are not familiar with, nor are

  18     they comfortable using technology with no human

  19     contact.  Neighborhoods are unique and have

  20     different credit needs which cannot be

  21     addressed by a machine, or by someone in

  22     another state halfway across the country.

  23               As Michelle stated, full service

  24     banking is really needed in low income

  25     communities such as ours.


   2               Citibank has the highest minimum

   3     balance of any bank with branches in or close

   4     to Cypress Hills.  The minimum balance to avoid

   5     paying a monthly fee is twice as high as any

   6     other bank with the requirement of six thousand

   7     dollars.  As Cypress Hills and City Line are

   8     low to moderate income communities this

   9     precludes many from being able to use their

  10     banking services.

  11               As Michelle was mentioning,

  12     Citibank's on the ground team helps homeowners

  13     or tries to help homeowners work out when they

  14     are facing any financial crisis.  If Citibank

  15     increases its lending, it has to increase its

  16     own infrastructure by creatively working.  The

  17     local on the ground team must have the

  18     authority to do this type of work.  Again, I

  19     call on you regulators to uphold the existing

  20     laws, and thank you for this.

  21               THE COURT:  Mr. Green.

  22               MR. GREEN:  My name is Michael Green

  23     Inner City Prospective Homeowners Association.

  24               I speak in Spanish.  The guy

  25     translate for all you.


   2               (Translated by Mr. Ortiz)

   3               The practice, this discriminatory

   4     practice of Citibank are in part the fault of

   5     the bank for not sufficiently enforcing the

   6     Community Investment Act.

   7               I am looking for credit and insuring

   8     offered by Travelers Group, but it's not given

   9     equally.  I will be hurt if the Federal Reserve

  10     Bank approves this application, especially

  11     since it's an illegal merger.

  12               We would like to thank the Federal

  13     Reserve Board for this public hearing, but we

  14     also think that the decision of the Federal

  15     Reserve Board has been made, even though it is

  16     an illegal merger.

  17               In 1995 I came here to testify

  18     against the Chase Chemical merger.  I spoke and

  19     you told me thank you, and I heard groups speak

  20     on behalf of Chase and Chemical, and about the

  21     good of the merger, and it hasn't been a good

  22     merger.

  23               We spoke at the Federal Reserve

  24     Board.  The Federal Reserve Board approved the

  25     merger in short, and said that our group had no


   2     right to take our decision to the courts.

   3               In the last couple of years Chase had

   4     sold about a hundred branches in New York, and

   5     it's very difficult for us now to get credit.

   6     We have been able to obtain five branches from

   7     other banks while Citibank and Chase have been

   8     continuing to close branches.

   9               The proposed merger of Citibank and

  10     Travelers is very different from the merger of

  11     Chase and Chemical.  The merger of Citibank and

  12     Travelers is illegal.  For a bank and insurance

  13     company to merge that would be like changing

  14     the law.  If the Federal Reserve Board thinks

  15     that the law is important, then you should deny

  16     the application and the merger.

  17               Our organization has asked for a more

  18     formal procedure for the application where we

  19     would ask questions to Citibank and Travelers

  20     officials.  In that procedure we will be able

  21     to amass more information considering that it

  22     has been short of time.

  23               Thank you.

  24               MR. LONEY:  Thank you, Mr. Green.

  25     Mr. Otenez.


   2               (Translated from Spanish by Mr.

   3     Ortiz)

   4               MR. OTENEZ:  Good afternoon, my name

   5     is Claudino Otenez.  I am a member of the Inner

   6     City Press Community on the Move and part of

   7     the Homesteader's Association.

   8               My experience with the Citibank has

   9     been negative or more accurately nonexistent.

  10               Citibank currently has one branch

  11     open in the South Bronx.  I'm a person looking

  12     for credit, insurance and I will be hurt if the

  13     Federal Reserve Board approves this

  14     application.

  15               I would like to thank the Federal

  16     Reserve Board for this public hearing, but we

  17     think that the decision of the Federal Reserve

  18     Board has already been made, even though it's

  19     and illegal merger.

  20               In 1995 we came here to protest the

  21     merger of Chase and Chemical Bank.  We spoke

  22     and we heard many groups that they talk about

  23     how good the Chemical and Chase merger would

  24     be.  The Federal Reserve Board approved the

  25     merger.  The Federal Reserve Board approved the


   2     merger and told us that we did not have a right

   3     to have a judge check the decision.

   4               In the last couple of years Chase has

   5     closed about one hundred branches in New York.

   6     It is very hard to obtain credit now.  We have

   7     been able to obtain five new branches

   8     throughout other banks, while Chase and

   9     Citibank continues to close theirs.

  10               The proposed merger of Citibank and

  11     Travelers is very different than the Chase and

  12     Chemical mergers.  The merger of Citibank and

  13     Travelers is and illegal merger.  The merging

  14     of an insurance company and a bank would be

  15     changing the law.  If the Federal Reserve is

  16     serious about the law, they would deny the

  17     application of the merger of Travelers and

  18     Citibank.  Thank you.

  19               MR. LONEY:  Thank you.  Any questions

  20     of this panel?  If not, I will thank the panel

  21     very much for coming.


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