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Public Meeting Regarding Citicorp and Travelers Group
Friday, June 26, 1998
Transcript of Panel Seventeen


  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?


   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


   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


   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


   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.


   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


   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


   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


   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


   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


   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


   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


   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.


   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


   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


   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,


   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


   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


   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.


   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


   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


   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


   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


   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


   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


   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


   2     support.

   3               MR. LONEY:  Thank you.

   4               Any other questions?  If not, I will

   5     thank the panel.


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Last update: September 27, 2002