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Public Meeting Regarding Citicorp and Travelers Group
Friday, June 26, 1998
Transcript of Panel Twenty-Three


   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


   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


   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


   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


   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


   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.


   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


   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


   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


   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


   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


   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


   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.


   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


   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.


   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


   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.


   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


   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


   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


   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


   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


   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


   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


   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.


   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


   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.


   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,


   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


   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


   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


   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


   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


   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


   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


   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


   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.



   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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Last update: September 27, 2002