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


   2               MR. LONEY:  The next panel will be

   3     comprised of Bill Traylor, Jacqueline O'Garrow,

   4     Michael Lappin, Edward Reed, Suzanne Israel

   5     Tufts.  We will start with Mr. Traylor from

   6     LISC.

   7               MR. TRAYLOR:  Before I begin I want

   8     to thank you for the opportunity to speak

   9     today.  My name is Bill Traylor.  I am the Sr.

  10     program director for the Local Initiative

  11     Support Corporation.  I run our New York

  12     program office, and I am also the managing

  13     director of our New York equity fund which

  14     invests in affordable housing projects

  15     developed through the federal low income

  16     housing and tax credit program.

  17               I'd like to give you a little bit of

  18     background on LISC before I move too far into

  19     my discussions of our relationship with the

  20     Travelers Group and Citibank.

  21               LISC is the national organization.

  22     We have forty offices in major urban centers

  23     across the country.  We also work in 63 rural

  24     counties.  We are an intermediary, a financial

  25     and technical assistance intermediary.  We are,


   2     we'd like to see ourselves as a bridge between,

   3     if I can for downtown and midtown sources of

   4     capital and uptown community grass roots

   5     organizations.

   6               We operate community development

   7     corporations which are grass roots indigenous

   8     locally directed or neighborhood directed

   9     organizations that have a comprehensive plan to

  10     revitalize poor and distressed communities.

  11     They are poor and distressed communities both

  12     through or through a variety of different

  13     mechanisms, first and foremost through the

  14     redevelopment and development of housing stock

  15     within their neighborhoods through economic

  16     revitalization activities, including the

  17     generation of new small businesses as well as

  18     the construction or rehabilitation of

  19     commercial space.

  20               We've over the last 18 years have

  21     enjoyed a tremendous amount of success through

  22     this vehicle and being a conduit for capital to

  23     the communities more than three billion dollars

  24     has been invested in the nation's poorest

  25     communities resulting in more than 75,000


   2     affordable homes being constructed and more

   3     than 3 million square feet of commercial space

   4     and numerous new jobs being created.

   5               Important to what we do obviously is

   6     partnerships with corporations like Travelers

   7     and Citibank for they are the ones who provide

   8     the capital that we can funnel into local

   9     communities, and they are the entities that

  10     fund our technical assistance operations as

  11     well.

  12               Our relationship with Citibank and

  13     the Travelers Group has been substantial over

  14     the last 18 years.  Travelers Group Salomon

  15     Brothers has invested more than forty million

  16     dollars with us to develop affordable homes

  17     that I spoke about before, that forty million

  18     dollars all for the City of New York.

  19               Our relationship with Citibank has

  20     been more complicated and more diverse and

  21     becoming broader over the course of time.

  22     Citibank has been a consistent lender to us on

  23     the bridge, to bridge our equity investments

  24     which generally come in over time from

  25     corporations so that we can begin immediately


   2     to construct or finance the contribution and

   3     rehabilitation of the affordable homes that I

   4     spoke about.

   5               Citibank, and this is I think because

   6     Citibank joined us very early on in the bridge

   7     financing, when our product was new, when the

   8     community groups with whom we were working were

   9     untested and untried, and when the

  10     neighborhoods we were working in were much more

  11     distressed than they are today that Citibank's

  12     involvement with us early on involvement is

  13     very significant, and I think fairly

  14     substantial indicating their ability and

  15     willingness to take risks.

  16               While it has taken sometime for

  17     Citibank to fund our endeavors other than

  18     through bridge lending and to achieve a level

  19     of involvement in our work commensurate with

  20     their asset side, Citibank is where it should

  21     be today when benchmarked against other

  22     financial institutions that are based in New

  23     York City.

  24               Beginning in 1995, Citibank became

  25     one of our larger investors with a 25 million


   2     dollar commitment to affordable housing to be

   3     funded through our New York equity fund and has

   4     recently made another commitment to fund $30

   5     million for the development of that housing.

   6               Citibank has also provided extensive

   7     philanthropic support to us.  Just one more

   8     word before I conclude, that philanthropic

   9     support all passes through us to community

  10     based organizations.

  11               They recently gave us $340 million to

  12     support our neighborhood homes program which

  13     will construct and renovate affordable homes

  14     for first-time home buyers and that type of

  15     philanthropic support is extremely important

  16     and extremely hard to find.  Given this level

  17     of substantial support both by Travelers and by

  18     Citibank, we support the proposed merger of the

  19     organization.

  20               MR. LONEY:  Thank you, Mr. Traylor.

  21     Ms. O'Garrow.

  22               MS. O'GARROW:  Good morning.  My name

  23     is Jacqueline O'Garrow and I am deputy director

  24     of the New York partnership office of

  25     FannieMae.  As many of you are undoubtedly


   2     aware FannieMae is America's largest supplier

   3     of conventional home mortgage funds, since its

   4     creation by Congress in 1939, and its evolution

   5     into a shareholder-owned accompanied in 1968

   6     FannieMae's mission has been to provide

   7     financial products and services that increase

   8     the availability and the affordability of

   9     housing for low, moderate and middle income

  10     Americans.  FannieMae has established 31

  11     partnership offices throughout the United

  12     States.  One such office is the New York

  13     partnership office.

  14               We work closely with city government

  15     officials, community based organizations and

  16     members of the professional real estate

  17     community to structure a series of creative and

  18     flexible products that are necessary to meet

  19     the home financing needs of New York's low to

  20     moderate income home buyers.

  21               The products and programs also

  22     warrant the support of strong lenders committed

  23     to affordable housing on the premise that

  24     everyone is entitled to decent affordable

  25     housing both rental as well as home ownership.


   2               Citicorp is one of several major New

   3     York lenders that have demonstrated a

   4     commitment to partnering with us to assure that

   5     these principles are achieved, and that

   6     products meet their intended concern.

   7               FannieMae's valued relationship with

   8     Citicorp of course predates the establishment

   9     of the partnership office.  However, it is also

  10     quite clear that the introduction of our

  11     programs could only be enhanced with the

  12     support of a lending source like Citicorp in

  13     New York City and Long Island.

  14               With respect to affordable housing

  15     Citicorp's participation in our city homes

  16     financing program is one such program that

  17     brings us closer to achieving our overall

  18     objective.  This program was developed to

  19     support the city's efforts to transform vacant,

  20     abandoned and neglected in rem once poor family

  21     housing stock into rehabilitated housing, low

  22     to moderate income first time home buyers.

  23               Citicorp is also a lender partner in

  24     the New York City housing partnership new homes

  25     program.  Another program for which FannieMae


   2     has negotiated flexible underwriting guidelines

   3     which serves to facilitate the opportunity for

   4     home owners of the thousands of New York City

   5     low to moderate income first time home buyers.

   6               Further, their overall performance in

   7     the origination and delivery of co-op housing

   8     units utilizing our co-op pilot has added

   9     considerable options to the co-op market.  In

  10     1997 Citicorp was one of three lenders who

  11     worked closely with us to structure a secondary

  12     market program that would compliment federal,

  13     state and local agencies in supporting the

  14     ground breaking City Lights at Queens Landing

  15     development.  The successes of these programs

  16     requires the experience of a skilled

  17     organization staff, sensitive to underwriting

  18     affordable housing loans.

  19               Citicorp has been a willing partner

  20     in taking the lead to facilitate partnerships

  21     among nonprofits and for profit developers to

  22     seek solutions to some of New York City's

  23     housing issues.  The spirit of working

  24     collaboratively with FannieMae's New York

  25     housing and neighboring housing service very


   2     low down payment, gut rehabilitation,

   3     convention financing program commonly known as

   4     the neighborhood pilot has been noted in our

   5     company as a model for other parts of the

   6     company to date.

   7               Until Citicorp's involvement this

   8     initiative sat dormant for five years waiting

   9     for a willing partner to bring a leveling of

  10     commitment necessary to have us realize the

  11     success in an urban setting.  The features of

  12     the program reach to the very issues home

  13     buyers face when purchasing or repurchasing one

  14     of New York's aged housing stock.

  15               With the added complexity and the

  16     issues of affordability this product offers a

  17     very low down payment feature with an

  18     aggressive form of rental underwriting to help

  19     low and moderate income families qualify.

  20               By working very closely with

  21     FannieMae to structure secondary market product

  22     that could be replicated in other cities when

  23     neighborhoods organizations operate Citicorp

  24     has contributed significantly to this product a

  25     availability and accessibility.  Their


   2     commitment to New York City is further

   3     demonstrated through a partnership with LISC,

   4     HPD and FannieMae to provide a financing

   5     structure to address the needs of existing one

   6     to four in rem occupied housing through the

   7     neighborhood homes program.

   8               Unlike other City of New York

   9     reconstruction efforts of in rem housing this

  10     program brings new challenges since existing

  11     rental families occupy all of these units.

  12     Citicorp has stepped to the plate to explore

  13     with FannieMae a financing structure that will

  14     allow low to moderate income families to

  15     purchase these occupied rehabilitated one to

  16     four unit properties.

  17               They have also been a significant

  18     partner of FannieMae as a source for

  19     identifying home ownership and the creation and

  20     development of products and programs and

  21     financial literacy tools to assist minorities

  22     and immigrants simulation to our social

  23     structure and achieve what most American

  24     strives for, home ownership.

  25               Citicorp recently participated as a


   2     partner in a community needs round table.  This

   3     round table assembled in Chicago on June 1 and

   4     was comprised of significant community lending

   5     and government partners from five major cities.

   6               The purpose of the round table was to

   7     bring the partners together to share

   8     experiences, best practices and identify

   9     solutions which will guide FannieMae to

  10     structure lots and experimental programs that

  11     will assist minority and immigrant communities

  12     gain greater access to affordable housing.

  13               From the perspective of the New York

  14     partnership office Citicorp is a major player

  15     in the New York City housing market.  Their

  16     commitment to housing issues and providing

  17     access to our flexible and affordable housing

  18     programs are all directed to addressing the

  19     complex housing needs of New York City.  We

  20     continue to work with Citicorp as we strive to

  21     reach our mutual objective which is to provide

  22     affordable financing access to low and moderate

  23     minority and immigrant community in New York

  24     City.

  25               MR. LONEY:  Those of you who didn't


   2     get to finish all they had to say, you can

   3     leave a copy with the folks at the registration

   4     table.  The entire thing will be put into the

   5     record.

   6               MS. ISRAEL TUFTS:  Thank you.  My

   7     name is Suzanne Israel Tufts and I am president

   8     and CEO of the American Women's Economic

   9     Development Corporation, the nations oldest

  10     not-for-profit organization providing in-depth

  11     counseling training and supportive services for

  12     womens business owners.

  13               I want to thank the Federal Reserve

  14     and the State Banking Commission for the

  15     opportunity to testify today, and to speak to

  16     community that while not defined by the

  17     traditional neighborhood and geographic bounds

  18     or racial bounds in the regulatory framework

  19     nevertheless represents the growing single

  20     largest customer base of the two companies at

  21     issue here, Citibank and Travelers.

  22               In our twenty-year history and over

  23     twenty year collaboration with Citibank and

  24     Travelers has worked with over one hundred

  25     thousand entrepreneurial women and we have


   2     spearheaded the creation and development of

   3     similar organizations throughout the country.

   4               We serve women from all income

   5     levels, all neighborhoods, all demographic

   6     background and all industries.  When we first

   7     started and Citibank first came to our help,

   8     women were just entering the small business

   9     market and were a negligible factor in that.

  10               Today women-own businesses account

  11     for over one third of all businesses in the

  12     United States, and it is estimated by the year

  13     2000, half of all small businesses will be

  14     owned by women.  Today they employ one out of

  15     every four US workers which is approximately

  16     18.5 million people.  They generate close to

  17     2.3 trillion dollars in sales and even in this

  18     bull market their growth outpaces overall

  19     business growth by nearly two to one.

  20               At the same time the largest

  21     demographic group of growth in the country is

  22     55 and older group.  In that group women make

  23     up the largest portion of that group.  So as

  24     women's credit needs are growing both

  25     professionally and personally their insurance


   2     needs and their retirement needs are growing.

   3     Whether from the standpoint of a business owner

   4     or from the standpoint of looking at their life

   5     and their financial planning as one uniform

   6     process, it is our belief that merger will

   7     represent for women efficiency, effectiveness

   8     and improvement of the services that they can

   9     render.

  10               WEDC and Citibank have as I've said

  11     in over twenty year history of strong creative

  12     collaboration on behalf of women business

  13     owners.  The burst in their growth is due to

  14     many market and social factors, but it is due

  15     to very much increased educational opportunity

  16     open to women, and this education simply would

  17     not have been available or affordable if it

  18     were not for Citibank's commitment to WEDC a

  19     commitment evidenced by financial support and

  20     also and most importantly by extraordinary time

  21     expertise and in depth involvement.

  22               Many employees in this organization,

  23     in particular Pamela Flaherty's familiarity and

  24     her team.

  25               Based on their work, Citibank has


   2     helped us, as I say, start and grow our

   3     organization at a time when people do not have

   4     faith that women could do it.  They helped

   5     reach out, have educated Congress, Small

   6     Business Administration, and women throughout

   7     the country to open similar offices which now

   8     exists all over the country.

   9               They have provided general operating

  10     support, the life blood of any organization.

  11     They have provided health in times of deficit

  12     and help wean us away from federal government

  13     funding to be predominantly private sector

  14     supported.

  15               They have helped in funding access to

  16     capital programs at a time when now women

  17     business owners are coming in to their own and

  18     Citibank is the one of the first to recognize

  19     the need for education that has to provide a

  20     good credit application, a good credit standing

  21     and a vibrant and growing business.

  22               Travelers has been involved with us

  23     focusing on women as insurance agents and

  24     people who are at this point under insured and

  25     need more education and protection towards


   2     their old age insurance product.

   3               What we have found is that time is

   4     womens most precious commodity and trust their

   5     most important asset, and when they can deal

   6     with one organization, with one person, be it

   7     their broker or their insurance broker or when

   8     they form trust in that person, they will put

   9     the repository of their trust there.  They will

  10     want the efficiency of one stop shopping.

  11               They do not have the time in their

  12     life to be dealing with older arcane systems of

  13     corporate structure.

  14               Today, for example, our organization

  15     is hosting an on-line marketing, on-line

  16     banking seminar with a group called Web World

  17     and we have over a hundred of the latest

  18     growing firms in the high tech community.

  19     These women represent the future and what they

  20     want is efficiency, speed and one stop

  21     shopping.

  22               They and we are grateful for the

  23     support Citibank and Travelers have shown as

  24     they were getting there and now that they are

  25     becoming successful again across all


   2     boundaries, no matter how that's defined, it is

   3     our belief that that merger will only help them

   4     continue, thank you.

   5               MR. LONEY:  Thank you.  That was well

   6     timed.  Mr. Reed.

   7               MR. REED:  Good morning.  My name is

   8     Edwin Reed.  I am here as chairman of the board

   9     of the Jamaica Business Resource Center.

  10               I'd like to thank the Federal Reserve

  11     Bank and the State banking of New York for

  12     giving me this opportunity to come before you

  13     today on what I think is a very critical

  14     development in the banking industry.

  15               The Jamaica Business Resource Center

  16     was established over three years ago to serve

  17     as the national power for President Clinton one

  18     stop capital shop initiative.

  19               This program which is administered by

  20     the US Small Business Administration has been

  21     replicated in 16 major urban cities across the

  22     United States.  Since its inception, JBRC has

  23     assisted approximately 748 businesses in

  24     creating or retaining over one thousand four

  25     hundred fifty nine jobs, has secured over 15


   2     million dollars in financing for small

   3     businesses resulting in over six hundred

   4     additional jobs, has provided high quality

   5     in-depth training to over five hundred

   6     entrepreneurs, has provided training to two one

   7     stop capital shops in Harlem and Detroit and

   8     provided orientation and in over one hundred

   9     LDCRs, CDCs, EDCs, bank and other public

  10     private sector organizations on the JBR team

  11     model and have initiated internal welfare to

  12     work and minority college intern programs.

  13               Citibank has played a pivotal and

  14     important role in the development in

  15     establishing JBRC.  Fairly early on three years

  16     ago it was a major sponsor, and in fact, lended

  17     its resources and expertise to meetings which

  18     helped develop the model for JBRC.

  19               Citibank has also provided grants of

  20     $25,000 per year to help support the programs

  21     and operations of JBRC.  In addition, Citibank

  22     has been a leader in establishing a new forum

  23     by which nonprofit organizations, specifically

  24     religious institutions, were trained in

  25     computer development.  This resulted in a


   2     partnership with Citibank, JBRC, Southeast

   3     Queens Clergy, York College and others, so that

   4     we could take advantage of the many

   5     opportunities that exist.

   6               In regard to this merger it is

   7     important to note that we are looking at an

   8     opportunity to make a significant and historic

   9     change in the way we do banking and financial

  10     services.  The people at JBRC welcome this

  11     opportunity because we have had a relationship

  12     with Citibank for the last three years and we

  13     believe that they have the innovative

  14     management technique and style to fully take

  15     advantage of this new horizon.

  16               The key element to success in this

  17     arena, we believe are going to be an effective

  18     response to the market by the combined company,

  19     the management, and its focus on the

  20     opportunities presented for community

  21     development and historically underserved

  22     community, and a role for the regulators which

  23     is oversight.  That oversight must be

  24     coordinated, consistent, and contain effective

  25     rule making so that the market is able to


   2     function efficiently.

   3               As we look at Citibank and the

   4     potential for this merger we believe that we

   5     have an example of where the development of the

   6     financial markets will go.  It is an

   7     opportunity for Citibank and Travelers to

   8     expand into markets that have been underserved

   9     before, but also represent the opportunity for

  10     future growth here in the domestic arena.

  11               We believe that Citibank is up to the

  12     challenge, and we as JBRC would like to join in

  13     that partnership so that we can successfully

  14     rebuild urban communities by entrepreneur and

  15     small business development.  Thank you very

  16     much.

  17               MR. LONEY:  Thank you.  Mr. Lappin.

  18               MR. LAPPIN:  Good morning, and thank

  19     you for this opportunity to speak.  My name is

  20     Michael Lappin.  I'm the president of the

  21     Community Preservation Corporation known as

  22     CPC.

  23               We are an affordable housing lending

  24     consortium that operates throughout New York

  25     State and will shortly open an office to serve


   2     New Jersey.  Our mission is to provide

   3     financing, to help preserve low and moderate

   4     income communities throughout these areas.

   5               (Continued on next page)






















   2               MR. LAPPIN:  We are one of the

   3     largest affordable housing lenders in the

   4     country, having to date invested over $1.8

   5     billion for the rehabilitation, development and

   6     preservation of almost 62,000 housing units.

   7               We have had a long history with

   8     Citibank.  Citibank was one of our founding

   9     members back in 1974.  Citibank has been

  10     unwavering in its commitment to CPC.  It has

  11     had a senior level executive serve on our

  12     board, as well on our investment committee.

  13     Currently, Pam Flaherty serves on our board,

  14     our audit committee, and our strategic planning

  15     committee, and Bernice Giscombe serves on our

  16     mortgage committee.  Both are highly valued

  17     participants in CPC and give freely of their

  18     time and experience in guiding our company and

  19     our investments.

  20               Citibank's standing financial

  21     commitments to our company total over $26

  22     million, and these revolve.  Additionally, they

  23     have made investments and grants in the many

  24     projects the CPC is involved with.

  25               The representative from Fannie Mae


   2     spoke of the City Home program, which we are

   3     very heavily involved in, and most recently

   4     Citibank has made a commitment with us in the

   5     Nehemiah housing projects, where they have made

   6     a sizable no-interest loan to help rebuild this

   7     blighted community with 600 new homes.

   8               Citibank has always been among the

   9     first institutions to sign up for new

  10     initiatives, which we have sponsored and have

  11     encouraged others to do the same.  They have

  12     truly been a leader in helping to serve the

  13     affordable housing market.  They will be a

  14     founding participant with us in our expansion

  15     into New Jersey.

  16               Citibank is also providing support

  17     for our efforts to revitalize the 12,000-unit

  18     housing complex in Parkchester in the Bronx.

  19     They have signed an expression of interest to

  20     provide $20 million of financing -- that is

  21     over and above the commitments I already spoke

  22     to -- to renovate this property that is now

  23     experiencing a certain amount of decline.  They

  24     are also working with us closely to provide end

  25     loans to condominium loaners and to refinance


   2     existing end loans that they have at the same

   3     complex.

   4               The bank has provided through its

   5     directors long-standing support for our public

   6     initiatives in the legislative arena on a

   7     variety of issues concerning affordable housing

   8     and have attended and been very much involved

   9     in these efforts, both on the city, state and

  10     federal level.

  11               In closing, Citibank's 24 years of

  12     support for CPC have been a crucial

  13     underpinning to our success in helping the

  14     affordable housing needs and helping us serve

  15     the affordable needs of the low- and

  16     moderate-income neighborhoods where we lend.

  17               Thank you very much.

  18               MR. LONEY:  Thank you, Mr. Lappin.

  19               Are there any questions from the

  20     panel?

  21               MR. ALVAREZ:  I have one question.

  22               Ms. Tufts and Mr. Reed, you both

  23     represent small business areas, and we have

  24     heard a lot of concern this morning that

  25     one-stop shopping from the individual side


   2     could cause some difficulties because of

   3     sharing of customer information.  A lot of

   4     folks were concerned that sharing customer

   5     information might actually lead to a cutback of

   6     services.

   7               That one-stop shopping, you think, is

   8     very helpful to the small business community.

   9     Do you think with your experience with small

  10     businesses that they would be concerned about

  11     sharing of information, calling an insurance

  12     company and a bank in the effort to provide

  13     one-stop shopping?

  14               MS. TUFTS:  Based on the businesses

  15     that we deal with, we see that they have really

  16     two concerns.  One is a general social privacy

  17     concern, and that is going to exist no matter

  18     what kind of corporate structures exist.  So as

  19     long as there are environments where they have

  20     knowledge of what is going on, that would just

  21     be a general concern, not specific to this

  22     issue.

  23               What we see as a greater concern is

  24     really -- I didn't mean to trivialize it -- is

  25     very truly one of time and one of trust.  When


   2     I say "trust," it is very hard for a small

   3     business person to approach a bank and bring

   4     their credit concerns to them.  Once they have,

   5     particularly in terms of the women's market and

   6     the way women work with their bankers or with

   7     their service providers, once they have formed

   8     that repository of trust, that is the person

   9     and that is the place where they want to

  10     discuss things in, frankly, a more holistic

  11     fashion.  I realize these are not banking terms

  12     necessarily, but those are how our customers,

  13     how the small businesses, look at that.

  14               Their business plan is not that

  15     different from their life plan and their

  16     concerns they have to bring together in their

  17     desire to approach things in a more integrated

  18     fashion, but, yes, with protecting dignity and

  19     privacy.  Nothing that we see would be

  20     precluded.  The two are not precluded.

  21               MR. REED:  My experience has been

  22     that, as it relates to privacy concerns and

  23     one-stop-capital shopping, I agree with

  24     Ms. Tufts that the most overriding issue for

  25     small businesses is the ability to get it done


   2     effectively and efficiently all at one time.

   3               As it relates to the issue of

   4     privacy, I think the regulators are the ones

   5     who are going to be very important in that.

   6     From a small business and from an individual

   7     standpoint, one of the most important things

   8     that one has is your credit report, which is a

   9     very public document, and if we have safeguards

  10     to be sure that the information that is being

  11     shared is accurate, reliable, if questioned can

  12     it be corrected, those are the things that will

  13     make sharing of information a viable

  14     opportunity.

  15               The other side of that issue is

  16     simply one of sharing information, not for

  17     making business decisions, but sharing it for

  18     marketing purposes.  And on that issue, the

  19     individual must have the right to understand

  20     how that information is being used and whether

  21     or not they should be the final one to

  22     determine whether or not they want that

  23     information in the overall marketplace, and

  24     guidelines must be set up in order for that

  25     process to work, in our opinion.


   2               MR. LONEY:  Thank you.

   3               Any other questions?  If not, I will

   4     thank the panel.

   5               MR. REED:  Thank you.

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Last update: September 27, 2002