Public Meeting Regarding Citicorp and Travelers Group
Thursday, June 25, 1998
Transcript of Panel Eleven
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25 Panel Eleven is Claudino Otenez,
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2 Michelle Neugebauer, Cesiah Mullane, Jennifer
3 Lee, Iris Itzkowitz and Michael Green.
4 Ms. Neugebauer, am I killing that
5 name?
6 MS. NEUGEBAUER: Cesiah is going to
7 testify first.
8 MR. LONEY: I'm sorry?
9 MS. NEUGEBAUER: Cesiah is going to
10 testify first.
11 MR. LONEY: I am sorry.
12 Ms. Mullane.
13 MS. MULLANE: Good afternoon members
14 of the Federal Reserve Bank. My name is Cesiah
15 Mullane and I am a member of the Reinvestment
16 Committee of Cypress Hills and City Line.
17 I have lived in Cypress Hills since
18 1957 and I have spent a large part of those 41
19 years contributing to my community in every way
20 I can, working on issues such as education,
21 affordable housing, the prosperity of our
22 business community and the quality of life
23 issues, all of which impact the stability of my
24 neighborhood.
25 I volunteer at the Cypress Hills LDC,
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2 our local Twelve Towns YMCA, and my church. I
3 am involved with our very young New Visions
4 School, our Child Care Corporation, and the
5 Cypress Hills Community Coalition, which
6 succeeded in securing a zoning amendment to
7 protect our blocks.
8 I advocated for a new intermediate
9 school for 20 years, and a new elementary
10 school is being built right now to relieve the
11 awful overcrowding. And once a year on our We
12 Love Cypress Hills Day, we hold a parade and
13 street festival to celebrate our wealth of
14 cultural and ethnic diversity and our
15 successes, big and small.
16 I am passionate about my
17 neighborhood -- that is where I live, and
18 improving it is my lifelong work.
19 The Reinvestment Committee of Cypress
20 Hills and City Line was organized in May 1992
21 after Cypress Hills Local Development
22 Corporation and the City Line Coalition
23 published a joint housing plan for our
24 communities that showed a deplorable lack of
25 lending by our banks.
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2 For the past seven years, we have
3 collected and analyzed HMDA data for the seven
4 local lending institutions in our area, and met
5 with representatives of these banks, including
6 Citibank, to share our analyses and work
7 cooperatively to increase lending.
8 Cypress Hills and City Line are
9 sister communities. Their housing stock,
10 populations and economic status are quite
11 similar.
12 According to the 1996 census, Cypress
13 Hills and City Line are predominantly Hispanic
14 communities, 63 percent and 53 percent
15 respectively. The residents of these two
16 communities earn low to moderate incomes. In
17 1990, households earned median incomes of.
18 $23,138 and $25,318 respectively compared to
19 $29,832 for New York City as a whole. Hence,
20 Cypress Hills and City Line households have
21 incomes that are 78 percent and 85 percent of
22 the city's median.
23 The Reinvestment Committee's
24 membership consists of resident activists of
25 Cypress Hills and City Line and staff and board
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2 members of the Cypress Hills LDC. For the past
3 seven years we have analyzed HMDA data for our
4 census tracts, brought together the seven local
5 lending institutions that serve Cypress Hills
6 and City Line to discuss their performance and
7 ways they should increase lending, and worked
8 cooperatively with our banks to meet the credit
9 needs of area residents and businesses.
10 We have convened five community
11 forums on bank lending activity in their
12 communities where Home Mortgage Disclosure Act
13 data was reviewed and the committee's concerns
14 were discussed. Our concerns included a lack
15 of affordable mortgage products offered by the
16 local banks, a laissez-faire attitude towards
17 marketing and outreach, and a lack of
18 educational home buyer counseling services to
19 support first time home buyers.
20 We requested that the smaller banks
21 reinvest 1 percent of their deposits and that
22 larger multinational lending institutions, e.g.
23 Chemical pre1997, Chase and Citibank reinvest 5
24 percent of the local deposit base in mortgage,
25 refinancing and home improvement loans.
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2 We also demanded expanded home
3 ownership counseling services, marketing of and
4 participation in affordable housing programs,
5 increased outreach in our area of support of
6 the Cypress Hills LDC mortgage foreclosure
7 prevention efforts.
8 The Reinvestment Committee has slowly
9 turned around the red lining of our
10 communities. Do I have more, or is my time up
11 or do I have the minutes?
12 MR. LONEY: If you can briefly.
13 MS. MULLANE: Let me find my closing.
14 Citibank in 1996 approved no home purchase
15 loans, had 72 percent denial for home
16 improvement and refinancing applications. 1997
17 saw the least yet, eight loans for a total of
18 $235,000.
19 I call your attention to a chart just
20 showing exactly what the activities in City
21 Line and Cypress Hills have been. '94 was a
22 wonderful year that passed even our committee
23 lending target, but after '94 it has not been.
24 The red lining has been dismal,
25 although Citibank has pledged to work on this
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2 through their lending commitment by their own
3 admission this translates into an 8 to 10
4 percent increase in lending for the New York
5 City area. In my community, this is less than
6 one home mortgage loan. In my community, you
7 have to do better than that.
8 Thank you.
9 MR. LONEY: Let me again state my
10 considerable ignorance, and ask you where
11 exactly is Cypress Hills?
12 MS. MULLANE: It's in the
13 northeastern side of Brooklyn. It's right next
14 to Queens. We're surrounded by 18, 20
15 cemeteries. Our next door neighbor is
16 Woodhaven, Queens.
17 MR. LONEY: Okay, I have a sense of
18 that. Okay, thank you very much.
19 We can take your statement and if you
20 make sure that the folks out at the
21 registration table get a copy of what you have
22 there, the entire thing will go into the
23 record.
24 MS. MULLANE: I gave them a copy.
25 MR. LONEY: Thank you.
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2 Ms. Neugebauer.
3 MS. NEUGEBAUER: Good afternoon. My
4 name is Michelle Neugebauer, and I'm the
5 executive director of the Cypress Hills Local
6 Development Corporation. My not-for-profit
7 community development organization was founded
8 in May, 1983, with wonderful dedicated
9 community residents like Cesiah Mullane.
10 My organization runs approximately
11 twenty different programs that are focused in
12 the areas of housing preservation, economic
13 development, and youth services, which are the
14 three greatest needs of our community.
15 We developed over 125 units of
16 affordable housing, renovated 130 storefronts
17 in our commercial strip, secured over a million
18 dollars in home improvement loans for Cypress
19 Hills small home owners, started a New Visions
20 public elementary school and launched a very
21 successful child care initiative that has
22 created sixty jobs in our neighborhood, and now
23 provides fair for 245 children.
24 Seven years ago, as Cesiah has
25 described, we came together with our sister
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2 community, City Line in Brooklyn, to form the
3 Reinvestment Committee of Cypress Hills and
4 City Line. My testimony really relates to the
5 Cypress Hills LDC's relationship with Citibank
6 and some of our concerns about the merger.
7 In general, Cypress Hills LDC has had
8 a very positive relationship with Citibank.
9 They've actively participated in the
10 reinvestment effort in terms of sending
11 representatives to our annual banking forums,
12 trying to work out solutions to a rising
13 mortgage foreclosure problem in our
14 neighborhood, helping to establish a mortgage
15 foreclosure action program, training our staff
16 in underwriting and financial packaging and
17 providing summer intern help to our
18 organization.
19 They collaborated very closely with a
20 program that some of the other people have
21 testified about Partners in Progress. Citibank
22 is giving us a $50,000 grant to build a
23 minimall on our commercial strip in a very
24 desolate section of Fulton Street where we hope
25 to bring much needed retail activity and jobs
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2 to our neighborhood.
3 Having said all that, we're still
4 very deeply concerned about some of the current
5 Citibank performance in terms of lending in our
6 neighborhood, and the banking practices.
7 We feel that, you know, Citibank
8 could make a specific commitment to lending
9 targets in our area, some of the targets that
10 Cesiah has discussed, trying to reinvest at
11 least 5 percent of the local deposits in
12 mortgages, refinancing and home improvement
13 loans. We want Citibank to maintain their full
14 service branch in City Line.
15 That City Line branch is essential to
16 the livelihood of the Liberty Avenue commercial
17 strip. That full-service branch services the
18 entire populations of Cypress Hills and City
19 Line, which is 48,000 people. These
20 communities, the communities in which I work,
21 Cypress Hills, and City Line are both
22 communities predominantly made up of immigrants
23 and have substantial elderly population.
24 We don't have a computer on every
25 desk or in every home in our neighborhood. We
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2 don't have access to technology, and many
3 people don't feel comfortable with it. As one
4 person on our reinvestment committee recently
5 said: People in our neighborhood work so hard
6 for their money, they want to feel it, they
7 want to touch it, they want to talk to a human
8 being when they do transactions related to
9 their money.
10 In 1995 Citibank closed a branch very
11 close to our neighborhood in Starret City and
12 that changeover was fought unsuccessfully by a
13 local community board. In anticipation of
14 Citibank automating our branch, we got out
15 there on the streets in the dead of winter and
16 we collected a petition with over 300
17 signatures asking Citibank not to automate our
18 branch, and they listened to us and they didn't
19 automate the branch, and we hope they continue
20 to listen to us.
21 The Reinvestment Committee believes
22 that the fees and the minimum deposits required
23 by Citibank really don't meet the credit needs
24 of our low and moderate income communities.
25 And we've attached to my testimony a comparison
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2 of the minimum deposits and fees required by
3 the seven local lending institutions in Cypress
4 Hills and City Line and Citibank really has the
5 highest requirement.
6 Our organization worked with people
7 that are in danger of losing their homes to
8 foreclosure. Citibank has an on the ground
9 team in New York City that assigns people to
10 work with delinquent borrowers to try to, you
11 know, work out forbearance agreements and other
12 things that could prevent foreclosures.
13 In summary, we feel that that on the
14 ground team really needs to be empowered a
15 little more. They have to go through St.
16 Louis, Missouri to get anything approved.
17 People have to wait very long periods of time
18 in order to get those work-out agreements and
19 those are things we asked to be considered in
20 this mega transaction that's going to be
21 happening between Citibank and Travelers.
22 We thank you for listening to our
23 concerns.
24 MR. LONEY: Thank you. Who did you
25 say had to go to St. Louis? I missed that.
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2 MS. NEUGEBAUER: The people at
3 Citibank that work with delinquent borrowers on
4 forbearance agreements and other workouts.
5 MR. LONEY: Thank you. Ms. Lee.
6 MS. LEE: Good afternoon. My name is
7 Jennifer Lee, and I work for the Cypress Hills
8 Local Development Corporation. In my role
9 there I work with the Reinvestment Committee of
10 Cypress Hills and City Line. I worked with
11 this committee for three years. The
12 Reinvestment Committee has joined with other
13 individuals and groups throughout the city to
14 form the Citibank Travelers Watch.
15 As my colleagues have said, Cypress
16 Hills Local Development Corporation and the
17 City Line Coalition joined forces in 1992 to
18 form the Reinvestment Committee of Cypress
19 Hills and City Line to promote reinvestment in
20 East New York, Brooklyn communities of Cypress
21 Hills and City Line.
22 I would like to take this opportunity
23 to reiterate many of the concerns my colleagues
24 have covered as well as some additional
25 concerns.
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2 My professional training is in social
3 work administration. I'm not a lawyer.
4 However, from the understanding I have of the
5 Glass-Steagall and Bank Holding Company Act the
6 application is not legal. Glass-Steagall
7 forbids a Federal Reserve member bank from
8 affiliating with another company that deals in
9 securities. Travelers deals in securities, so
10 does Salomon Smith Barney which now has plans
11 to expand this activity by purchasing overseas
12 investment company.
13 The Bank Holding Company Act
14 explicitly forbids the bank holding company,
15 which is what Travelers is applying to become,
16 of dealing in insurance activities. Travelers
17 is primarily an insurance company.
18 If the law allows for two years to
19 divest of these activities, where is the
20 divestiture plan? They seem to be in expansion
21 rather than contraction mode. If there is no
22 plan, I cannot understand how they plan to
23 divest such a large amount of business activity
24 in such a short period of time.
25 It seems they are banking on the law
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2 changing within the next two years. I call on
3 you as regulators to uphold the existing laws
4 you were given jurisdiction over.
5 In the event that my understanding of
6 the law is flawed and you find the intent to be
7 legal, I request that you consider the impact
8 this may have. I speak about Cypress Hills and
9 City Line where I have worked for the past four
10 years.
11 Between 1995 and 1997, Citibank only
12 originated 20 loans in Cypress Hills and City
13 Line for a total of $1,509,000. This is less
14 than one third the amount lent in 1994. In
15 1996 no home purchase loans were approved for
16 the 22 census tracts for Cypress Hills and City
17 Line and 72 percent of the applicants for home
18 improvement and refinancing loans were
19 rejected.
20 As Cesiah spoke of, the Reinvestment
21 Committee has asked for the last several years
22 that all major commercial banks in our
23 communities reinvest 5 percent of their local
24 deposits in affordable housing credit products.
25 For Citibank this is equivalent of 5
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2 percent of 30 million dollars annually.
3 Citibank has fallen short of its goal every
4 year since 1995.
5 Remarkably, the beginning of this
6 decline in lending corresponds with Citibank's
7 rash of downgrading the ATM centers and branch
8 closings. Given Citibank's penchant for
9 closing branches and converting full service
10 branches to technology centers, the
11 Reinvestment Committee of Cypress Hills and
12 City Line is wary of Citibank's assurances of
13 maintaining services that will adequately meet
14 the credit needs of our community.
15 Many seniors, new immigrants and
16 merchants use the branch located in City Line.
17 These consumers are not familiar with, nor are
18 they comfortable using technology with no human
19 contact. Neighborhoods are unique and have
20 different credit needs which cannot be
21 addressed by a machine, or by someone in
22 another state halfway across the country.
23 As Michelle stated, full service
24 banking is really needed in low income
25 communities such as ours.
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2 Citibank has the highest minimum
3 balance of any bank with branches in or close
4 to Cypress Hills. The minimum balance to avoid
5 paying a monthly fee is twice as high as any
6 other bank with the requirement of six thousand
7 dollars. As Cypress Hills and City Line are
8 low to moderate income communities this
9 precludes many from being able to use their
10 banking services.
11 As Michelle was mentioning,
12 Citibank's on the ground team helps homeowners
13 or tries to help homeowners work out when they
14 are facing any financial crisis. If Citibank
15 increases its lending, it has to increase its
16 own infrastructure by creatively working. The
17 local on the ground team must have the
18 authority to do this type of work. Again, I
19 call on you regulators to uphold the existing
20 laws, and thank you for this.
21 THE COURT: Mr. Green.
22 MR. GREEN: My name is Michael Green
23 Inner City Prospective Homeowners Association.
24 I speak in Spanish. The guy
25 translate for all you.
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2 (Translated by Mr. Ortiz)
3 The practice, this discriminatory
4 practice of Citibank are in part the fault of
5 the bank for not sufficiently enforcing the
6 Community Investment Act.
7 I am looking for credit and insuring
8 offered by Travelers Group, but it's not given
9 equally. I will be hurt if the Federal Reserve
10 Bank approves this application, especially
11 since it's an illegal merger.
12 We would like to thank the Federal
13 Reserve Board for this public hearing, but we
14 also think that the decision of the Federal
15 Reserve Board has been made, even though it is
16 an illegal merger.
17 In 1995 I came here to testify
18 against the Chase Chemical merger. I spoke and
19 you told me thank you, and I heard groups speak
20 on behalf of Chase and Chemical, and about the
21 good of the merger, and it hasn't been a good
22 merger.
23 We spoke at the Federal Reserve
24 Board. The Federal Reserve Board approved the
25 merger in short, and said that our group had no
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2 right to take our decision to the courts.
3 In the last couple of years Chase had
4 sold about a hundred branches in New York, and
5 it's very difficult for us now to get credit.
6 We have been able to obtain five branches from
7 other banks while Citibank and Chase have been
8 continuing to close branches.
9 The proposed merger of Citibank and
10 Travelers is very different from the merger of
11 Chase and Chemical. The merger of Citibank and
12 Travelers is illegal. For a bank and insurance
13 company to merge that would be like changing
14 the law. If the Federal Reserve Board thinks
15 that the law is important, then you should deny
16 the application and the merger.
17 Our organization has asked for a more
18 formal procedure for the application where we
19 would ask questions to Citibank and Travelers
20 officials. In that procedure we will be able
21 to amass more information considering that it
22 has been short of time.
23 Thank you.
24 MR. LONEY: Thank you, Mr. Green.
25 Mr. Otenez.
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2 (Translated from Spanish by Mr.
3 Ortiz)
4 MR. OTENEZ: Good afternoon, my name
5 is Claudino Otenez. I am a member of the Inner
6 City Press Community on the Move and part of
7 the Homesteader's Association.
8 My experience with the Citibank has
9 been negative or more accurately nonexistent.
10 Citibank currently has one branch
11 open in the South Bronx. I'm a person looking
12 for credit, insurance and I will be hurt if the
13 Federal Reserve Board approves this
14 application.
15 I would like to thank the Federal
16 Reserve Board for this public hearing, but we
17 think that the decision of the Federal Reserve
18 Board has already been made, even though it's
19 and illegal merger.
20 In 1995 we came here to protest the
21 merger of Chase and Chemical Bank. We spoke
22 and we heard many groups that they talk about
23 how good the Chemical and Chase merger would
24 be. The Federal Reserve Board approved the
25 merger. The Federal Reserve Board approved the
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2 merger and told us that we did not have a right
3 to have a judge check the decision.
4 In the last couple of years Chase has
5 closed about one hundred branches in New York.
6 It is very hard to obtain credit now. We have
7 been able to obtain five new branches
8 throughout other banks, while Chase and
9 Citibank continues to close theirs.
10 The proposed merger of Citibank and
11 Travelers is very different than the Chase and
12 Chemical mergers. The merger of Citibank and
13 Travelers is and illegal merger. The merging
14 of an insurance company and a bank would be
15 changing the law. If the Federal Reserve is
16 serious about the law, they would deny the
17 application of the merger of Travelers and
18 Citibank. Thank you.
19 MR. LONEY: Thank you. Any questions
20 of this panel? If not, I will thank the panel
21 very much for coming.