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


   2          A F T E R N O O N    S E S S I O N

   3                       1:00 p.m.

   4               MR. LONEY:  I'd like to call the

   5     meeting back to order.  We're only a few

   6     minutes late from what I originally planned.

   7     We are going to start this afternoon's

   8     proceedings with panel 7, John Shemo, Peter

   9     Libassi, Kathleen Gordon, Ceasar Claro, Paul

  10     Christie, and Carol Aranjo:

  11               We'll start with Mr. Shemo.

  12               MR. SHEMO:  Good afternoon.  My name

  13     is John Shemo and I am here on behalf of

  14     Connecticut Capital Region Growth Council which

  15     is the leading economic development

  16     organization for the 29 town Metro-Hartford

  17     region.

  18               I serve as the agency's executive

  19     vice-president.  I'm pleased to have this

  20     opportunity to testify before you in favor of

  21     Travelers Group proposal to acquire Citicorp.

  22     There are two reasons that we as a Growth

  23     Council support this merger.  The first is job

  24     preservation and growth.  The second is

  25     Travelers' long history of for being a good


   2     corporate citizen in your community.  The

   3     mission of the Growth Council is to boost the

   4     local economy by fostering job growth in

   5     Metro-Hartford.

   6               It is our opinion that the Travelers

   7     Citicorp merger would not only preserve the

   8     thousands of jobs each company currently

   9     provides in Metro-Hartford but also would

  10     expand the local employment basis of the two

  11     companies.  Travelers has always been a key

  12     employer of Metro-Hartford.

  13               Before the companies earlier merger

  14     with Primerica, about six thousand Travelers

  15     jobs were lost and thousands more were at

  16     serious risk.  Since that merger, the company

  17     has reversed its situation, returned to

  18     profitability, and begun to grow its work force

  19     again.  Travelers Group now employs roughly

  20     seven thousand people in Hartford, plus another

  21     two thousand jobs were saved by Travelers

  22     selling its health benefits operation to

  23     another insurer.  In effect, Travelers

  24     practices of strategic acquisition and

  25     restructuring has preserved nine thousand jobs


   2     for Metro-Hartford residents.

   3               Separately, the Growth Council

   4     recently completed successful negotiations to

   5     bring the Citicorp in-bound call center to

   6     Metro-Hartford.  This customer service er

   7     center will employ between 550 to 600 people.

   8     We believe that the merger will have a positive

   9     impact on this operation as well, as the two

  10     companies began cross-selling their products

  11     through telemarketing efforts.

  12               The second reason that the Growth

  13     Council supports this merger is as I said

  14     because of Travelers strong track record in our

  15     community.  We believe that as a larger company

  16     its ability to promote the region's economic

  17     development will be enhanced.

  18               Travelers was an original

  19     incorporator of and investor in the Growth

  20     Council, again, funding our efforts this year.

  21               There are several other efforts of

  22     Travelers community support.  Travelers

  23     currently provides the use of its education

  24     center to the University of Connecticut as a

  25     downtown campus.  We view this as the first


   2     step in creating even a larger downtown

   3     Hartford higher education center, involving

   4     courses offered to many of the local

   5     universities.

   6               The higher education center is high

   7     on our list of projects that would both draw

   8     more people downtown and benefit the city's

   9     current employers and workers.  Riverfront

  10     Recapture, which has revitalized recreational

  11     activities on the Connecticut River also has

  12     been a recipient of Travelers'generosity.  To

  13     date, the company has invested point one

  14     million dollars in Riverfront programs, which

  15     give new life to the region and attract both

  16     residents and visitors to Hartford, East

  17     Hartford and other towns along the river.

  18               It is our opinion that the Travelers

  19     Citicorp merger would serve the best interest

  20     of the Metro-Hartford region.  We urge you to

  21     consider it favorably.  Thank you.

  22               MR. LONEY:  Thank you, Mr. Shemo.

  23     Maybe I should repeat what I said this morning

  24     about the time sequence, because some of you

  25     may not have been here and some of the next few


   2     panels may not have been here.  The lady in the

   3     middle in the front row here is going to be

   4     holding up signs to tell you when you're down

   5     to two minutes remaining, and then when time

   6     has expired.

   7               I will say that the folks this

   8     morning blazed a trail that will be hard for

   9     this afternoon's group to emulate.  They stayed

  10     very close to on time and I appreciate that,

  11     and it helps us get in everybody's testimony

  12     and I'd like to try to repeat this morning's

  13     success, and I'm taking up too much time saying

  14     that.  Mr. Libassi.

  15               MR. LIBASSI:  My name is F.  Peter

  16     Libassi.  I'm a Travelers retiree and I'm also

  17     a Travelers shareholder.

  18               I'm here today in my capacity as

  19     president of the Childrens Fund of Connecticut

  20     which is a grant making foundation and my

  21     statement will deal with the leadership role

  22     that Travelers played in the establishment of

  23     that foundation, and the public benefits which

  24     have flowed from it.

  25               In 1992 the Newington Children's


   2     Hospital in Newington, Connecticut which was an

   3     orthopedic hospital decided that due to a

   4     reduction in patient load it would close and

   5     reopen as a specialized childrens' hospital in

   6     the City of Hartford.

   7               In reviewing the health needs of the

   8     children of Hartford, the Travelers thought

   9     that perhaps they were very serious issues

  10     related to childrens health, but they dealt

  11     more with primary and preventive care.  They

  12     dealt with such issues as immunization, well

  13     baby checkups, teen age pregnancy, prenatal

  14     care, issues which were quite different than

  15     those served by a high tech specialty hospital.

  16               As a result, the Travelers in fact

  17     questioned the wisdom of whether a high tech

  18     hospital as proposed actually addressed the

  19     health needs of children in Hartford.  With

  20     that question as its focus the Travelers

  21     decided to initiate a study.  The independent

  22     study as to what were in fact the health needs

  23     of children, and at first other corporations

  24     were curious about the study, and eventually

  25     actually joined with Travelers in sponsoring


   2     that study, which was done by Lewin/ICF.  That

   3     study concluded that there was in fact a need

   4     for a childrens' hospital, but a much smaller

   5     hospital than had been originally proposed, but

   6     the study also concluded, as the Travelers had

   7     argued, that the health needs of the children

   8     of Hartford would only be served if a serious

   9     campaign was launched that would focus on

  10     primary and preventive care.

  11               Now, as a result of that the

  12     Childrens' Fund of Connecticut was established

  13     with a leadership grant of one million dollars

  14     from the Travelers foundation.

  15               With that gift as a leadership gift

  16     other corporations and other hospitals in the

  17     area also contributed and the foundation was

  18     established of $17 million to serve the under

  19     served children in the City of Hartford and in

  20     other you are been areas in Connecticut dealing

  21     primarily with preventive and primary care.

  22               The board of that foundation after

  23     exhaustive study of the needs of children

  24     throughout the state, concluded that it ought

  25     to focus on developmental delays and


   2     developmental deficiencies, and how they might

   3     be prevented.

   4               That led to the decision that what

   5     was needed most in the state was training for

   6     those people who provide care for children.  We

   7     were surprised to learn of the extent to which

   8     pediatric nurses, social workers, child care

   9     providers, day care center people really had

  10     very limited knowledge of primary and

  11     preventive strategy with respect to those

  12     deficiencies, and with that the Childrens Fund

  13     sponsored the first state-wide training program

  14     for child care providers in the State of

  15     Connecticut.

  16               This foundation brought together four

  17     state agencies and three private organizations

  18     all of which contributed $600,000 to the

  19     training and $200,000 from the Childrens Fund

  20     of Connecticut.  So at this time in Connecticut

  21     1600 family child care providers are in the

  22     first training program that has ever been

  23     offered in the State of Connecticut.

  24               The result is that ten thousand

  25     children in September will reap the benefits of


   2     being under the care of providers who are

   3     receiving the very finest in child care

   4     training.  There is no question that the extent

   5     of training of child care providers in the

   6     State of Connecticut would not now be under way

   7     if it had not been for the leadership and for

   8     the foresight of the Travelers Corporation.

   9     Thank you.


  11               MR. LONEY:  Thank you, Mr. Libassi.

  12     I have next Ms. Gordon.

  13               MS. GORDON: Yes.  I'm Kathleen Gordon

  14     and I'm president founder and board member of

  15     Working Capital Florida which is a nonprofit

  16     community lending organization.  We provide

  17     uncollateralized small loans under $5,000 for

  18     low income people to be self-employed.

  19               I'm here at my own expense, and I'm

  20     also here to attend the micro-credit summit

  21     conference of practitioners which begins

  22     tomorrow.  There are more than a thousand

  23     people that have paid their own way to come to

  24     New York with the commitment of reaching one

  25     hundred million families with credit around the


   2     world for self-employment.

   3               City Corporation was the first funder

   4     of the micro-credit summit which took place

   5     last February in New York City.  More than

   6     three thousand people came to the summit and

   7     committed to reach one hundred million

   8     families.  We are presenting our action plan

   9     tomorrow to each one of the organizations on

  10     how we're going to reach those families with

  11     credit.

  12               The average loan outside the United

  13     States is around $100 for self-employment and

  14     we're targeting women.  On the domestic side, I

  15     will present tomorrow to the summit members on

  16     how we in South Florida are going to expand and

  17     reach ten thousand low income people in South

  18     Florida with loans under $5,000 for

  19     self-employment.

  20               The chair of our board of directors

  21     is Barbara Manning who is the vice-president of

  22     Citibank in our community.  She has provided

  23     invaluable support and assistance, and also

  24     helped with our loan portfolio for the work

  25     that we're doing in our local community.  We


   2     have started four hundred businesses in Dade

   3     County in the last two and a half years.  We

   4     provide loans, technical assistance and

   5     business training in 16 of the poorest

   6     neighborhoods in Dade County.  65 percent of

   7     our loans go to people of African descent.  We

   8     have an overall 96 percent repayment rate on

   9     those loans.

  10               Once we borrowed the money from a

  11     consortium of ten banks of which Citibank is,

  12     and Citicorp are one of the funders of our loan

  13     portfolio.  They have also provided operational

  14     support for our organization to expand our

  15     outreach into these low-income communities, and

  16     the business training that we do provide.

  17     They've also provided us again with the

  18     leadership at the local level in expanding the

  19     program.

  20               Dade County, as you know, is a city

  21     of primarily immigrants, and we are now

  22     considered one of the six poorest cities in

  23     America.  So this type of lending where we

  24     provide self-employment, even for welfare

  25     mothers, has been critical in our community,


   2     and I'll tell you the truth, we could not have

   3     done it without the support of Citibank and

   4     City Corporation.  They were one of the leaders

   5     in coming for providing this kind of

   6     assistance.  So they are providing leadership

   7     at the international level, the global level

   8     and also at the local level which is extremely

   9     powerful.

  10               I don't know about the merger.  I am

  11     impressed with the 115 billion dollar

  12     commitment for community development in this

  13     country, and I do feel as a regulatory board

  14     that we can, that you have a responsibility for

  15     oversight that that money really gets targeted

  16     down to these low-income communities, because

  17     we're growing the businesses, and once the

  18     businesses get up to the $5,000 loan site with

  19     us, the participating banks put in a matching

  20     loan.

  21               So we help people develop a credit

  22     history.  They get a Dun & Bradstreet number

  23     with us.  We also have access development

  24     accounts.  Each one of the businesses to get a

  25     loan also has to have a savings account, a


   2     group savings account.  So we are promoting

   3     asset development and business loans.  They get

   4     a credit history, and then they move up to bank

   5     loans.  We have ten banks that are

   6     participating with us, and Citibank is one of

   7     those.

   8               We are excited about micro lending.

   9     We feel that it's a program that should be

  10     expanded all across the United States.  Working

  11     Capital is now working in seven states.  We

  12     started more than three thousand businesses.

  13     So our program is the largest nonprofit micro

  14     lending program in America to date, and we hope

  15     to expand it all across the country.  Thank you

  16     so much.

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

  18               MR. CLARO: good afternoon.  My name

  19     is Ceasar Claro and I am a director of the

  20     Staten Island Economic Development Corporation,

  21     the borough-wide business development agency

  22     for Staten Island.

  23               I am submitting testimony today on

  24     behalf of the board of directors of the Staten

  25     Island DC in support of the proposed Citicorp


   2     Travelers Group merger.

   3               For the past four years Citibank has

   4     a major support of the SIDC contributing in

   5     exceeds of over sixty thousand dollars to the

   6     organization as well as providing free

   7     technical marketing and legal assistance.  They

   8     have provided much needed counsel on small

   9     business development issues, and on many

  10     occasions have guided our staff in implementing

  11     new programs.

  12               In addition, Citibank frequently

  13     offers free capacity building courses to

  14     not-for-profit organizations throughout the

  15     city.  All in all, they have been a great

  16     corporate citizen to the people in small

  17     business community of Staten Island.

  18               As one who has worked in urban

  19     economic and community development for over

  20     eight years, and in two New York City counties,

  21     I can honestly say that Citibank has been at

  22     the forefront of urban revitalization.  They

  23     have devoted countless manpower hours and

  24     financial support to underserved neighborhoods

  25     and vital community organizations.


   2               In the outer boroughs of New York

   3     City Citibank's name has become synonymous with

   4     community development.  They have been one of

   5     the leading small business banking institutions

   6     developing model programs to assist start up

   7     firms, and womens-minority-owned businesses.

   8               Unlike recent bank mergers, the

   9     proposed Citibank Travelers merger involves

  10     only one current philanthropic community

  11     development corporation, in this case,

  12     Citibank, thus preventing a negative impact on

  13     the financial support organizations currently

  14     receive.

  15               Once again SIDC wholeheartedly

  16     supports the merger and hopes this board does

  17     as well.

  18               Thank you for your time.

  19               MR. LONEY:  Thank you.

  20               Mr. Christie.

  21               MR. CHRISTIE:  Members of the Federal

  22     Reserve Board panel, my name is Paul Christie.

  23     I'm executive director of Center City Churches

  24     Incorporated.

  25               Center City Churches is a


   2     not-for-profit nonsectarian human services

   3     agency in Hartford, Connecticut.

   4               It started in 1967.  We are now

   5     comprised of 12 congregations representing ten

   6     religious traditions.  Our mission is to be a

   7     partnership of congregations, institutions and

   8     individuals which cares for the city by finding

   9     innovative and effective ways to help

  10     Hartford's neediest residents work towards

  11     self-sufficiency.

  12               Since our beginning we have relied on

  13     active partnerships to fulfill our mission.

  14     Today with the help of over four hundred

  15     volunteers annually dozens of corporate

  16     foundations, public and private commitments, we

  17     operate six programs.  Among them Peters

  18     Retreat is the first and largest AIDS housing

  19     program in Connecticut, Laurel Street, the only

  20     state licensed group home for the chronically

  21     mentally ill in Hartford, Center for Hope,

  22     offspring of the first soup kitchen in the

  23     city, and Center for Youth, the most

  24     comprehensive school tutoring and enrichment

  25     program in Hartford serving over four hundred


   2     children weekly.

   3               The Travelers Group Incorporated

   4     plays a pivotal role in helping us fulfill our

   5     mission.  Here are some of the ways Travelers

   6     puts energy into being community partner with

   7     Center City Churches.  Travelers is providing a

   8     three-year grant for the Center for Youth which

   9     enables us to double the number of children we

  10     serve by adding a second school to our program.

  11               Travelers purchased a van so we can

  12     transport our program participants safely.

  13     Travelers donates staff time to find office

  14     space for our agency and secures furnishings

  15     for that space.  It provides consultations to

  16     revise our personnel policies, and upgrade our

  17     pension plan, while excluding themselves from

  18     being considered as a vendor.

  19               Travelers recruits board members and

  20     school tutors.  This spring Travelers developed

  21     an ongoing art gallery in their offices to

  22     display our students work, and that of their

  23     employees and other community groups, thus

  24     building bridges between the neighborhoods and

  25     the board room.


   2               Already Travelers personnel have

   3     purchased some of the students' work and

   4     underwritten an artist residency see in the

   5     school.

   6               My daughter's crew experience in

   7     college illustrate what I'm trying to say about

   8     college as a community partner.  Every seat in

   9     crew has a name and a task.  The "stroke" is

  10     the team member who sets the pace for the boat.

  11     By example all the other rowers align

  12     themselves with him or her.  The stroke sets

  13     the standard.

  14               In Center City Church's experience

  15     Travelers is the corporate stroke for community

  16     involvement in Hartford.

  17               MR. LONEY:  Thank you very much.

  18     Ms. Aranjo.

  19               MS. ARANJO:  Good afternoon.  My name

  20     is Carol Aranjo and I am chair of the board of

  21     the National Federation of Community

  22     Development Credit Unions.

  23               The National Federation of Community

  24     Development Credit Unions represents 170 credit

  25     unions that specialize in serving low income


   2     and minority communities in forty states.

   3               Our members are located both in urban

   4     and rural areas.  Many of our members' credit

   5     unions have served their community for some

   6     fifty years.  Our credit unions serve people in

   7     communities who have often been ignored or

   8     neglected, or are unable to be served by banks.

   9               For the most part the members of CDCU

  10     have small needs and need small loans.

  11     Sometimes they have credit histories that would

  12     make them unacceptable to banks.  Serving this

  13     market is not very profitable, which is why

  14     many banks have retreated from our communities.

  15               Our communities' development of

  16     credit unions have decades of experience in

  17     trying to fill the banking gaps and bringing

  18     services to the unserved.  It's not an easy

  19     job.  It can take many years and enormous

  20     sacrifices for community development credit

  21     unions to achieve the level of assets and

  22     capital they need to serve their members

  23     adequately.

  24               Often our credit unions need help

  25     getting to those levels.  Citibank has provided


   2     that kind of help to the CDC movement.  It has

   3     not always been easy to convince banks, and

   4     especially in today's climate where there seem

   5     to be some real adversarial relationship

   6     between some banks and credit unions to help

   7     institutions that some bankers may call

   8     competitors.  But Citibank looked beyond this

   9     to the needs of low income communities.  They

  10     decided if their bank presence wasn't

  11     sufficient in a community it would be important

  12     for low-income people to have access to a

  13     nonprofit finance institution owned by the

  14     community itself.

  15               Listening to all the testimony today,

  16     as a person of color I would like to say that

  17     too often people of color are brought up when

  18     these type of issues come before you, and often

  19     groups say what they are doing to serve the

  20     people of color, and I'm talking about

  21     intermediaries and advocates, but I would ask

  22     the Federal Reserve to be very careful about

  23     the rainbow effect which I call, a pot of gold

  24     at the end, the banks on one end and the

  25     financial institutions and the adversaries and


   2     intermediaries on the other.  Both have the pot

   3     of gold.

   4               The community is under need watching

   5     the funds go from one end to the other and

   6     they're not getting it.  Statistics prove that

   7     communities of color are in worse shape today

   8     than they were twenty years ago.  Something is

   9     wrong.

  10               I would like to say that Citibank I

  11     commend them for understanding what a

  12     conglomerate can do and what it cannot.  In not

  13     being able to do it, they are willing to

  14     support those who can do it.

  15               The micro fund, the community

  16     development credit unions, the loan funds, the

  17     community CDC, they are in the community run by

  18     the people of the community making the

  19     decisions to lift themselves up.  People have

  20     been trying to do it for them for twenty years.

  21     It has not worked.  They need to be able to do

  22     it for themselves.

  23               When institutions such as Citibank

  24     recognize this, and are willing to support

  25     those organizations that are in the community


   2     working to empower themselves and lift

   3     themselves up, then I support this type of

   4     bank.

   5               So I would say that from the CDCU

   6     movement, and I would also like to say someone

   7     mentioned identifying the CDCU received money

   8     from Citibank.  The Federation received a

   9     million dollars from Citibank to deposit into

  10     low income credit unions to help them have the

  11     equity they needed to continue lending to poor

  12     people in the communities throughout the United

  13     States.  And I would say to those groups who

  14     said this, I would ask that they identify

  15     themselves if they plan to be recipients of any

  16     monetary requirement, that the Federal Reserve

  17     would put on a merger of this type.  Oft times

  18     they are complaining about the people who have

  19     already received the money, but they plan to be

  20     on the recipient side if the monetary

  21     requirement is necessary.

  22               I would also ask that you approve the

  23     merger, but that you also keep an eye on any

  24     monetary requirements, that you make sure that

  25     you follow the dollars to make sure that they


   2     actually get to the communities that are being

   3     represented as being underrepresented and

   4     needing your concern.

   5               Thank you.

   6               MR. LONEY:  Thank you.

   7               Are there any questions from the

   8     panel?

   9               MR. ALVAREZ:  I don't have any

  10     questions, but I have a comment that pertains

  11     to what some of the other speakers on the panel

  12     before have represented people who have done

  13     incredible work in the community like

  14     yourselves and we appreciate you all taking the

  15     time to come and talk to us.  So no matter what

  16     happens in this merger, good luck in continuing

  17     the work you're doing.

  18               MR. LONEY:  I've been remiss in not

  19     worrying about this before.  I guess I was

  20     thinking that everybody has been here all day.

  21     Maybe they have.

  22               So let me just repeat, if you have

  23     written materials that represent your remarks

  24     we would like to have copies if we could get

  25     one before you leave.  Also, if any of you who


   2     testified wish to supplement your oral

   3     testimony you may do so by close of business 5

   4     p.m. on July 2, by sending in such supplemental

   5     information care of Jennifer Johnson, secretary

   6     of the Board of Governors of the Federal

   7     Reserve in Washington, D.C. 20551.  Also, you

   8     can fax it to 202-452-3462.  So if you have

   9     supplemental information we'd like to have it

  10     by the end of business July 7th.

  11               Also, I'll let you know that there

  12     will be transcripts available by June 30th of

  13     today's part of the meeting, and by July 1st

  14     for tomorrow's part of the meeting that can be

  15     obtained through the Federal Reserve Bank of

  16     New York, and the transcript will be available

  17     by close of business June 29th for today's part

  18     of the meeting and June 30th for tomorrow's

  19     meeting.  The board's public website www.frb.


  21               (Laughter)

  22               So I would be remiss in not saying

  23     this to the afternoon session as well as to the

  24     morning session.  Thank you very much.


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