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

  25               The next panel is panel 8 Hubert Van


   2     Tol, Phyllis Salowe-Kaye, Rashnmi Rangan, Ruhi

   3     Maker, Gail Burks, and Alan Fisher from

   4     California Reinvestment Committee has asked

   5     that the letter that he propose be read into

   6     the record as has Mr. Van Tol of the Wisconsin

   7     Rural Development Center.

   8               Mr. Ortiz, are you going to read both

   9     of those letters?

  10               MR. ORTIZ:  No. I'm going to read Mr.

  11     Fisher's letter.

  12               Dear Mr. Loney:  The California

  13     Reinvestment Committee regrets it cannot be

  14     present for this testimony in person.  We

  15     authorize the Inner City Press/On the Move to

  16     enter our testimony into the record and request

  17     it consent on the matter.

  18               We would like to extend our

  19     appreciation to the Federal Reserve for

  20     inviting public comment on the Citicorp

  21     Travelers proposed merger.

  22               I am Ernesto Ortiz representing the

  23     California Reinvestment Committee from San

  24     Francisco, California.

  25               We regret that we cannot attend in


   2     person and with our coalition members, who

   3     represent two hundred community-based

   4     organizations around California.

   5               For a number of critical reasons

   6     described below, we urgently request that the

   7     Federal Reserve deny Travelers' application to

   8     acquire Citicorp.  The crux of our argument

   9     rests on the record Travelers and Citicorp has

  10     established in communities of color and how

  11     this merger will adversely affect low-income

  12     communities.

  13               As you have heard or may hear in

  14     testimony from other groups both Travelers and

  15     Citicorp have programs supporting community

  16     investment and charitable giving.  Yet both

  17     groups have poor histories of serving people of

  18     color and of underserving low-income

  19     communities.

  20               In addition, the announced $115

  21     billion CRA lacks scope, size and detail for an

  22     institution the size and scope of the proposed

  23     Citigroup.

  24               Citibank has one of the worst

  25     reinvestment programs for a major California


   2     financial institution.  The bank has a record

   3     of severely underserving Hispanics in the

   4     State.  California is at least 30 percent

   5     Hispanic, yet only 12 percent of the

   6     applications taken by Citibank in California in

   7     1995 were from Hispanics.

   8               In 1996 that number plummeted to only

   9     4 percent of mortgage applications.  Over that

  10     same period of time, the number of applications

  11     accepted from white applicants increased nearly

  12     10 percent.

  13               For many years the bank received

  14     below satisfactory ratings on it's CRA

  15     performance evaluation.  Oddly enough, the CRA

  16     rating for Citibank improved in 1996 as their

  17     lending record to Hispanics was decimated.

  18               Just when their rating began to

  19     improve, the bank also dropped its commitment

  20     to low-income people and began to pander to

  21     moderate and high income people.  The bank has

  22     systematically eliminated low-cost products

  23     such as those Citibank competitors offered

  24     specifically designed to meet the needs of

  25     low-income consumers.


   2               According to Citibank literature, the

   3     Basic Banking Account has a monthly service

   4     charge of $6.50 and is only free if you do

   5     $10,000 in business with them.

   6               The new EZ Checking program is a

   7     no-fee account only if you keep a balance of

   8     $1500.  Clearly, low-income account holders

   9     were not in mind when these programs were

  10     develop.  The Citibank developed the small

  11     business loan product which has a minimum loan

  12     requirement of $100,000.

  13               The minimum requirement prevents most

  14     small businesses owned by people of color or

  15     businesses that reside in low-income

  16     communities from qualifying.

  17               Instead, these communities need loans

  18     in the amounts of ten to forty thousand.  The

  19     California Reinvestment Committee has tried

  20     unsuccessfully to work with Citibank.  Since

  21     1992 Citibank has refused to adopt Community

  22     Reinvestment recommendations provided by the

  23     California Reinvestment Committee.  If one

  24     looks at Travelers record of serving people of

  25     color, the picture is equally harrowing to that


   2     of Citibank.

   3               As you may already know there is

   4     outstanding housing discrimination complaint

   5     against Travelers Group.  The suit alleges that

   6     Travelers discriminates in the provision

   7     underwriting, and terms and conditions of

   8     homeowners insurance to homeowners and homes in

   9     African American or Latino neighborhoods.

  10               Travelers maintains a minimum policy

  11     value of $250,000 in metropolitan Washington,

  12     D.C.  This excludes more than 90 percent of

  13     homes in predominantly African American and

  14     Latino neighborhoods from qualifying for

  15     Travelers homeowners insurance.

  16               In what may be an effort to right the

  17     wrong, Travelers and Citicorp has delivered a

  18     $115 billion commitment to communities.

  19     Unfortunately, this pledge is minuscule for an

  20     institution the size of the proposed Citigroup.

  21               The California Reinvestment Committee

  22     has been working with banks for eleven years to

  23     develop community investment goals and in all

  24     our times we have not had one bank measure its

  25     goals based on the bank's deposit business.


   2     Banks such as Bank of America, Washington

   3     Mutual, Wells Fargo, as well as others, have

   4     measured their CRA goals based on a percentage

   5     of the bank's assets.

   6               Currently, the industry standards is

   7     8 percent of assets.  If a proposed Citigroup

   8     were to revise its goal amount to reflect its

   9     assets, as it should, the pledge will need to

  10     be increased from 115 billion to 560 billion

  11     dollars, nearly a 500 percent increase.

  12               But more important than the size of

  13     the commitment, is how it would impact the

  14     communities.  This commitment provides zero

  15     assurance that it will benefit low-income

  16     people because the commitment lacks details on

  17     how the program will be delivered.  For

  18     example, the proposed Citigroup pledges to

  19     quote expand the availability of commercial and

  20     homeowners insure coverage and low and moderate

  21     income customers, yet does not describe any

  22     details on how this program will be developed

  23     and delivered.

  24               Considering Citibank and Travelers

  25     histories of underserving communities of color,


   2     we are not convinced that this pledge is backed

   3     up by a clear understanding of the needs of low

   4     in come areas and communities of color, nor a

   5     concrete commitment that the proposed Citigroup

   6     would indeed serve the chronically underserved

   7     communities.

   8               MR. LONEY:  Thank you, Mr. Ortiz.

   9               MR. LEE:  We will put it in the

  10     record.

  11               MR. LONEY:  Please do.  Mr. Lee.

  12               MR. LEE:  I don't know if you want to

  13     alternate.  I'll do it.  To whom it may concern

  14     at the Federal Reserve:  I authorize Matthrew

  15     Lee of Inner City Press, or whomever he

  16     designates, to read the following comments

  17     during my scheduled appearance at the Citicorp

  18     Travelers merger hearing on Thursday, June

  19     25th, in New York City as a representative of

  20     the Wisconsin Rural Development Center.

  21               Mr. Lee is also authorized to answer

  22     any questions that you may have.  We'll see.

  23     Don't count on it.

  24               I would have preferred to make these

  25     comments myself, but unfortunately the Federal


   2     Reserve has not agreed to use readily available

   3     technologies to allow testimony from people who

   4     cannot afford to travel to New York.

   5               The same goes for Woodstock and I

   6     also raise that for the record.  Here it is.

   7     Wisconsin Rural Development Center testimony to

   8     the Federal Reserve on the Citicorp Travelers

   9     merger.

  10               June 25, New York City.

  11               My name is Matthew Lee.  Hubert Van

  12     Tol of Sparta, Wisconsin has asked me to

  13     present these comments today on behalf of the

  14     Wisconsin Rural Development Center.

  15               Mr. Van Tol also served as a board

  16     member of the National Community Reinvestment

  17     Coalition and is co-chair of NCRC's Legislative

  18     Regulatory Committee.

  19               Thank you for the opportunity to

  20     testify today.  We would have preferred the

  21     opportunity to testify in a location more

  22     convenient to our membership, but we

  23     nevertheless bring this message to you from our

  24     members.

  25               Don't allow this illegal merger to


   2     take place.  Wisconsin Rural Development Center

   3     has been assessing the credit needs of our

   4     community and working with banks in Wisconsin

   5     for the past five years.  WRDC is a member of

   6     the National Community Reinvestment Coalition

   7     and we endorse NCRC's position on this merger.

   8               Our members know that the

   9     consolidation in the banking industry has not

  10     provided them with benefits that are worth the

  11     increased fees.  They doubt that further

  12     consolidation across the whole range of

  13     financial services will bring them any more

  14     benefits than banking consolidation has.

  15               Our members are primarily from rural

  16     and small-town Wisconsin.  They are people who

  17     work hard, play by the rules and often find the

  18     deck stacked against them.  Even if they could

  19     do so, our members would never dream of making

  20     an application to the Federal Reserve for the

  21     privilege of breaking the law.  They don't

  22     think that way, and even if they did, they

  23     would have no hope of succeeding.

  24               When they hear the details of what

  25     Citicorp and Travelers are proposing to do with


   2     merger they just shake their heads.  They know

   3     why government regulators are so willing to

   4     bend and break the law on behalf of powerful

   5     corporations, but they wonder if our democracy

   6     really has to be that way.

   7               The Bank Holding Company Act makes

   8     clear that any bank holding company aquiring

   9     another company which is engaged in activities

  10     which are impermissible for a bank, has two

  11     years to divest themselves of those

  12     impermissible activities.

  13               The Federal Reserve has ruled very

  14     explicitly in previous cases that during the

  15     two year waiver period the acquiring

  16     institution may not engage in cross-marketing

  17     and cross-selling between the bank and the

  18     business in question.  The two year waiver

  19     period is granted in the law solely for the

  20     purpose of providing a reasonable length of

  21     time for the bank holding company to divest

  22     itself of impermissible businesses without

  23     having a fire sale.

  24               The three additional one year waivers

  25     were only intended for use in cases in which


   2     the bank holding company had made a good faith

   3     effort to divest itself during the two year

   4     period but was unable to do so.

   5               With this application Citicorp and

   6     Travelers are throwing the law, Federal Reserve

   7     precedent and common sense out the window.

   8     They seek what they believe should be an

   9     automatic two year waiver, not so they will

  10     have time to divest their insurance

  11     underwriting business, but so they will have

  12     time to integrate the different businesses.

  13               They present their application with

  14     the assumption that they are automatically

  15     entitled to the two year waiver, and it seems

  16     the additional three one year waivers as well,

  17     even though they have no intention of divesting

  18     their insurance underwriting business.

  19               They have made it very clear they

  20     intend to use the two year period to build and

  21     develop their insurance business by

  22     cross-marketing and cross-selling between the

  23     banking and insurance sides of the business.

  24     They are rubbing our faces in their blatant

  25     disregard for current banking laws.


   2               It is clear the Citicorp and

   3     Travelers want the Congress to pass a financial

   4     modernization bill; it is also clear that the

   5     Federal Reserve wants Congress to pass a

   6     financial modernization bill, but such a bill

   7     has not passed and in fact may not pass in the

   8     next two years.  The responsibility of the

   9     Federal Reserve is to enforce the laws and

  10     regulations as they written, not as particular

  11     Federal Reserve or arrogant corporate leaders

  12     may wish they were written.

  13               While we agree that the Citicorp

  14     Travelers CRA pledge with nearly half the

  15     dollars in credit card lending is a bogus

  16     pledge, we are not raising community

  17     reinvestment issues or convenience and needs

  18     questions at this hearing.

  19               Any question of the adequacy of the

  20     of Citicorp's CRA record and the future CRA

  21     commitments of the merged entities is

  22     overshadowed by the legal questions raised by

  23     the proposed merger.

  24               If corporations like Citicorp and

  25     Travelers are allowed to ride roughshod over


   2     the law in this way it will mean that virtually

   3     everything about our democracy is up for sale.

   4               We ask the Federal Reserve to do the

   5     right thing, deny this application and tell

   6     Citicorp and Travelers that if they wish to

   7     change the law, they are entitled to do so in

   8     the same way that everyone else is in this

   9     country by petitioning Congress to change the

  10     law.

  11               Thank you very much.

  12               MR. LONEY:  Phyllis Salowe-Kaye.

  13               MS. SALOWE-KAYE:  You had asked

  14     before another speaker to give you the

  15     information that they had requested from

  16     Travelers that they didn't receive, and I have

  17     a letter and I had marked the things that we

  18     didn't receive that we requested, so I'll leave

  19     it here.

  20               Secondly, we received no money from

  21     Travelers or Citibank, although Citibank does

  22     take a table at our recent annual dinner, but

  23     we haven't gotten the check.

  24               (Laughter)

  25               And I don't know if we'll get the


   2     check after today.

   3               My name is Phyllis Salowe-Kaye and

   4     I'm executive director of New Jersey Citizen

   5     Action.

   6               The testimony I'm going to give today

   7     is on our behalf.  We are the state's largest,

   8     New Jersey's largest consumer watch dog

   9     organization with over one hundred affiliated

  10     organizations and more than sixty thousand

  11     families which pay dues to us.  The second

  12     group is the New Jersey Affordable Nonprofit

  13     Housing Network, and they are the state's trade

  14     association representing over one hundred

  15     nonprofit organizations.

  16               We oppose this merger for the

  17     following reason.

  18               Number one, the merger is illegal.

  19               Two, it's not safe or sound.

  20               Three, Citibank comes into this state

  21     into New Jersey with a less than impressive

  22     record of service to low and moderate income

  23     communities.

  24               And, four, Travelers activities are

  25     not regulated under the Community Reinvestment


   2     Act, a situation which we believe is a threat

   3     to all low and moderate income residents in New

   4     Jersey.

   5               Speaking to the first point, it

   6     almost seems silly to be addressing the

   7     illegality of this merger under the current law

   8     when we all know that changing the law is what

   9     this is all about.  Both entities have been

  10     lobbying Congress to pass the Financial

  11     Services Act of 1998 that would presto-changeo

  12     make all of this legal.  But until that happens

  13     this merger is premature and dangerous.

  14     Afterwards, if it happens, this merger will be

  15     dangerous.

  16               While Citigroup claims that the

  17     merger is legal so long as the new entities

  18     divest itself of Travelers underwriting

  19     business within two years, there is no mention

  20     of such divesture and no good faith attempt to

  21     share a plan for how this might happen.  We

  22     don't believe that they've given it a single

  23     thought.

  24               Clearly, they expect to have one foot

  25     out of the gate when the legislation that they


   2     have lobbied for so heavily is finally passed.

   3     Why should you, the Federal Reserve Board, give

   4     them the advantage?

   5               On the second point, the merger

   6     brings up the issue of safety and soundness.

   7     No one seems to know what this new

   8     sewing-together and it's entity will look like

   9     or how it will behave once it has been created.

  10               We believe it will be a monster.  Now

  11     we know that Godzilla is fake, but this new

  12     Citigroup will be real, and once it is set in

  13     motion with no rules to govern half of its

  14     limbs and a part of its brain, it will too

  15     late.

  16               This merger has the potential for

  17     exposing taxpayers to another situation like

  18     the S&L bailout.  As a result, Citigroup could

  19     become dangerously exposed to sudden crises

  20     either of their own making, or due to events

  21     beyond their own control, that could wipe out

  22     assets.

  23               Citicorp remember received constant

  24     oversight by both your board and the OCC when

  25     it overextended itself in developing countries


   2     in the 1980s.

   3               This merger could recreate a company

   4     that is too big to be allowed to fail when in

   5     times of trouble it would mean costly

   6     government bailouts in order to prevent

   7     economic catastrophe.  We do remember the S&L

   8     bailout and will never forget who paid for it.

   9               The third issue, which is the poor

  10     quality of the Citibank service to low and

  11     moderate income people in New Jersey, is a

  12     matter of record.

  13               While they claim some improvement

  14     over the last year, their 1996 record is

  15     abysmal.  Loans by Citicorp to African

  16     Americans were denied 2.4 times more than

  17     whites, the number being far higher than the

  18     national denial rate.

  19               The record shows that the bank is

  20     clearly underserving a significant portion of

  21     minority and low and moderate income people in

  22     New Jersey.  They trail their peers in all

  23     categories with the exception of having the

  24     same denial rate to Hispanics as all lenders.

  25               Now Travelers.  Citizens Action and


   2     the Affordable Housing Network have held some

   3     promises meetings with Citibank over the last

   4     few months about how they could better meet the

   5     needs of New Jersey, but nothing has been

   6     finalized.

   7               Our recent discussions have only

   8     emphasized the lack of clarity regarding the

   9     intentions of their bride-to-be, Travelers

  10     insurance company.  Travelers has been a real

  11     Neanderthal when it comes to recognizing and

  12     understanding their responsibility to low,

  13     moderate and minority communities in New

  14     Jersey.

  15               Here is an example.  When questioned

  16     about -- and we met with the general counsel of

  17     the P and C for the whole country -- when

  18     questioned about their Fair Housing complaint

  19     filed against Travelers last year which accused

  20     them of not insuring homes valued at less than

  21     $250,000, the answer was that the property

  22     casualty insurers in New Jersey actually has

  23     been doing much better, because they market the

  24     houses of a lower value, somewhere between two

  25     hundred thousand and $225,000.  That should


   2     really make the aspiring homeowners in Newark,

   3     Trenton and Camden breathe easier.

   4               That's not the worst of it.  On a

   5     Tuesday we were told that New Jersey was one of

   6     the top ten markets for P and C insurance and

   7     that they write lots of homeowners insurance in

   8     New Jersey.

   9               The following Monday we get a call

  10     from them telling us that almost all the

  11     wonderful things that were announced in the

  12     Citigroup press release won't be done in New

  13     Jersey because they hardly write any homeowners

  14     policies in New Jersey.

  15               Two days later they call us and tell

  16     us they have 4.9 percent of the market and

  17     yesterday we find out from the Department of

  18     Banking that they're number 6 out of 77

  19     companies in New Jersey that write homeowners

  20     insurance.

  21               We don't know who they are.  We've

  22     asked for information from them.  This points

  23     to why they must be forced to disclose all of

  24     the information just like the bank has to.

  25     Finally, in their press release, Citigroup


   2     makes the following pledge and I'm going to

   3     quote.  They say:  They promise to be fair and

   4     transparent in dealing with our customers and

   5     their communities, so we can earn their trust

   6     and support.

   7               In light of their lack of clarity and

   8     candor regarding the nature of Travelers

   9     current business in New Jersey, or its future

  10     commitment, or its plan to divest of

  11     underwriting business under the current law, I

  12     would say that transparent is light years away.

  13     In fact, they haven't made it out of opaque

  14     into translucent, and the only thing that's

  15     transparent here is their clumsiness in trying

  16     to avoid making a clear commitment to the

  17     people of New Jersey.  This merger must be

  18     stopped.

  19               MR. LONEY:  Thank you, ma'am.

  20               Ms. Rangan.

  21               MS. RANGAN:  Good afternoon.  My name

  22     is Rashmi Rangan.  I am the executive director

  23     of Delaware Community Reinvestment Action

  24     Council.  I am also board member of National

  25     Community Reinvestment Coalition, a trade


   2     association of more than six hundred fifty

   3     organizations nationwide.

   4               I am also a member of Inner City

   5     Press/Community On the Move.  I'm also a tax

   6     paying citizen, and I'm very concerned about

   7     this merger.

   8               I am testifying today under protest.

   9     These proceedings are already tainted because

  10     of the illegality of this merger, and the fact

  11     that apparently it has already been

  12     preapproved.

  13               Without taking away the important

  14     role that groups who have testified and will

  15     testify in favor of this merger, and the

  16     support that the banking community rendered

  17     Citicorp offered these communities, we still

  18     say that we are the community reinvestment

  19     experts.  We assess a bank's performance

  20     exclusive of its subsidiaries and affiliates

  21     and other entities locally, nationally and now

  22     globally, and what the impact will be on our

  23     community.

  24               We are a ten-year old nonprofit

  25     advocacy organization.  We are opposed to the


   2     merger, proposed merger of Travelers to

   3     Citicorp, and there are a number of adverse

   4     issues.

   5               The announced merger is an illegal

   6     proposal.  Under the federal Bank Holding

   7     Company Act and even under the Federal Reserve

   8     Board's own precedents and regulations, the

   9     BHCA prohibits a bank holding company from

  10     owning insurance underwriter or agency

  11     operations.

  12               The Act was enacted precisely to

  13     prohibit combinations like Travelers and

  14     Citicorp.  Even Travelers say that under

  15     current law it would have to divest its

  16     insurance underwriting operation.  The

  17     announced merger is and unethical proposal.

  18               Back in 1956 when the Bank Holding

  19     Company Act was enacted the two year waiver

  20     made sense to the newly created bank holding

  21     company to buy time to come into compliance

  22     with the law.  42 years later to ask for it

  23     this time does not make sense, particularly

  24     when the intent is absolutely clear that

  25     lobbying efforts will be stepped up.


   2               Of much concern to us is the fact

   3     that the discussion between applicants and the

   4     Federal Reserve System prior to the merger

   5     announcement which make a mockery of today's

   6     proceedings and tomorrow's proceedings.

   7               I also would like to, actually, I

   8     have too little time, so I'll skip some.  But I

   9     have a big packet out there already presented

  10     with transcripts from the Delaware Department

  11     of Insurance public hearing and I want to

  12     request that you get the transcript of the New

  13     Jersey Insurance Department hearing, the

  14     Delaware Banking Department public hearing, and

  15     we testified at all those places.

  16               The proposed merger is an expensive

  17     bet.  We have been led to believe in the

  18     doctrine of too big to fail.  If the big giants

  19     have to be bailed out, we, the taxpayers, will

  20     be stuck with that cost.

  21               The savings banks will end up paying

  22     hefty premiums.  Maybe some of you don't

  23     remember the S&L crisis.  We do.  Most megabank

  24     mergers today tout the advantage of electronic

  25     banking and technology.


   2               Can you imagine within this

   3     environment the impact on safety and soundness

   4     when with one stroke on the keyboard you can

   5     move your deposit, particularly when the entity

   6     which is a large insurer of property in a

   7     geographic area struck by a national

   8     catastrophe also happens to be your bank?

   9               What about the implied subsidies?

  10     We're talking about the FDIC insurance.  This

  11     proposal also raises concerns with the

  12     community convenience and need.  Travelers

  13     Group to our community symbolizes antitrust.

  14               We do not trust PrimeAmerica

  15     Financial Service in our community.  We do not

  16     trust Commercial Credit loan officers in our

  17     community.  We do not trust property casualty

  18     insurance insuring our community.  We do not

  19     trust Travelers Group, period.

  20               Relative to that, we remain

  21     unimpressed.  This application should be

  22     dismissed or otherwise denied.

  23               Thank you.

  24               MR. LONEY:  Thank you, Ms. Rangan.

  25               Ms. Maker.


   2               MS. MAKER:  Good afternoon.  My name

   3     is Ruhi Maker, and I am co-convenor of the

   4     Greater Community Reinvestment Coalition in

   5     Rochester, New York, and I present this

   6     testimony on their behalf.

   7               We have been in existence since 1993

   8     and approximately serving not-for-profit

   9     organizations which is actually quite a large

  10     number in Rochester, and I would say about a

  11     million, and I'm show you some of our

  12     demographics later.

  13               I also work as a Senior Attorney at

  14     the Public Interest Law office of Rochester.

  15               Many of our colleagues have spoken

  16     about some of the technical legalities and I

  17     won't belabor those specific points.  I'm here

  18     to speak against the proposed merger today.  In

  19     the name of modernizing the laws governing the

  20     financial institutions of this country the CEOs

  21     of the largest of those institutions have been

  22     lobbying for a number of years to repeal the

  23     Act.  Despite pouring of millions of dollars

  24     into the contributions into the campaigns of

  25     the House and Senate Banking Committee, they


   2     have failed to achieve their goal, and there is

   3     still no consent on what financial

   4     modernization should look like, despite the

   5     version of HR we have before the Senate today.

   6               In the face of their failure, the

   7     CEOs of Citicorp and Travelers, two of the

   8     largest financial institutions in the country,

   9     have now decided to simply forge ahead with the

  10     merger that takes advantage of a loophole in

  11     the existing law trusting that their political

  12     and financial clout will insure that there fait

  13     accompli is legalized.

  14               This is not modernization.  It is a

  15     reversion to the oligarchies of the past.  As

  16     someone who grew up in Pakistan, I emigrated to

  17     this country about 13 years ago, I know what it

  18     is like to live in an oligarchy, where a

  19     handful of families control the economy and are

  20     free to act as if they were above the law.

  21               For the Federal Reserve to approve

  22     this merger under these conditions would send a

  23     clear signal to the financial elite that their

  24     privileged status carries no corresponding

  25     obligations to the community.


   2               True financial modernization would

   3     require the systematic revision of the laws

   4     governing the financial industry.  It cannot be

   5     done by granting piece meal exceptions to

   6     existing regulations of time there is a new

   7     merger application.

   8               True financial modernization would

   9     require the systemic extension of existing

  10     community investment obligation from the

  11     banking industry to the securities and

  12     insurance industry in line with their recently

  13     acquired rights to provide services formerly

  14     restricted to banks.

  15               True financial modernization would

  16     require an increase in the responsiveness of

  17     financial institutions to the needs of their

  18     host communities.

  19               Here I can speak from my own

  20     experience as a member of the RC, the

  21     coalition.  We have had ongoing discussions

  22     with four area banks about the credit needs in

  23     Rochester.  The three banks with the regional

  24     or local-decision making authority have been

  25     far more responsive than has the megabanks in


   2     our region.  We have had virtually no dialogue

   3     with Citibank.

   4               When Rochester represents a

   5     significant portion of a banks market share the

   6     regional presence returns our phone call, and

   7     makes sure the deal gets done, even if someone

   8     has to work on it over the weekend.

   9               When Rochester represents 1 percent

  10     of an essentially global bank's market which is

  11     probably what we will be if this merger goes

  12     through, the needs of a local community are

  13     very low priority.

  14               As the trend of globalization of the

  15     economy proceeds apace, we must ensure that the

  16     democratic accountability of those who control

  17     the commanding heights of the economy keeps

  18     pace, otherwise false modernization is liable

  19     to lead us back in the era of robber barons.

  20               One of the things that we said when

  21     the merger was first announced was that the

  22     pledge, the CRA records for me, it's

  23     irrelevant.  Even if the CRA record was

  24     perfect, this for policy reasons that I've just

  25     outlined, I would have problems with this


   2     merger.

   3               However, we have analyzed some of the

   4     data.  We have been analyzing it since 1993.

   5     We released reports.  You always rank all major

   6     nine banks doing business in the Rochester.

   7     '93, '94, '95, Citibank has had the worst

   8     record of lending in low-income neighborhoods

   9     and always the last of all nine banks.

  10               I would like to, maybe you can wake

  11     us up a little bit, Matt.  Matt has agreed to

  12     work with me on this in showing the three

  13     little maps.

  14               I'll first show you the racial

  15     composition map which will show what the

  16     demographics of Rochester looks like.

  17               Turn that on.  Essentially the red is

  18     poorer, redlining.  The yellow is median income

  19     indications over there, and the green are the

  20     more moderate income neighborhoods and then the

  21     little black pie charts show you the rates.

  22     The ones that are predominant black are

  23     predominantly minority neighborhoods.  The ones

  24     that are predominantly.

  25               So you understand what the racial


   2     composition looks like, I will then quickly

   3     show you two maps of 1996 small business and

   4     home mortgage lending.

   5               Here is home mortgage, and I don't

   6     know how familiar you are with Rochester but

   7     basically the red with the black pies and

   8     that's black and tends to be poor and you can

   9     very quickly see there were no loans in the red

  10     center, and if you look at the red, many of

  11     them are predominantly minority census tracts.

  12     That is clear with the numbers that I could

  13     speak to if I have more time.

  14               Matt, look at the small business.

  15     This is, again, you know very recent data.  The

  16     red represents the no loans and, again, very

  17     graphically the lack of lending occurs in many

  18     of the minority low-income neighborhoods and

  19     I've submitted copies of the maps along with

  20     written testimony.

  21               Very quickly, if I may proceed, you

  22     know, if you look at 1996 loans to blacks and

  23     Hispanics in the entire MSA, Citibank had 11.

  24     The person who is number 8, and all of this is

  25     again in charts that are submitted in terms of


   2     market share, had twice, two times as many

   3     loans, the nearest competitor.  The one who is

   4     right at the top, the bank that was right at

   5     the top, had eight times as many loans to

   6     blacks and Hispanics.  Again, looking at low

   7     numbers, 21 loans home mortgage loans in the

   8     MSA to low census tracts.  Bank number 8 had

   9     four times as many loans.

  10               The bank that was number one had 13

  11     times as many loans, and in terms of deposits,

  12     they are the second largest deposit in

  13     Rochester, so it's not that they are small

  14     presence.  They have a lot of our money.  I

  15     don't know what they do with it.  So I will

  16     conclude at this point.

  17               Thank you.

  18               MR. LONEY:  Thank you.

  19               Ms. Salowe-Kaye, I wasn't quite clear

  20     what you were saying about the issue of

  21     Travelers' present involvement activities in

  22     New Jersey.

  23               MS. SALOWE-KAY:  Sure.

  24               MR. LONEY:  Is it a mystery to

  25     people?  I mean it sounded like were getting


   2     different answers.

   3               MS. SALOWE-KAY:  When Travelers came

   4     down from Connecticut and met with us they told

   5     us that they did a whole lot of, they wrote a

   6     whole lot of policy for homeowners insurance in

   7     the state.  They told us they were one of the

   8     top ten, they had a great amount of market

   9     share.

  10               A week later, when we asked that we

  11     be included as one of the states that was

  12     announced in their press release to receive a

  13     bunch of special programs, like their diversity

  14     training for ages -- they had a whole bunch of

  15     things to increase their policy sales.  They

  16     had a program where they would decrease the

  17     cost of policies for people of lower income.

  18               They said, no, now we can't do that

  19     in New Jersey because we really write virtually

  20     no homeowners insurance in New Jersey.  Then

  21     we, they called two days later they said, well,

  22     our market share is 4.9.  By that time, the

  23     Department of Banking in New Jersey had gotten

  24     back to us with the statistics -- insurance --

  25     and we discovered that in fact they are number


   2     6 out of 77 in terms of who writes the most

   3     homeowners policy in New Jersey.

   4               What I'm saying is we asked them for

   5     some very specific information about the

   6     income, the race, the census tracts as to where

   7     they write their policies.  They refused to

   8     give us that information, plus a whole lot of

   9     other information that we requested, and what

  10     I'm saying is it seemed that they were less

  11     than truthful with us when they met with us

  12     about what kind of business they actually were

  13     doing in New Jersey, and when we actually found

  14     out they in fact were doing a fair amount of

  15     market share.

  16               MR. LONEY:  Okay.

  17               MS. SALOWE-KAY:  The letter shows you

  18     who we met with, also.

  19               MR. ALVAREZ:  I have a question for

  20     Ms. Maker on the charts.

  21               Did you do your analysis based on the

  22     controlling for income or taking into account

  23     income levels?  You showed us charts that were

  24     based primarily on race.

  25               MS. MAKER:  The first chart actually


   2     had race and income on it.  It's the red was

   3     the low income and the yellow was the median.

   4               MR. ALVAREZ:  I'm asking a slightly

   5     different question.

   6               Did you control for the income of the

   7     borrower in the area where there were loans?

   8     You showed us some areas where there are no

   9     loans, and some areas where there are loans and

  10     then you break the chart out into various

  11     racial groups.

  12               Did your analysis go another step to

  13     include also an analysis of income levels of

  14     the various people who did receive loans to

  15     show disparities among income levels?

  16               MS. MAKER:  Yes, I think I need to

  17     refer to -- you're talking about HMDA at this

  18     point as opposed to small business?

  19               MR. ALVAREZ:  I'm just asking if it's

  20     in the study you're going to be providing.

  21               MS. MAKER:  We looked at both.

  22               (Continued on next page)





   2               MS. MAKER:  Low-moderate houses,

   3     low-moderate census tracts, I have the previous

   4     year's numbers; all of that is provided in

   5     there.

   6               I can see, for example, in 1996 there

   7     were 78 loans in low-mod households in the MSA

   8     and, again, that was the last low-mod household

   9     that received the least number of loans in the

  10     MSA.  And the next bank up was, actually, First

  11     National Bank, which was a tiny bank in

  12     Rochester, which was 130.  Again, that persists

  13     across income.  Yes.  That is all in the -- the

  14     little charts are attached to stuff that was

  15     handed out, and handed out, again, as with the

  16     maps.

  17               MR. HODGETTS:  You say it appears to

  18     form better -- I can't hear you.  You said the

  19     peers perform better than City.  Do they

  20     perform better in those inner city census

  21     tracts?

  22               MS. MAKER:  In all of the categories,

  23     the peers perform.  If you look at 1996, for

  24     HMDA, Citibank is, I think, last, apart from

  25     that bank which now doesn't exist anymore; it


   2     has merged with a tiny bank.  Citibank is last

   3     for the MSA.  It is last for the City of

   4     Rochester.  It is last in black Hispanic

   5     households in the MSA.  It is last in terms of

   6     low-mod households in the MSA.  It is last in

   7     terms of low-mod income census tracts as well.

   8     So it is consistently -- I think when we did --

   9     the '96 data hasn't been put into that ranking.

  10               But '93, '94, '95, we look at loan to

  11     deposit, we have 13 different

  12     characteristics -- and, again, that study is

  13     also included in the comments.  We looked at 13

  14     different characteristics, and however you spun

  15     the numbers, because I know statistics can say

  16     a lot and this is why I have done it, I have

  17     spun the numbers every single way and they

  18     always came at the bottom.

  19               The middle ranks -- sometimes the

  20     banks would move depending on how you cut the

  21     numbers.  Citibank, maybe they could figure out

  22     a way to make themselves come out ahead.  But I

  23     cut the numbers many, many different ways when

  24     I did this and they all came ranked ninth.

  25               Again, the point is they are the


   2     second largest depository bank in Rochester.

   3     They are not a nonexistent presence.  It is

   4     Citibank New York State which is, in fact, a

   5     subsidiary of the entity you have here.

   6               MR. HODGETTS:  Thank you.

   7               MR. LONEY:  Any other questions?  If

   8     not, I will thank the group, and don't forget

   9     your slides.

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