Public Meeting Regarding Citicorp and Travelers Group
Thursday, June 25, 1998
Transcript of Panel One
39 1 2 MR. LONEY: Because some of the 3 people on the panel scheduled to testify next 4 are not here, we are going to call people from 5 both Panel One and Panel Two at this time. 6 If David Nocenti, Robert Elliot, 7 Stephen Kaufman, Dannel Malloy and Nellie 8 Santiago-Fernandez could come up, I would 9 appreciate it. 10 I will follow the order that is in 11 the agenda that we sent out. In doing that, I 12 will ask Ms. Santiago-Fernandez, who is the 13 senator from New York State, to begin. 14 MS. SANTIAGO-FERNANDEZ: Good 15 morning. Thank you very much. 16 I am speaking today in favor of the 17 proposed conversion of Travelers Group into a 18 bank holding company, its acquisition of 19 Citicorp and the request for an exemption from 20 divestiture of assets under Section 1842 of the 21 Bank Holding Company Act. 22 I am speaking in both my capacity as 23 an elected official, representing a very poor 24 community in Brooklyn served by Citibank, as 25 well as a ranking member of the State Senate . 40 1 2 Banking Committee and as chair of the Senate 3 Democratic Task Force on Banking and Community 4 Reinvestment. 5 This is a merger of truly historic 6 significance. For years, as financial 7 modernization has been debated in Washington 8 and in the states, we have heard of these new 9 all-purpose, one-stop-shopping financial 10 services corporations which would be emerging. 11 Now for the first time we have seen one. 12 This question which must be asked is 13 if permitting the birth of this particular 14 prototype is in the best interest of financial 15 consumers. I strongly believe that the answer 16 to this question is yes. 17 In considering what this new entity 18 can do, I started by considering what Citibank 19 already has done. 20 Citibank maintains several branches 21 in my own senatorial district. Through these 22 branches, the bank not only provides a wide 23 range of basic financial services to my 24 constituents, but also a variety of educational 25 services to help consumers get the most out of . 41 1 2 their money. These include both training 3 courses on how to use the latest innovations in 4 computer-banking technology and small business 5 lending seminars targeted to the needs of 6 low-income neighborhoods. 7 It is through these same branches 8 which the new Citigroup will be able to offer 9 my constituents and people all over New York 10 City not fewer banking services, as some might 11 say, but an extended menu of insurance products 12 through their association with Travelers. 13 While some condemn Citibank for branch 14 closings, I have a positive story to tell. 15 Two years ago Citibank proposed the 16 closing of a branch in my own district. My 17 district, as I mentioned, is a low-income 18 neighborhood largely underserved by any other 19 financial institution. I and members of my 20 community appealed to the sensitivity of the 21 bank to preserve this branch, and I am proud to 22 say that the branch is open today. 23 Looking beyond Brooklyn to the larger 24 picture, Citibank has been a rising leader in 25 providing home mortgage loans to minorities. . 42 1 2 The Home Mortgage Disclosure Act data from 1990 3 to 1996 shows that the mortgage loan denial 4 rates for minorities nationwide has 5 consistently fallen, meaning more Hispanics and 6 African-Americans are having mortgage 7 applications approved at a greater rate than 8 ever before. 9 Citibank has also been a national 10 leader in providing support for building a 11 self-sustaining community development 12 infrastructure by providing grants and special 13 low interest loans for local organizations 14 specializing in economic development. Nearly 15 all of the CBOs in my district have benefitted 16 from this help, providing us with long-term 17 stability in the community. 18 Citibank even pioneered an extremely 19 innovative form of support for community 20 not-for-profit financial institutions with its 21 Equity Equivalent Program, which enables 22 community development financial institutions to 23 strengthen their balance sheet's very long term 24 and very substantiated debt. 25 It is through all of these activities . 43 1 2 that the New York City bank has maintained a 3 satisfactory overall CRA rating with an 4 outstanding rating in community development. 5 The new Citigroup gives every 6 indication that this high level of support will 7 continue but be greatly enhanced by this 8 merger. 9 Citigroup's community reinvestment 10 pledge of $150 billion represents an amount 11 twice the bank's current domestic deposits; a 12 considerable commitment. But it is not the 13 sheer quantity of money which should receive 14 the most attention. 15 Citigroup's proposed program on 16 financial and technological literacy is a very 17 forward-thinking initiative design to help 18 teach young people how to take the widest 19 advantage of the possibilities offered by 20 computer banking. The program will help 21 prepare consumers for the realities of banking 22 in the 21st century. 23 Another new program, one more 24 immediately beneficial to low-income 25 communities, is their Proposed Center for . 44 1 2 Community Development Enterprise. This 3 subsidiary will be making loans and providing 4 technical support to community development 5 organizations to provide them with the tools, 6 resources, and knowledge they need to build 7 their own economic development programs. This, 8 I believe, helps bring about true community 9 empowerment. 10 Finally, I have worked on the CRA 11 issue for many years now and I want to remind 12 everyone how historic the commitment made by 13 Citigroup is, especially from the Travelers 14 side. 15 Travelers has promised to make a wide 16 variety of insurance products available in 17 low-income communities utilizing the extensive 18 Citibank branch network. What this will mean 19 is more insurance products will be made 20 available to more people in low-income 21 communities. This is a very significant move. 22 The CRA requires Citibank to invest a 23 portion of its assets in the communities it 24 accepts deposits from, including poor 25 communities. However, there is no similar law . 45 1 2 which binds insurance companies. 3 While financial modernization 4 legislation may ultimately include such 5 provisions, Travelers has boldly decided to 6 voluntarily target insurance products to poor 7 neighborhoods, to poor communities, products 8 designed specifically to meet their needs. I 9 believe that this historic commitment has set a 10 standard by which future cost industry 11 financial mergers should be judged. 12 In closing, let me once again state 13 that I support this merger. It represents a 14 natural trend in the financial marketplace and 15 has a vast potential to benefit all financial 16 consumers, poor and otherwise. 17 Thank you very much. 18 MR. LONEY: Thank you. 19 Mr. Nocenti. 20 MR. NOCENTI: Good morning, Officer 21 Loney, Mr. Alvarez, Mr. Hodgetts, 22 Superintendent McCaul. My name is David 23 Nocenti, and I am the counsel from the Office 24 of Queens Borough President Clair Shulman. I 25 want to thank you for giving us the opportunity . 46 1 2 to provide our comments this morning. 3 The proposed merger of the Travelers 4 Group and Citicorp raises many complex legal, 5 financial, regulatory, and competitive issues, 6 and I know that you are going to be hearing 7 comments from both sides on many of these 8 issues today. 9 Our expertise does not lie in the 10 analysis of competition or the impact of 11 mergers on markets and so our testimony is 12 going to be limited to your request for 13 information regarding the impact of the merger 14 on the convenience and needs of the community. 15 Specifically, the Queens Borough 16 President's Office has worked very closely with 17 Citibank on numerous issues during the past ten 18 years, and we will provide some background on 19 Citibank's community activities in Queens. 20 Citibank has always been responsive 21 to the needs of our local residents, and this 22 history of cooperation and assistance should be 23 given strong consideration as you evaluate the 24 benefits of the merger. 25 Queens County geographically is the . 47 1 2 largest borough in the City of New York and is 3 also the second most populous with almost 2 4 million residents. If Queens County were a 5 separate city, we would be the fourth largest 6 city in the United States behind New York, Los 7 Angeles and Chicago. 8 Queens is also the most ethnically 9 and culturally diverse county in the world with 10 Kennedy Airport serving as the new Ellis Island 11 for the past 50 years. Queens County is the 12 first stopping point for immigrants all over 13 the globe. Over 35 percent of Queens residents 14 were born outside the United States and they 15 come from over 150 countries and speak over 120 16 languages. 17 Queens is primarily a working-class 18 borough. We do not have the conspicuous wealth 19 of Manhattan, and we have the specific needs, 20 economic needs, as in all areas of New York 21 City. There is a tremendous need for 22 affordable housing in Queens, and we also have 23 some of the most overcrowded schools in the 24 country. 25 The borough president is the highest . 48 1 2 elected official in Queens, and as a result our 3 office is involved in economic development, 4 housing, education and community projects 5 throughout the borough. 6 We work very closely with our 7 financial institutions and other private 8 businesses and, thus, are uniquely qualified to 9 evaluate the civic participation of these 10 private entities. 11 Citibank has been one of the most 12 active and effective businesses working towards 13 improvements in the borough of Queens. In the 14 area of economic development, Citibank has 15 provided important assistance to small 16 businesses throughout the borough. They have 17 worked closely with the Queens County Overall 18 Economic Development Corporation, the Greater 19 Jamaica Development Corporation, the Jamaica 20 Business Resource Center, the Rockaway 21 Development and Revitalization Corporation, and 22 many other local community development 23 entities. 24 Citibank has provided project grants, 25 has offered technical assistance and has led . 49 1 2 the way to helping these organizations and 3 other small businesses to develop and grow in 4 Queens County. 5 Citibank has also been a leader in 6 the area of housing development. As previously 7 noted, Queens County has a great need for more 8 affordable housing, and Citibank has provided 9 the financing necessary for many such projects. 10 Our office has undertaken major efforts to spur 11 the creation of more low-income and 12 moderate-income housing in Jamaica, the 13 Rockaways, and elsewhere in the borough, and 14 Citibank has provided invaluable financial and 15 technical assistance in this effort. 16 Although there are many one-family 17 and two-family homes in Queens, in other areas 18 of the borough the predominate housing stock is 19 apartment buildings. In the early 1980s, many 20 buildings converted from rental units to 21 cooperative ownership, and these co-ops became 22 the only available form of home ownership for 23 many residents in the area. 24 Unfortunately, the New York City real 25 estate market collapsed in the late 1980s. It . 50 1 2 left many of these co-ops with serious 3 financial problems. Virtually every bank had 4 lent funds based on overvaluations of the 5 properties, and most of these financial 6 institutions simply stopped lending any money 7 for these co-ops, leaving tens of thousands of 8 apartment owners stranded in apartments they 9 could not sell. 10 The Queens Borough President's Office 11 immediately formed a Co-op and Condo Task 12 Force, comprised of building owners, lending 13 institutions, apartment owners, government 14 agencies, and others, to address the problems. 15 Working with Fannie Mae and Freddie 16 Mac, we brought the necessary parties together 17 and achieved work-outs that allowed the co-ops 18 to avoid defaulting on their loans. Although 19 several financial institutions chose not to 20 participate in this collaborative effort, 21 Citibank was an integral player in the process 22 and helped us to save the homes of tens of 23 thousands of individuals. 24 In addition to its active role in 25 economic development housing, Citibank has also . 51 1 2 been a good corporate citizen working closely 3 with not-for-profit groups throughout Queens 4 County. Indeed, Citibank was instrumental in 5 saving several financially-troubled 6 organizations, included in the Jamaica Arts 7 Center and the Queens Symphony Orchestra. 8 Citibank provides technical and 9 financial assistance to many community groups 10 and cosponsors many events held in the borough. 11 In addition, for the past several years 12 Citibank has sponsored a bus tour for 13 foundations and other charitable organizations 14 which has helped our Queens group to access 15 additional funding sources that traditionally 16 have been providing grants only to 17 Manhattan-based organizations. 18 Citibank is also very active in 19 education issues. Citibank has formed 20 partnerships with several New York City 21 elementary schools. They work closely with the 22 City University of New York and St. John's, and 23 Citibank employees act as mentors to individual 24 students. 25 Moreover, a Citibank employee was . 52 1 2 recently named as the borough president's 3 appointee to the seven-member New York City 4 Board of Education, which is responsible for 5 overseeing the education of over 1 million 6 school children in New York City. 7 Finally, it is important to note that 8 Citibank is one of the largest employers in 9 Queens County with over 3,500 employees in the 10 borough. The construction of the Citibank 11 Tower, which opened in 1990, helped to initiate 12 a revitalization of the Court Square area, and 13 they have provided funding for amenities above 14 and beyond what were initially requested of 15 them. 16 In sum, the Borough President's 17 Office has had a close working relationship 18 with Citibank for many years, and we have found 19 them to be excellent corporate citizens. They 20 are very responsive to the needs of the 21 community. They have been eager to join in 22 public-private partnerships and have provided 23 tremendous financial and technical assistance 24 which has helped us to revitalize significant 25 areas of the borough. . 53 1 2 Thank you once again for providing 3 this opportunity to testify today, and we hope 4 that the Federal Reserve Board's evaluation of 5 the benefits of this merger will include 6 consideration of Citibank's long history of 7 working to assist and improve businesses, 8 housing, education and cultural institutions 9 throughout Queens County. 10 MR. LONEY: Thank you. 11 Mayor Malloy. 12 MR. MALLOY: I am Mayor Dannel 13 Malloy. I'd like to begin by thanking you for 14 the opportunity, as the Mayor of Stamford, 15 Connecticut, to testify on behalf of Citibank. 16 Stamford is the Connecticut 17 headquarters for Citibank. Since the bank 18 opened its first of seven branches only four 19 years ago, I have been impressed with the 20 bank's commitment to be a major community force 21 in Stamford and within the State of 22 Connecticut. 23 As the Mayor of the fourth largest 24 city in Connecticut, with the third largest 25 concentration of Fortune 500 corporate . 54 1 2 headquarters in the country, I know firsthand 3 that corporate partners like Citibank are vital 4 to continued urban growth. 5 If such Citibank current activities 6 are a reflection of broader available resources 7 that result from the Citicorp/Travelers Group 8 merger, then I can only look forward to 9 stronger partnerships with the proposed 10 Citigroup in Stamford and throughout the state. 11 To illustrate the depth of the bank's 12 commitment to the community, I would like to 13 highlight three key areas of creative 14 initiatives that Citibank has led. 15 First of all, I'd like to speak about 16 education. Citibank and the City of Stamford 17 share a personal commitment to the excellence 18 of public education for children of all ages. 19 Citibank has partnered to spearhead two 20 Stamford school readiness programs. These 21 programs promise that all Stamford children 22 will have an opportunity to be ready to learn 23 before entering school. 24 The initiatives are the Hillandale 25 Child Development Center. This will be the . 55 1 2 first program in the State of Connecticut to 3 fully integrate state-of-the-art learning 4 strategies with health, nutrition, and 5 parenting modules in a childcare environment 6 for preschool children. In fact, the City of 7 Stamford will guarantee all of its 4-year-olds 8 pre-K experience, that is, prior to the time 9 they would enter our kindergarten. 10 Secondly, Success By 6. Citibank is 11 a key member of the Leadership Council. 12 Success By 6 will ensure that all children 13 entering kindergarten do, in fact, enter with 14 the foundation needed to prepare them to 15 succeed in school. 16 In addition to the above educational 17 activities, Citibank has adopted the Hart 18 Magnet School Read-A-Loud program; received 19 major awards for junior achievement of 20 Southwestern Connecticut in connection with 21 their educational activities; funded Connect 22 '96, which established Internet access for both 23 of our high schools in Stamford; and developed 24 and implemented a summer associate program with 25 The Urban League of Southwestern Connecticut, . 56 1 2 which is based in Stamford. 3 The second key area is human and 4 social services. Citibank helped plan and fund 5 with the City of Stamford United Way and 6 Infoline, the Infoline Referral Center. The 7 center is a unique staffed storefront operation 8 offering community agency information, access 9 to caseworker services and job shopping through 10 a Department of Labor kiosk. 11 The referral center is the result of 12 the partners concern that people moving from 13 welfare to work needed a place to connect with 14 local, regional and statewide agencies that can 15 help them become self-sufficient. 16 Secondly, Cheryl Adkins Green, 17 Citibank F.S.B. president, will serve as the 18 chair of the United Way of Stamford, 1998-99 19 fund-raising campaign, which will raise over 2 20 million for local agencies. This is another 21 example of the personal commitment Citibank 22 senior management demonstrates in our community 23 every single day. 24 The third key area, access to credit 25 for low- and moderate-income areas and . 57 1 2 household. Citibank is an active lender in all 3 Stamford neighborhoods. The bank has made 4 substantial inroads in the enterprise zone with 5 small business loans to help retain jobs and 6 help businesses grow. 7 Additionally, the leadership of the 8 community development loan program is 9 well-recognized. The bank became a pacesetter 10 two years ago for new Connecticut banks, which 11 it committed $1 million to the Housing 12 Development Fund for affordable housing in the 13 city and directed more than $2 million in 14 community development investments to 15 Bridgeport, Norwalk, and Stamford. 16 Citibank loans have extended to 17 statewide initiatives, including a $2 million 18 loan for the Connecticut Preservation Loan Fund 19 and an approval to fund $3 million for a 20 childcare loan fund this month. 21 Citibank knows that money alone 22 cannot build neighborhoods. Therefore, in 1995 23 the bank helped establish the Fairfield County 24 Local Initiative Support Corporation office, 25 located in Bridgeport, and serving all of the . 58 1 2 state, in particular Fairfield County and the 3 City of Bridgeport, Norwalk and Stamford. 4 I would like to conclude my testimony 5 with the benefits of the proposed merger for 6 the community of Stamford and the State of 7 Connecticut. 8 Unlike the traditional in-market bank 9 merger that I have seen in Connecticut, where 10 physical locations overlap and savings are 11 achieved by consolidation, the formation of 12 Citigroup is different. The merger will not 13 eliminate available resources as other mergers 14 have; rather, the combination will greatly 15 increase the value and convenience for 16 customers through offering access to a broader 17 range of high-quality financial services and 18 products, all from one convenient location in 19 Stamford and other Connecticut locations. 20 Additionally, the wide range of 21 products and services offered by the combined 22 company will add breath and depth to the career 23 opportunities in Connecticut. The stronger 24 company will mean more jobs to my community. 25 As I stated at the beginning of my . 59 1 2 testimony, I believe that the merger of 3 Citicorp and Travelers Group will only enhance 4 the bank's deep commitment of human and 5 financial capital to the City of Stamford and 6 to the State of Connecticut. 7 Thank you. 8 MR. LONEY: Thank you. 9 Assemblyman Kaufman. 10 MR. KAUFMAN: Good morning. I am 11 Assemblyman Steve Kaufman. I represent the 12 82nd Assembly District in the Bronx, which 13 includes Co-op City, Throgs Neck, Westchester 14 Square and Eastchester Gardens. 15 I am here today to tell you that 16 Citibank has demonstrated again and again its 17 commitment to the social and economic 18 well-being of the Bronx, and as the borough 19 undergoes a renaissance in many of its 20 neighborhoods, Citibank has been there to play 21 a major role. 22 Citibank has focused its resources, 23 technical assistance, leadership, and grants to 24 foster the business development, home 25 ownership, comprehensive economic development . 60 1 2 and educational programs to school children, 3 high school students, and college students, as 4 well as welfare-to-work participants. 5 Citibank fervently seeks to ensure 6 that the unique needs of senior citizens are 7 not only met, but also exceeded through 8 superior service and customer satisfaction. In 9 fact, Citibank's work with legislators like 10 myself and community leaders have led to 11 innovative and creative initiatives that have 12 resulted in safer, more convenient alternatives 13 to accomplish their banking. 14 For example, while responding to the 15 need for greater education around direct 16 deposit and familiarity with using the phone 17 for banking, Citibank also discovered and 18 responded to the need for transportation 19 services and protection against con games. 20 In response to concerns expressed by 21 seniors in the Pelham Manor/Co-op City area, 22 Citibank offered to present its consumer 23 education series to seniors on a range of 24 issues from how to use ATMs and PC Banking; how 25 to access basic checking; how to call into its . 61 1 2 phone service and speak with a representative; 3 and how to protect themselves from con games. 4 Citibank consumer educators worked 5 one-on-one with seniors to teach them what to 6 watch for and how to protect themselves. 7 Through the consumer education 8 program, Citibank has also worked one-on-one 9 with senior citizens who travel to Puerto Rico 10 and Florida. 11 Many seniors were not aware that 12 Citibank offers free bill payment service 13 through its 1-800 service line. In one 14 instance, a senior was able to avoid surcharges 15 on her rent when she was in Puerto Rico by 16 having Citibank pay her bills. 17 Overall, Citibank consumer educators 18 have conducted over 600 seminars in English and 19 Spanish, 20 percent of which were conducted in 20 the Bronx in senior citizen centers, schools, 21 hospital and locals businesses. 22 Beyond the bricks and mortar of its 23 branches, however, Citibank uses the strength 24 of its human resources to invest time, 25 leadership, and technical assistance to . 62 1 2 community groups and residents. 3 In my own district, Citibank's staff 4 has volunteered for the 45th precinct Night Out 5 Against Crime, and other health fairs in Co-op 6 City and Throgs Neck, assisting the creation of 7 KidCare ID cards for hundreds of area school 8 children. Citibank has also cosponsored with 9 me a wonderful bus trip for senior citizens who 10 are brought to an all-day picnic and barbecue 11 in Sunken Meadow Park. 12 As another example of Citibank's 13 responsiveness, the staff at the Castle Hill 14 Avenue branch found out that I was sponsoring 15 the city teddy bear drive for physically and 16 emotionally abused children who were brought 17 into Montefiore Child Protection Center and 18 immediately took up my cause and collected over 19 200 teddy bears for these children. These are 20 the kind of wonderful people that are the 21 backbone of this institution. 22 Citibank has worked hand-in-hand with 23 many community associations in my district on 24 numerous different issues. Citibank has also 25 participated in Read Aloud programs in schools . 63 1 2 in my district and has also taken part in a 3 clothing drive for people making the transition 4 from welfare to work. In my community, 5 Citibank has surely made a difference. 6 In the Bronx last year, through its 7 Partnership In Progress program, Citibank 8 committed 150,000 to the three creative and 9 innovative community development corporations 10 for the creation of affordable housing, 11 commercial stores and community revitalization. 12 In conclusion, for 25 years Citibank 13 has had a long-standing commitment to improving 14 the quality of life in the communities it 15 serves. It is clear from these activities in 16 my assembly district and also those throughout 17 the Bronx that Citibank demonstrates its pledge 18 to CRA by providing access to the highest 19 quality financial services and products, making 20 them available to everyone regardless of where 21 they live and how much they earn. 22 I look forward to continuing my 23 office's participation with Citibank to effect 24 positive change in the Bronx. 25 MR. LONEY: Thank you. . 64 1 2 Mayor Robert Elliot. 3 MR. ELLIOT: I would like to briefly 4 add my comments with respect to Citibank's 5 community development activities. 6 I am Bob Elliot and Mayor of 7 Croton-on-Hudson; until a few weeks ago, 8 president of New York Conference on Mayors. I 9 am here as the chairman of an eleven-community 10 organization known as Historic River Town. 11 Historic River Town is a 12 representable eleven communities, extending 13 from the New York City border northward nearly 14 50 miles, from the City of Yonkers to the City 15 of Peekskill, representing a population of 16 nearly a quarter of a million people. 17 A number of years ago, these 18 communities came together in the midst of a 19 severe recession to address economic problems. 20 We couldn't wait for the state or the federal 21 government to help us wrestle with these 22 problems, particularly with the limited 23 resources that we had. We were wrestling with 24 a recession unlike no other that we had 25 encountered in the past. We had both blue . 65 1 2 collar workers and white collar workers out of 3 work, facilities such as GM closing, and IBM 4 downsizing, affecting our community. We needed 5 to build on what we had, address our downtown 6 and mainstream problems, and our focus became 7 tourism. 8 Beneath this was the broader economic 9 development and the regional planning, and we 10 formed Interest Municipal Agreement, a 11 nonprofit organization, and a number of 12 public-private partnerships which have now 13 become models for other areas throughout the 14 State of New York. 15 From the very beginning, Citibank's 16 community development division understood what 17 we were doing. They grasped the concept when 18 no others did. They understood the 19 complexities and the interdependencies of our 20 economy, with such issues as transportation and 21 housing as relates to the environment and 22 relates to our community. 23 Citibank's assistance extended way 24 beyond the grants for a number of programs, 25 programs which involved a number of the area . 66 1 2 branches, programs which involved community 3 planning, community meetings and several 4 planning conferences which, for example, last 5 week ended up at a planning conference using a 6 bottom-up process where we laid out nearly 50 7 miles of waterfront development plans along the 8 Hudson River coastline, Westchester County. 9 More important was the expertise and technical 10 assistance that Citibank gave us and, 11 particularly, the high standard to which they 12 have held us, a standard to which we are still 13 trying to reach. 14 Citibank's community development 15 efforts made a tremendous difference in our 16 eleven communities and a significant difference 17 in the Hudson Valley. 18 I thank you for the opportunity to 19 testify this morning. 20 MR. LONEY: Thank you. 21 Are there any questions for the 22 panel? Thank you very much.