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

  10               The next is Panel Nine, Gilbert

  11     Rivera, Mark Pinsky, Clara Miller, Paula Gavin,

  12     Peter Elkowitz and William Dorsey.

  13               Mr. Rivera is not here, I take it.

  14     All right.

  15               We will start with Mr. Pinsky.

  16               MR. PINSKY:  Thank you.  Good

  17     morning.

  18               MR. LONEY:  Afternoon.

  19               MR. PINSKY:  Good afternoon.  My name

  20     is Mark Pinsky.  I am the executive director of

  21     the National Community Capital Association,

  22     which is a membership organization representing

  23     more than 210 organizations around the nation,

  24     including 50 member community development

  25     financial institutions or CDFIs.


   2               Just to give you a sense of who we

   3     are, at year end 1997 those CDFIs managed about

   4     $475 million in predominantly private-sector

   5     capital, had loaned and invested about $710

   6     million, with a cumulative loss rate of about

   7     1.2 percent in working in many of the nation's

   8     poorest and most distressed communities.  That

   9     lending and investing had created about 4,000

  10     jobs and about 22,000 affordable housing units.

  11               National Community Capital believes

  12     that every financial institution that received

  13     a public benefit should provide a commensurate

  14     public return.  Through its performance and its

  15     practices, Citibank has proven to National

  16     Community Capital that it is committed to

  17     providing a public return more than

  18     commensurate with the benefits it receives at

  19     taxpayer expense.

  20               Over the past six years, Citibank has

  21     been a key player in building and expanding the

  22     CDFI industry.  In the U.S. in particular, it

  23     has done four things that I want to highlight.

  24               First, it's embraced community

  25     development finance as integral to its core


   2     business.  Second, it's invested invaluable

   3     expertise, as well as capital in its community

   4     development finance work.  Third, it's treated

   5     CDFIs as customers rather than as applicants.

   6     Fourth, it's supported the expanding CDFI

   7     industry without regard to geographic

   8     boundaries.

   9               Citibank has never required National

  10     Community Capital to limit the use of its

  11     equity, debt or operating support to the

  12     Citibank service area.  Citibank understands

  13     that building a strong CDFI industry requires

  14     National Community Capital to pursue market

  15     opportunities where they exist.

  16               Citibank has worked closely with

  17     National Community Capital and many CDFIs, and

  18     a couple are here today.  In its work with

  19     CDFI, Citibank has exceeded every reasonable

  20     expectation.

  21               National Community Capital's

  22     relationship with Citibank began in 1992 when

  23     Citibank made a $1.1 million grant to launch

  24     our National Equity Grants program.  By year

  25     end 1998, National Community Capital will have


   2     awarded more than $3.3 million in equity grants

   3     to nonprofit CDFIs, including the money that

   4     has been provided to us some years ago.

   5               The success of this program has been

   6     important.  It's influenced three other

   7     major -- three other important initiatives.

   8     First, National Community Capital's experience

   9     providing equity grants helped shape the

  10     federal community financial institutions of the

  11     CDFI.  Second, National Community Capital's

  12     success paved the way for Citibank's $1 million

  13     grant to the National Federation of Community

  14     Development Credit Unions, that you heard about

  15     earlier, for an Equity Grants program that was

  16     modeled on ours.  And, finally, in 1997

  17     Citibank made 17 equity grants directly to

  18     CDFIs across the nation.

  19               National Community Capital and

  20     Citibank partnered again in 1996 to develop an

  21     innovative equity financing product called the

  22     Equity Equivalent, or the EQ2.  The EQ2 is, in

  23     our perspective, a win-win-win product.

  24               Banks win because they make high-risk

  25     equity investments in CDFIs that promise to


   2     return their principal and because they receive

   3     multiplied CRA credits for making these

   4     investments.  An EQ2-investing bank can receive

   5     lending test credit equal to the pro rata share

   6     of the CDFI's lending over the life of the EQ2

   7     investment.  The share is based on the bank's

   8     percentage of total equity in the CDFI.  In the

   9     alternative, the bank can receive investment

  10     test credit.

  11               CDFIs win because the EQ2 leverages

  12     debt to fuel the CDFI's lending and investing

  13     activities; and low-income -- most importantly,

  14     low-income and low-wealth communities benefit

  15     because more financing is available to them

  16     through CDFIs.

  17               In late 1996, Citibank made a $2

  18     million equity equivalent investment in

  19     National Community Capital to put this

  20     ambitious concept into practice.  Citibank also

  21     has provided substantial financial support for

  22     National Community Capital's human capital

  23     building activities, including our training and

  24     our consulting business.

  25               Let me in the interest of time sort


   2     of jump to the conclusion and say that the

   3     ultimate goal for CDFIs is to link economically

   4     poor people to the financial products and

   5     services they need to act in their own

   6     self-interest.  To do this, CDFIs need to

   7     recognize change and respond with creative,

   8     innovative solutions.

   9               We feel that CDFIs and community

  10     development in general will not succeed if we

  11     get caught up perpetuating CDFI for their own

  12     sake -- because they exist -- defending the

  13     CRA, without acknowledging the revolutionary

  14     changes in the financial services industry, or

  15     justifying the behavior of financial services

  16     companies without regard to their performance

  17     in serving low-income and low-wealth people in

  18     communities.  We need a community investment

  19     strategy that builds on the strengths of the

  20     financial services industry as it is, not as we

  21     want it to be.

  22               The industry is in the midst of a

  23     major and rapid transformation which will

  24     reshape how poor people, like most people, use

  25     financial services.  The proposed


   2     Citibank/Travelers merger is now the cutting

   3     edge of this transformation.

   4               The question before us today is

   5     whether the proposed Citigroup can lead the way

   6     on community development finance in the

   7     financial services marketplace of the future.

   8     Given Citibank's past performance and practice,

   9     particularly, from our perspective, its vision

  10     in helping to develop the CDFI industry as a

  11     distribution system that bridges gaps between

  12     poor people and conventional capital and

  13     financial services, National Community Capital

  14     is confident that Citigroup will continue

  15     Citibank's leadership in community development

  16     finance.

  17               Thank you.

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

  19               Ms. Miller.

  20               MS. MILLER:  Hello.  Good afternoon.

  21     My name is Clara Miller.  I am the president of

  22     the Nonprofit Facilities Fund.  I also chair

  23     the Board of the National Community Capital

  24     Association, and I am an advisory board member

  25     of the U.S. Department of the Treasury's


   2     Community Development Financial Institutions

   3     Fund, which together give me a fairly broad

   4     perspective on the field.

   5               I am speaking today, however, from

   6     the perspective of NFF, the Nonprofit

   7     Facilities Fund.  We operate nationally and

   8     have about $23 million in assets, and we make

   9     loans and provide development services to

  10     nonprofit organizations that make broad and

  11     diverse contributions to low- and

  12     moderate-income communities.  We have financed

  13     approximately $90 million in projects, with $25

  14     million in loans, most of them being in the New

  15     York area, but we have offices now in five

  16     sites throughout the nation.

  17               Small- and medium-sized nonprofit

  18     organizations, especially those serving low-

  19     and moderate-income communities, have a

  20     difficult time accessing capital in general.

  21     Their access to debt is complicated by the

  22     underlying problem of lack of access to money.

  23     The debt is not always the problem in the

  24     growth of these organizations.  They are

  25     frequently engaged in low- or no-margin


   2     businesses, thus lack retained earnings to fund

   3     their growth needs.  They lack the ability to

   4     raise equity because individual ownership is

   5     not an option for nonprofits.

   6               We at the NFF work in a variety of

   7     ways to improve their access to capital.  One

   8     of the main strategies we have in doing so is

   9     to partner with banks -- as direct lenders to

  10     nonprofits, as investors in NFF's loan program,

  11     and as partners in innovation, to help us

  12     create new products, understand the industry,

  13     go to scale and provide services to address the

  14     changing needs of our market.

  15               NFF has a long history of bank

  16     partnerships.  Ten banks are direct investors

  17     in NFF's loan funds now; some take part in

  18     other ways.  With a few, we have relationships

  19     that include a complex mix:  Volunteer

  20     involvement, financial and business advice,

  21     product development, participation in deals and

  22     referrals -- in addition to investment and

  23     grant support.  Citibank has really been such a

  24     partner for us, working with us not only to

  25     fill the capital gap, but to strengthen the


   2     nature and volume of financial and advisory

   3     services that we can provide to the nonprofit

   4     sector in order to increase its capacity

   5     overall.

   6               Citibank has been a particularly

   7     valuable contributor to innovation in our

   8     sector because of the quality as well as the

   9     size of its investment.

  10               Mark mentioned the EQ2 investment,

  11     which NFF has undertaken as well.  Citibank has

  12     made long-term commitments -- and long term is

  13     in many ways more important than scale, in my

  14     opinion -- to the field and to NFF in the form

  15     of innovative subordinated loan product, and we

  16     are currently working closely with Citibank to

  17     develop a nondebt financial product that helps

  18     build essentially the equity-like part of a

  19     nonprofit organization, even though that is not

  20     really the correct term.

  21               We have found that Citibank is

  22     willing to take the long view, and that is a

  23     rare and enormously important piece of this.

  24     It looks at the long-term growth needs of

  25     borrowers, including CDFI such as the Nonprofit


   2     Facilities Fund.  It is curious about and

   3     engaged in the community development market and

   4     understands the broad needs of the market.  We

   5     together are trying to serve, including

   6     management development, non-debt financing and

   7     ongoing financial advice, as well as capital.

   8               Based on our direct experience with

   9     over an 18-year period, we believe that the

  10     proposed acquisition of Citicorp by Travelers

  11     Group will not affect Citibank's proven

  12     commitment and track record in long-term

  13     community investment.

  14               Thank you.

  15               MR. LONEY:  Thank you.

  16               Ms. Gavin.

  17               MS. GAVIN:  Good afternoon.  My name

  18     is Paula Gavin.  I am president of the YMCA of

  19     Greater New York, which is the largest YMCA in

  20     our country.  We were founded in 1985, and we

  21     are a community service organization which

  22     supports positive values, development in

  23     programs that range from spirit, mind and body

  24     activities.  We serve today 144,000 young

  25     people and by the millennium expect to serve


   2     200,000.

   3               I am here today to strongly support

   4     the merger of Citibank and Travelers as one of

   5     the organizations who today and in the future

   6     will continue to help organizations like the

   7     YMCA serve young and very needy children

   8     throughout our urban areas.

   9               We have had a very long and

  10     supportive relationship with both the Citibank

  11     and Travelers Group.  Over the last decade,

  12     Citibank has contributed well over $200,000 to

  13     our YMCA, and the rest to go into the course of

  14     communities.  Similarly, Travelers, including

  15     Salomon Smith Barney, has also contributed

  16     $200,000.  As a result, our programs have

  17     expanded again in areas of youth sports,

  18     character and leadership development, community

  19     service and literacy -- to as many as thousands

  20     of children who otherwise would have gone

  21     unserved.

  22               I am most proud of their support of a

  23     new program we launched in 1997 called the

  24     Virtual Y, which brings afterschool programming

  25     to the poorest and most needy schools.  We have


   2     sponsors for this program, and early on

   3     Citibank, Salomon Smith Barney and Travelers

   4     were all strong supporters of this program in

   5     three schools in the Bronx, Brooklyn and

   6     Chinatown.

   7               What we do is go in, help children

   8     learn to read, and love to read, and they have

   9     been extremely supportive in all cases.  We

  10     have been very grateful for their support.  And

  11     on a personal note, I would like to say that

  12     the leadership of the foundations have

  13     demonstrated themselves not only to me, but to

  14     my counterparts, to be extremely strong

  15     supporters of community groups like ours.  I

  16     specifically highlight Paul Ostergard from

  17     Citicorp Foundation, Chip Raymond from the

  18     Travelers Foundation, and Jane Heffner from

  19     Salomon Smith Barney.

  20               I do believe a lot of this turns out

  21     to be people, and these people who are leading

  22     these organizations are pledged to continue to

  23     support community groups like ours.  So in

  24     closing I just want to say thank you for giving

  25     us this opportunity to testify on behalf and in


   2     support of this merger of Citibank and

   3     Travelers.

   4               Thank you.

   5               MR. LONEY:  Thank you.

   6               Did you say a Virtual Y?

   7               MS. GAVIN:  I did.

   8               MR. LONEY:  And do you serve virtual

   9     children?

  10               MS. GAVIN:  But now the Y is

  11     virtually all over.

  12               MR. LONEY:  Interesting concept.

  13               Mr. Elkowitz.

  14               MR. ELKOWITZ:  Good afternoon.  My

  15     name is the Peter Elkowitz.  I am the executive

  16     vice president and chief financial officer of

  17     the Long Island Housing Partners and its

  18     affiliates.

  19               The Housing Partnership is a

  20     not-for-profit organization whose mission is to

  21     create housing opportunities for those who,

  22     through the unaided operation of the

  23     marketplace, would be unable to secure decent

  24     and safe, affordable home ownerships.

  25               LIHP has been accomplishing its


   2     mission through the development and sale of

   3     homes to persons of very low, low and moderate

   4     incomes as well as through the provisions of

   5     various support services such as mortgage and

   6     financial counseling, technical assistance and

   7     downpayment assistance.

   8               I would like to take this opportunity

   9     to thank the Federal Reserve Bank of New York

  10     for allowing me to speak at this hearing.  On

  11     behalf of the Long Island Housing Partnership

  12     and its affiliates, I would like to express

  13     sincere support of the proposed acquisition of

  14     Citicorp by Travelers Group, Inc. on the

  15     assistance that the Housing Partnership has

  16     received from Citibank/Citicorp Foundation.

  17               LIHP and its various affiliated

  18     corporations have been extremely productive

  19     with various accomplishments relating to

  20     housing production, community development and

  21     supportive programs.  Since its founding ten

  22     years ago, the Partnership has constructed and

  23     sold over 400 units of affordable housing and

  24     has counseled thousands of prospective

  25     first-time home buyers.  In addition, the


   2     Partnership administers municipal community

   3     development programs and downpayment assistance

   4     programs throughout Long Island.

   5               The Housing Partnership has many

   6     members from business, labor, religious,

   7     education and financial sectors.  Much of our

   8     support, including administrative grants,

   9     construction loans for our affordable housing

  10     programs, and mortgage loans for our

  11     purchasers, comes from our member financial

  12     institutions.

  13               I am pleased to say that the

  14     Citibank/Citicorp Foundation has been an active

  15     member of the Long Island Housing Partnership

  16     and has provided financial support and

  17     expertise over the past ten years.  In fact,

  18     Citicorp has been one of LIHP's most responsive

  19     partners, consistently demonstrating a

  20     commitment to affordable housing and community

  21     development.  Over the years the institution

  22     has provided the Housing Partnership with well

  23     over $179,250 in contributions for various

  24     programs and operating expenses.

  25               Citibank serves as an active member


   2     of the Long Island Housing Partnership board of

   3     directors and its regional lending consortium,

   4     as well as the Mastic/Shirley, Long Beach,

   5     Membership, Minority Outreach, Bablyon,

   6     Nominating and Foreclosure Task Force

   7     committees and the partnership.  Specifically,

   8     Citibank's representative on the Partnership

   9     board, Michelle DiBenedetto, is chairman of the

  10     Mastic/Shirley, Long Beach, Nominating and

  11     Membership Committees.

  12               In addition, Citibank cosponsored

  13     mortgage counseling seminars for very low, low

  14     and moderate Long Islanders.  Citibank has

  15     provided mortgage loans to low- and

  16     moderate-income persons who purchased homes

  17     through the Long Island Housing Partnership.

  18               Citibank is also a member of the New

  19     York Mortgage Coalition, an effort by financial

  20     institutions and community organizations,

  21     including the Long Island Housing Partnership,

  22     who are committed to increasing home ownership

  23     opportunities for persons of low and moderate

  24     income by helping them qualify for mortgages.

  25     As part of the New York Mortgage Coalition,


   2     Citibank offer mortgage products that it make

   3     easier for lower income persons to qualify for

   4     loans.

   5               Citicorp Foundation funds were given

   6     to LIHP for training to the not-for-profit

   7     mortgage counselors in Brooklyn, Queens, and

   8     Long Island, and to assist with the development

   9     of 78 low- and moderate-income rental and home

  10     ownership units in downtown Bayshore.

  11     Specifically, the funds were used to offset

  12     administrative costs associated with securing

  13     public funds and to hire a social worker to

  14     assist with the relocation of current

  15     residents.

  16               Citibank is also an active

  17     participant in the Long Island regional lending

  18     consortium, a group of lending institutions

  19     that pool their funds and share the risk so

  20     that socially and creditworthy affordable

  21     housing can be financed and constructed.

  22               It should also be pointed out that

  23     Michelle DiBenedetto from Citibank was

  24     instrumental in the success of the Federal

  25     Reserve Long Island Home Purchase Process


   2     Initiative.  In addition, as an LIHP board

   3     member, Ms. DiBenedetto kept the Board informed

   4     of the progress made by this initiative.

   5               It is noteworthy that, in

   6     anticipation of the merger, the new Citigroup

   7     has indicated that it would continue to provide

   8     substantial administrative support and special

   9     project grant funds for affordable housing

  10     initiatives to low- and moderate-income home

  11     buyers.  In addition, the Housing Partnership

  12     has been assured that the new Citigroup will

  13     continue to provide both construction and

  14     mortgage loans for its various affordable

  15     housing development programs.

  16               Over the next five years, the Housing

  17     Partnership will be embarking on many of the

  18     affordable housing projects, the largest of

  19     which are redevelopment efforts in the Town of

  20     Islip and Riverhead that are projected to yield

  21     over 150 affordable housing units for families

  22     of low income.

  23               The Housing Partnership also plans to

  24     develop other housing units in Nassau and

  25     Suffolk County will which require both


   2     construction and end-loan financing.  While it

   3     is difficult to estimate the value of end loans

   4     projected for our affordable home buyers over

   5     the next five years, it is expected that such

   6     values will exceed $10 million.  Based on past

   7     experiences, the Housing Partnership is certain

   8     that the new Citigroup will be an active

   9     participant in the financing of its affordable

  10     housing and community development programs.

  11               The Housing Partnership is grateful

  12     to Citibank for its support through various

  13     community development programs.  Furthermore,

  14     it commends the new Citigroup for its foresight

  15     of the importance of such programs.  Again, the

  16     Housing Partnership would like to express its

  17     support of the acquisition of Citicorp by

  18     Travelers Group.  Based upon our past

  19     interactions with Citicorp, it is our belief

  20     that Citicorp's demonstrated commitment to

  21     development of affordable housing and community

  22     development in this region will continue.

  23               Thank you for the opportunity to

  24     speak to you today.  The Housing Partnership

  25     looks forward to working with the new Citigroup


   2     to fulfill its pledge of $115 billion for

   3     affordable housing and community development.

   4               Thank you.

   5               MR. LONEY:  Thank you.

   6               Mr. Dorsey.

   7               MR. DORSEY:  Good afternoon.  My name

   8     is William Dorsey.  I am the executive director

   9     of the Grow Bridgeport Fund.

  10               The Grow Bridgeport Fund is a capital

  11     access program designed to provide credit to

  12     small- and medium-sized businesses in the

  13     greater Bridgeport region.  GBF is a

  14     partnership made up of the City of Bridgeport,

  15     the State of Connecticut, Bridgeport Economic

  16     Development Corporation, Community Economic

  17     Development Fund, and three banks, including

  18     Citibank.

  19               I came here today to talk about the

  20     crucial role that Citibank has played in the

  21     formation of the Grow Bridgeport Fund and how

  22     the bank's continued involvement is critical to

  23     the fund's future development.

  24               GBF grew out of Bridgeport's

  25     empowerment zone application process, when the


   2     entire community recognized that a key

   3     impediment to the city's economic growth was

   4     that credit from traditional lenders was not

   5     available for small businesses.  This sentiment

   6     was particularly acute in the wake of the New

   7     England banking crisis, which witnessed the

   8     demise of several local financial institutions

   9     and the removal of credit institutions from

  10     local to regional banking centers.

  11               The community as a whole suffered

  12     from this lack of access to credit because it

  13     stunned Bridgeport's ability to expand its tax

  14     base and create job opportunities for low- to

  15     moderate-income residents.

  16               In early 1995, the City of Bridgeport

  17     set out to request 18 banks operating in

  18     southwestern Connecticut to participate in the

  19     Grow Bridgeport Fund.  Citibank was only one of

  20     three banks that responded.  From the earliest

  21     planning sessions, it has actively participated

  22     in the fund through its representative Ellen

  23     Tower, and its counsel, Larry Brown.  They

  24     asked tough questions, but they were also

  25     willing to make the compromises necessary to


   2     make this unusual coalition of the private and

   3     public sectors work.

   4               Further, once our operating agreement

   5     was put into place in late 1997, Citibank was

   6     the first bank to provide an equity

   7     contribution in the amount of $250,000.

   8               Since that time, the Grow Bridgeport

   9     Fund has gone on to make loan commitments

  10     totaling $61,000, with another million seven in

  11     requests.  Ellen Tower sits as a member of our

  12     board of managers and Michael LaBella serves on

  13     our investment committee, which reviews and

  14     approves all requests for credit.

  15               They continue to bring resources to

  16     the table, both human and financial, which

  17     contribute to the growth and stability of GBF.

  18     Citibank has made training available to develop

  19     and expand the capacity of our staff and

  20     classes, taught by the National Development

  21     Council on the Design and Administration of

  22     Rabb Funds.  It has helped to defray a portion

  23     of our marketing expenses, it has helped shape

  24     a risk rating system for our loan portfolio,

  25     and it has identified potential sources of


   2     capital, which will allow GBF to expand its

   3     lending activities.

   4               I think Citibank's participation in

   5     the Grow Bridgeport Fund and other

   6     Bridgeport-based organizations is all the more

   7     praiseworthy because there are no Citibank

   8     branches or loan offices in our city.  What we

   9     are witnessing is not the infiltration of some

  10     marketing strategy, but, rather, the type of

  11     corporate citizenship that has recognized the

  12     genuine needs of an underserved community and

  13     has taken steps to serve those needs.

  14               Citibank's commitment to Bridgeport

  15     represents an act of leadership that is all too

  16     often absent in this era of consolidation

  17     within the financial services industry, which

  18     has been marred by rampant disinvestment of

  19     smaller and less wealthy communities.

  20               The collective expertise and wisdom

  21     of a Citibank is an invaluable resource and it

  22     is the most valuable asset to a fledgling

  23     organization such as the Grow Bridgeport Fund.

  24               As the financial services industry

  25     continues to contract, and creative alternative


   2     lenders continue to emerge to serve the needs

   3     of those business borrowers at the low end of

   4     the spectrum, we don't need additional credit

   5     criteria.  Energetic participation by lenders

   6     is needed to support the efforts to manage and

   7     expand these portfolios.  It is the transfer of

   8     the larger institution's expertise that is

   9     almost as critical as capital in making these

  10     alternative lending institutions viable.

  11               Citibank's participation in Grow

  12     Bridgeport Fund has been a model of how those

  13     knowledge transfers can take place, and we hope

  14     this example of responsible and enlightened

  15     corporate support will continue in the future.

  16               Thank you.

  17               MR. LONEY:  Thank you, Mr. Dorsey.

  18               Any questions from the group?  If

  19     not, then I will thank the panel.

  20               Let's take till 2:45, take a break.

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