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Public Meeting Transcripts

Public Meeting Regarding Citicorp and Travelers Group

Thursday, June 25, 1998

Transcript of Panel Two

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  20               MR. LONEY:  Thank you.

  21               Are there any questions for the

  22     panel?  Thank you very much.

  23               Because some people who were

  24     scheduled to testify on Panel One and Two

  25     haven't arrived yet, I am going to ask that



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   2     Panel Three, made up of Gloria Waldron, Chitra

   3     Desai, Matthew Lee, Jose Torres, Narcisco Ortiz

   4     and Gwendolyn Jacobs come up.

   5               I understand that you are all ready.

   6               Since this panel is made up of

   7     representatives from two organizations in the

   8     City Press and Community On The Move and ACORN,

   9     the way we are going to proceed, if I

  10     understand, Mr. Lee wants to make some

  11     technical, legal objections first.  We will

  12     take a couple of minutes to do that.  We will

  13     then follow with ACORN dividing its time in 15

  14     minutes between its members, however you wish.

  15     And then the City Press can divide the

  16     remainder of the time as you wish to make more

  17     fulsome statements.

  18               Mr. Lee.

  19               MR. LEE:  Thanks, Mr. Loney.

  20               There has been sort of -- the initial

  21     panels were somewhat surreal.  On behalf of

  22     Inner City Press, Community On The Move, and

  23     the Delaware Reinvestment Action Council and

  24     certain other groups opposed to the merger as

  25     an illegal combination of banking and insurance



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   2     underwriting by companies with negative records

   3     in low- and moderate-income areas and to people

   4     of color, we want to put in some actual

   5     objections even to the proceeding going

   6     forward.

   7               We have asked that the Federal

   8     Reserve Board dismiss the application, both on

   9     the grounds that Travelers has presented no

  10     plan to divest insurance underwriting --

  11     although, the Bank Holding Company Act makes

  12     clear that it is to prohibit the combination of

  13     the two, and we heard earlier today, if it

  14     proves necessary to divest, essentially absent

  15     a divestiture plan from Travelers the

  16     application should be dismissed.

  17               Second, we think it should be

  18     dismissed based on improper communications that

  19     have taken place between Travelers, Citicorp

  20     and the Federal Reserve Board.

  21               Prior to the deal even being

  22     announced and the application being submitted,

  23     not only did the two CEOs of the two

  24     institutions meet with Chairman Greenspan, we

  25     found that, in fact, there was very detailed



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   2     preapproval sought for particular practices,

   3     including cross-selling and the sharing of data

   4     within the two-year divestiture period, which

   5     totally contradicts the theory of selling it

   6     off.  We think it is tainted.

   7               We also asked that Chairman Greenspan

   8     and McDonough be recused from deliberation and

   9     decision making on the application because they

  10     have already indicated their support of and, in

  11     fact, essentially preapproval of the proposal.

  12               There is also -- a lot of information

  13     still remains withheld from the public.  Large

  14     portions of the applications have been withheld

  15     and haven't been released.  As noted, Travelers

  16     has not submitted any plan to divest and has no

  17     intent to divest.  And finally on that front,

  18     the Fed continues to withhold documents about

  19     the communications it had with the companies

  20     before the proposal was even announced.  So the

  21     application should have been dismissed.

  22               We think the common period has to

  23     remain open for at least 20 business days after

  24     all that information is released.

  25               Thanks.



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   2               MS. JACOBS:  My name is Gwendolyn

   3     Jacobs.  I am the president of New York ACORN,

   4     and I am testifying today for New York ACORN

   5     and for Maude Hurd, ACORN's national president,

   6     who is not able to be here.

   7               In April ACORN did a study of

   8     Citibank's record on single-family lending to

   9     borrowers of different races and incomes in ten

  10     cities; we also looked at their lending record

  11     by neighborhood in six cities.  Finally, we

  12     compared Citibank's performance to the

  13     performance of other institutions.

  14               What we found is that if you are a

  15     lower income person of any race, and especially

  16     if you are African-American or Latino, you had

  17     better not look to Citibank for loans.

  18     Citibank is not looking for our business, and

  19     if we go to them, we are much more likely to be

  20     rejected.  Citibank is not making loans in our

  21     communities and not meeting its basic legal

  22     obligation to serve all potential boroughs in

  23     the service areas.

  24               Before I go over some of the details

  25     of Citibank's outrageously bad record, there



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   2     are two important things to keep in mind.

   3               First, don't dismiss the numbers on

   4     Citibank's failure to serve low- and

   5     moderate-income people with the thought we

   6     can't afford to buy homes anyway.  In cities

   7     around the country, people with moderate

   8     incomes, below 80 percent of the area median,

   9     and people with low incomes, below 50 percent

  10     of the area median, even those with incomes

  11     below 30 percent of the area median, can and do

  12     buy homes.  We can and do buy homes, and we can

  13     and do pay our mortgages when banks will lend

  14     to us.

  15               When banks like Citibank won't lend

  16     to us, we pay someone else rent forever --

  17     often more rent than we would pay monthly for a

  18     mortgage -- without ever building the equity of

  19     owning a home.  Or we are forced to pay

  20     outrageous interest rates at mortgage

  21     companies.  Potential home buyers who would

  22     contribute to community growth and stability

  23     are forced to move in order to get a loan;

  24     houses are left abandoned, and neighborhoods

  25     deteriorate.



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   2               In 1996, the most recent year for

   3     which data was available, a Latino applicant

   4     for a home loan at Citibank was 300 percent

   5     more likely to be rejected than a white

   6     applicant.  An African-American applicant was

   7     350 percent more likely to be rejected than a

   8     white applicant.

   9               How does this compare to other

  10     institutions?

  11               Citibank is much worse than your

  12     average bank.  Citibank's rejection ratios --

  13     the rate at which minority applicants are

  14     turned away as compared to white applicants --

  15     are substantially worse than the average

  16     rejection ratios of all lenders in the 15 major

  17     cities that ACORN has studied.

  18               On average, Latinos were rejected 1.7

  19     times as often as whites in 1966 compared to

  20     three times as often as Citibank; and

  21     African-Americans on average were rejected 2.1

  22     times as often as white applicants compared to

  23     3.6 times as often as Citibank.

  24               How does this compare to Citibank's

  25     own performance?  Citibank's own performance is



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   2     getting worse, not better.  Citibank's loans to

   3     African-Americans and Latinos fell by more than

   4     50 percent in 1995 and 1996.  The share of

   5     Citibank's single-family mortgages that went to

   6     Latino and African-American families fell

   7     dramatically from 36 percent in 1995 to 13

   8     percent in 1996.

   9               Even when we looked only at

  10     relatively high-income applicant -- families

  11     earning $50,000 and $60,000 a year and more --

  12     we found that African applicants were rejected

  13     nearly three times as often as whites, and

  14     Latino applicants were rejected more than four

  15     times as often as whites.

  16               One thing that is particularly

  17     disturbing about Citibank's record is the fact

  18     that not only do they reject minority

  19     applicants at high and growing rates, but also

  20     their practices -- rejection, location

  21     decision, advertising, outreach, customer

  22     service -- who knows what combination of

  23     elements -- seem to be working increasingly to

  24     discourage or prevent minority families from

  25     even applying for loans.



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   2               While the bank's total number of

   3     applications per year is growing, both the

   4     percent of their applications from minority

   5     borrowers, and even the absolute number of such

   6     applications shrank between 1996 and 1995 to

   7     unacceptable levels.  Total applications from

   8     African-Americans and Latinos fell by 47 and 48

   9     percent, respectively.

  10               What if we look at a neighborhood,

  11     not individual borrowers, or if we focus on

  12     income alone, rather than race?

  13               Citibank has systematically redlined

  14     lower income neighborhoods of all races, as

  15     well as minority neighborhoods.

  16               For example, Citibank made 104 loans

  17     in Baltimore area in 1996.  Only 13 of these,

  18     however, were made inside the city limits --

  19     where the Citibank branch itself is located.

  20               Looking outside as well as inside the

  21     city, nearly half of the Baltimore area

  22     neighborhoods, 47 percent, are low and moderate

  23     income -- that is, with average incomes below

  24     80 percent of area medians -- but these

  25     neighborhoods received only 17 percent of the



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   2     loans from Citibank.  Neighborhoods with

   3     average income below 50 percent of the area

   4     median are 16 percent of the metro area, but

   5     received only 2 percent of Citibank's

   6     mortgages.  Neighborhoods with more than 90

   7     percent minority residents make up 1.54 percent

   8     of the Baltimore metro area, but received only

   9     one mortgage loan.  One mortgage loan.

  10               In Miami, where nearly half -- so you

  11     can see from the practices that have taken

  12     place Citibank does not have a good lending

  13     record where blacks and Latinos are concerned,

  14     and merging with Travelers is going to give

  15     them more, make them bigger, but bigger does

  16     not necessarily mean better.

  17               MR. LONEY:  Gloria Waldron.

  18               MS. WALDRON:  My name is Gloria

  19     Waldron.  I am a member of the New York ACORN.

  20     I am testifying in part for Ted Thomas, who is

  21     the president of Chicago ACORN, and was not

  22     able to be here.

  23               I want to say first for Ted and

  24     others in Chicago and around the country how

  25     disappointed and angry we are that the Federal



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   2     Reserve is holding hearings on a merger of this

   3     magnitude here in New York.  A huge merger is

   4     being proposed between two giant companies with

   5     bad records, and it is a merger that we and

   6     many of us believe is illegal under current

   7     banking law.

   8               Tens of thousands of consumers across

   9     the country will be affected by this merger, in

  10     Chicago and in Oakland, Miami, and everywhere.

  11     They are being denied the opportunity to

  12     comment on it in person and leave their

  13     messages to the regulators about what is at

  14     stake here.

  15               In Chicago in particular I know that

  16     not only ACORN but also the Chicago Community

  17     Reinvestment Coalition and the Woodstock

  18     institute and others, groups with a long,

  19     active, and successful history of fighting for

  20     fair access to credit have asked for hearings.

  21     When the Federal Reserve Board refused, the

  22     Woodstock institute proposed a video hearing,

  23     but the Board said that that was too

  24     complicated, too.  When we see that the Federal

  25     Reserve Board cannot even be bothered to take



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   2     the trouble to be thorough in hearing from the

   3     public about a merger this important, we are

   4     pretty upset.

   5               Now I want to talk about three

   6     things.  First, the Travelers record of

   7     ignoring inner city and minority neighborhoods;

   8     second, the total inadequacy of Citibank's

   9     announced CRA commitment; and, third, the legal

  10     and dangerous nature of this proposed merger.

  11               Travelers Insurance is not serving

  12     lower income, urban and minority neighborhoods.

  13     We don't have as many numbers on Travelers as

  14     we do on Citibank, because they do not have to

  15     make their numbers public.  That is part of the

  16     problem.  What we do know isn't good though.

  17               Insurance industry studies have

  18     pointed out that most insurance agent's

  19     business comes from within three miles of the

  20     office location, and office location was a key

  21     element in the Justice Department's Fair

  22     Housing Suit against the American Family

  23     company in 1995.  So, in order to back up what

  24     we know from the experience about Travelers'

  25     performance, ACORN has taken a look at their



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   2     office locations and also the advertising

   3     practices.

   4               What we have found is that in the ten

   5     large racially mixed cities and their

   6     surrounding metro areas that we looked at,

   7     three out of four Travelers agents are located

   8     in zip codes where whites make up more than 85

   9     percent of the population.

  10               The Travelers' agents are located

  11     mostly in suburban areas, especially wealthier

  12     and whiter ones.  Fewer than one-third of the

  13     agents overall were located within the city

  14     limits, and this ratio was especially bad in

  15     certain cities.  In D.C., only 13 percent are

  16     within the city limits; in Bridgeport, only 8

  17     percent are within the city limits; and listen

  18     to this, in Philadelphia, only 2 percent of

  19     Travelers' agents are located -- we have the

  20     maps here to show you the locations.  We have

  21     the maps here.  You can peruse it afterwards.

  22               The Travelers' agents are located 3

  23     miles away from the low- and moderate-income

  24     and minority neighborhoods.  93 percent of

  25     Travelers' insurance agents in the cities we



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   2     looked at were further than 3 miles from ACORN

   3     neighborhoods, while, as I said, industry

   4     studies show that most of an agent's business

   5     comes from within 3 miles of the office.  In

   6     Philadelphia Travelers' agents are on an

   7     average more than 20 miles from central North

   8     Philly.  In New York, the average distance of

   9     Travelers' agents from downtown Brooklyn is 24

  10     miles.

  11               These maps let you see where

  12     Travelers' offices are and aren't in New York

  13     and Philly.

  14               Limited information about Travelers

  15     is available for average consumers, especially

  16     in large cities.  The company doesn't list many

  17     agents in the phone book, and when it does list

  18     it is most often in suburban books.  Unlike its

  19     competitors.  Travelers does not advertise in

  20     city telephone books.

  21               In contrast, the company's Internet

  22     home page -- which is much less accessible to

  23     low- and moderate-income people, as well as

  24     minorities who are below rate of Internet

  25     access than the population as a whole -- list



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   2     many more agents than do the phone book.

   3               MS. DESAI:  My name is Chitra Desai

   4     and I am a proud member of ACORN.  I will

   5     continue.  Gwen Jacobs, the president, has

   6     spoken before.

   7               Citibank has now announced a

   8     so-called commitment to low-income areas to go

   9     with its merger proposal.  We think it is much

  10     too little and much too vague.

  11               Citibank has promised $115 billion

  12     over ten years, which is only 2 percent of its

  13     assets annually.  That is 2 percent of its

  14     assets for African-Americans and low- and

  15     moderate-income people.  I call it insulting,

  16     and so do we at ACORN.

  17               Other banks involved in recent

  18     mergers have promised much more -- 6 percent

  19     for Nationsbank; 5.5 percent for Bank of

  20     America, etc.

  21               Even within the 115 billion, most of

  22     what Citibank has promised is consumer lending,

  23     like credit cards and auto loans.  This will

  24     not do anything to deal with their basic

  25     problem with making home loans or small



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   2     business loans in our neighborhoods.

   3               Finally, not only do Travelers and

   4     Citibank each have records of shutting the door

   5     to credit, home ownership and insurance in the

   6     faces of low- and moderate-income and minority

   7     people -- I repeat, in the faces of low- and

   8     moderate-income and minority people -- but the

   9     giant combination they are proposing breaks

  10     banking laws designed to protect the public

  11     from too close relationships between banks and

  12     other kinds of companies, and make sure that

  13     banks and other kinds of companies are

  14     regulated as they need to be.

  15               These laws were passed by Congress --

  16     elected by the American people -- and they have

  17     not yet been changed by Congress.  We do not

  18     think that the Federal Reserve Board on its own

  19     should be deciding to change them or to allow

  20     special exceptions.

  21               Citibank and Travelers alone already

  22     have the power to block people in my

  23     neighborhood and in neighborhoods like mine

  24     around New York and around the country from

  25     getting the financial resources we need to have



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   2     a fair chance in this economy.  They are doing

   3     it already.

   4               I am honestly angry and scared at the

   5     thought of their getting together, getting

   6     bigger, getting even less interested in dealing

   7     with anyone who is not already part of their

   8     world.  I am angry personally, and the voices

   9     of the people will be heard.

  10               (Demonstration)

  11               MR. LONEY:  We need some order,

  12     please.

  13               MR. HODGETTS:  Mrs. Jacobs, before

  14     you leave, you mentioned a study you did on

  15     lending.  If you haven't submitted that, will

  16     you submit it, please?

  17               MS. JACOBS:  Certainly.  You will get

  18     it tomorrow.

  19               MR. LONEY:  Mr. Lee, you want to go

  20     first?

  21               MR. LEE:  Sure.  In terms of surreal,

  22     obviously we had one panel saying how great

  23     Citibank is in Stamford, Connecticut, or in

  24     Co-op City in the Bronx.  Our organization is

  25     headquartered in South Bronx, although we now



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   2     do work elsewhere.

   3               Despite what Ms. Flaherty said on the

   4     Citibank panel, in the last two years Citibank

   5     has closed seven branches in the Bronx.  They

   6     haven't really replaced it with any kind of

   7     meaningful technology.  Elderly people, at the

   8     same time -- I guess there was other testimony

   9     about that -- have had to travel a mile and a

  10     half or two miles to go to another Citibank

  11     facility.  Citibank had first offered to run a

  12     van and then stopped running the van after

  13     about a month.

  14               So what we have decided to focus

  15     on -- because we are aware of the Fed record --

  16     the Federal Reserve Board, despite holding

  17     these hearings, in the case of Chemical and in

  18     the case of First Union Costars, in the case of

  19     Wells Fargo, First Interstate, since 1977 the

  20     Fed has denied about four mergers on CRA

  21     grounds.  So in a way I don't want to say -- I

  22     think that maybe there is a new mood afoot, but

  23     in this merger it is not -- I think to turn the

  24     public median into a referendum on their pledge

  25     is only serving the bank.



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   2               The pledge is bogus.  That is our

   3     position.  More than half of it is credit

   4     cards, which no other bank is included in a

   5     pledge.  The thing about it is, also, it is not

   6     even -- the pledge is not binding in any way.

   7     It is essentially a press release.  But the

   8     thing is, to even get into that, we are going

   9     to hear, I guess, later today from some

  10     witnesses saying with the pledge they feel that

  11     the support will still come through.  I have

  12     seen letters of support from symphonies in Boca

  13     Raton, Florida, things like that.  These are

  14     fine.  We are all for the symphony.

  15               I think the simplest ground we want

  16     to focus on is that this merger is illegal

  17     under current law, that for the Fed to even be

  18     considering approving it is being totally

  19     remiss in its duty.  The Fed doesn't write the

  20     law.  Congress writes the law.  Congress wrote

  21     a law that says no company should own banks and

  22     insurance underwriting operations at the same

  23     time.  It is totally clear.

  24               At the time it was written, companies

  25     were given two years to sell off nonpermissible



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                                                                85
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   2     things.  The purpose of the two years was to

   3     separate the things.  We have gone back and

   4     looked at legislative history.  Law was passed.

   5     To bring up TransAmerica, which used to own

   6     banks and insurance companies, and Oxidental

   7     Life, which used to own the same.

   8               Mr. Prince, earlier today -- just for

   9     the record, we sort of tracked Mr. Prince

  10     around the eastern seaboard for the last few

  11     months, in the sense that we did

  12     cross-examination of Mr. Prince at the Delaware

  13     Insurance Department in early June.

  14               Under oath Mr. Prince said,

  15     essentially said, they have absolutely no

  16     financial projections of what would happen if

  17     they sold off the insurance and essentially no

  18     plan to sell the insurance.  I guess they

  19     honestly believe that the Fed -- based on

  20     having checked with the Fed before announcing

  21     the deal -- likes the deal and would give

  22     extensions even beyond the two years.

  23               Here is something, because I can't --

  24     to shift into saying, well, no credit cards,

  25     let's say Citibank tomorrow said, OK, no more



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                                                                86
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   2     credit cards.  It is the "emperor has no

   3     clothes."  In other words, it is illegal.  This

   4     is actually one where for the Fed it is pretty

   5     straightforward in terms of not -- the Fed is

   6     lobbying for a financial modernization bill,

   7     but that is not the law.  And I think the Fed,

   8     by lobbying for it, it is clear that it is not

   9     the law.

  10               There are some sort of key things we

  11     want to put in and then we will go back to the

  12     same analysis that ACORN did very well.

  13               The Fed's own -- hang on a second.

  14     This is important, because this is a

  15     regulation.  It is the Fed's own regulation.

  16               The Fed's own regulation says any

  17     time -- Travelers claims to have two years.

  18     They would have a two-year waiver.  The Fed's

  19     own regulation, regulation-wide Section

  20     225.138, says, "when a time period has been

  21     fixed for divestiture, the effected company

  22     should endeavor and should be encouraged to

  23     complete the divestiture as early as possible

  24     in this specific time period."

  25               It goes on to say, "the company



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                                                                87
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   2     effected should be asked to submit a

   3     divestiture plan promptly and it should be as

   4     specific as possible, and no extension should

   5     be granted unless the company has established

   6     that it has made a good faith effort to

   7     accomplish the divestiture."

   8               For Travelers to even be saying maybe

   9     they could get extensions is a joke.  If they

  10     wanted to sell their insurance operations, they

  11     could sell it tomorrow.  To claim in two years

  12     to haven't sold it yet, there is obviously no

  13     good faith effort.

  14               There is another key point.  They

  15     claim the two years is automatic.  We think

  16     that the whole proposal here is directed at

  17     evading the Bank Holding Company Act.  It is

  18     clear that it is.

  19               There is a Fed precedent right on

  20     this point, where an insurance company called

  21     Fortis -- it is a foreign insurance company --

  22     it bought a Belgian bank with a branch in the

  23     United States.  Fed says you have to sell the

  24     bank in two years, and during the two years no

  25     steps shall be taken to identify the insurance



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   2     products as being related to the banking

   3     products; there shall be no cross-marketing of

   4     the bank's banking products and insurance

   5     products; Fortis and bank shall not share

   6     customer lists or otherwise share information

   7     relating to the customers of either; and the

   8     bank may not expand beyond the size at the time

   9     of the combination.

  10               We think these are -- the reason that

  11     Travelers and Citibank checked with Chairman

  12     Greenspan and the general counsel of the Fed

  13     before announcing the deal is because they

  14     couldn't live with these conditions.  With

  15     these conditions, they wouldn't announce the

  16     deal.  So they checked with the Fed to say,

  17     this is a little different; that is Fortis, but

  18     we are Travelers and Citibank.

  19               As ACORN said, the power -- this is

  20     not a small bank.  These are among the most

  21     powerful people in the country.  They go down

  22     to Washington, and people are running for

  23     Congress; everyone will listen to them.

  24               For the Fed to have indicated in

  25     advance that its own prior decisions on other



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                                                                89
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   2     banks' applications mean nothing and that

   3     because the Fed likes this idea, the idea of

   4     this deal, it will go forward and it will sort

   5     of pretend to hear about consumer issues.

   6               A main consumer issue here -- one of

   7     the reasons the law is the law, but if you

   8     wanted to know why the law is the law -- you

   9     give information to your health insurer that

  10     you don't want to give to your bank.  Your

  11     health insurer knows if you're sick, might know

  12     if you're dying.  I guess that is their job.

  13     Your bank doesn't know that; don't want your

  14     bank to know that.  If a bank knows that, they

  15     may not extend credit to you.  They may call in

  16     the loans that you have.  In a way, I don't

  17     even feel this is the forum to have to sort of

  18     make the argument of why insurance and banking

  19     should be separate.

  20               The law is the law, and that's the

  21     current law.  They have applied under the

  22     current law.  It is clearly invasive.  The Fed

  23     should never have given any preindication that

  24     it might try, and it should be dismissed and

  25     denied.



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   2               I am going to turn over to Narcisco

   3     to talk about the community record of Citibank.

   4               MR. ORTIZ:  Good morning.  My name is

   5     Narcisco Ortiz.  I live in New Jersey, where

   6     Citibank made 108 loans to whites while only

   7     making five to African-Americans and two to

   8     Hispanic Americans.

   9               Last week, a week ago today, to be

  10     exact, we went down to Trenton, to the New

  11     Jersey Insurance Department, to oppose

  12     Travelers' application to acquire a Citicorp

  13     subsidiary in New Jersey.  We're concerned

  14     about Travelers redlining, including by its

  15     property counsel -- to insure First Trenton

  16     Indemnity.  Travelers, last week, hired the

  17     ex-Attorney General of New Jersey to argue that

  18     the public should not be able to even

  19     participate in the required public hearing.

  20               We did participate, and we asked the

  21     court to take a look at Travelers' arguments.

  22     But the other community groups here today

  23     should know that if Travelers buys Citicorp,

  24     this is the kind of abusive power attitude you

  25     will be facing.



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   1

   2               Inner City Press, Community On The

   3     Move, has put in filings with the Fed that

   4     argue not only that this merger will be

   5     illegal, but that Citicorp and its bank have

   6     weak and disparate lending practices.  I am

   7     going to review some of the analysis for the

   8     record.

   9               Entity-wide in 1996, the most recent

  10     year for which industry data is publicly

  11     available, Citibank New York State denied 52

  12     percent of mortgage loan applications from

  13     African-Americans, while denying only 20

  14     percent of applications from whites.  Citibank

  15     New York State's rate disparity between

  16     African-Americans and whites of 2.6 to 1 is

  17     significantly higher than the rest of the

  18     industry.

  19               In the past two years, Citibank has

  20     closed or downgraded seven of its already too

  21     few branches in the Bronx.  Citibank, the

  22     second largest bank in New York City and in the

  23     United States, has only one bank branch in the

  24     entire south Bronx where half a million people

  25     live.  Overall, in the New York City



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   1

   2     metropolitan area in 1996, Citibank made 3,999

   3     loans.

   4               Citibank's market share of loans to

   5     whites, 12.5 percent, was double its market

   6     share of loans to African-Americans, 2.2

   7     percent, and lowered its market share of loans

   8     2.2 percent.  The same holds true for the 600

   9     loans made by Citibank Mortgage in this MSA

  10     1996.  Nevertheless, Citibank mortgage in this

  11     MAS denied 35 percent of applications of

  12     African-Americans and only 15 percent of

  13     applications from whites, a disparity of 2.33,

  14     higher than the industry average in the MSA.

  15               Citicorp in Connecticut in 1996.

  16     Citicorp, while systematically closing and

  17     downgrading its branches in low- and

  18     moderate-income and minority inner city

  19     neighborhoods, have opened branches in more

  20     affluent areas, including in Connecticut.

  21               (Continued on next page)

  22

  23

  24

  25



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   1

   2               Citicorp through Citibank SSD now has

   3     seven branches in Connecticut and affluent

   4     suburbs.  In Stanford-Norwalk 1996 Citibank F&C
   5     made 573 loans.  It made 401 of these loans to

   6     whites and only five African-Americans and one

   7     toward Hispanic household.  In this MSA 1996

   8     Citibank mortgage made thirty loans to whites,

   9     only one to Hispanic and no loans at all to

  10     African-American.

  11               This exemplifies its discriminatory

  12     pricing, separate and unequal structure of

  13     proposed Citigroup would have.  As Matthew said

  14     in 1997 denied only four branch on CRA grounds.

  15     If this merger is not warranted now, I don't

  16     know what does.  Not only is it illegal by

  17     violating the Bank Holding Company Act, but it

  18     would expand the serious power on Citibank a

  19     lender, denying and excluding other minority

  20     customers while PrimeAmerica Commercial Credit

  21     lending at higher rate and overpriced product.

  22     The proposal to be denied.  Thank you.

  23               MR. TORRES:  Good morning.  My name

  24     is Jose Torres.

  25               I'm going to use Matthew to translate



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                                                                94
   1

   2     my English because my English not good, I'm

   3     sorry.

   4               (Through translator)

   5               Good day.  My name is Jose Torres.  I

   6     am a member of South Bronx Inner City Small

   7     Business Association.

   8               Our experience as residents of small

   9     business people in South Bronx have been that

  10     Citibank has abandoned our community.  We found

  11     that Citibank has closed its branches, has been

  12     unwilling to lend, especially to small

  13     businesses.  Now they say they'll leaned $115

  14     billion dollars over ten years.  It's too late.

  15               Fundamentally this proposed merger of

  16     an insurance company and a bank is illegal.

  17     Congress has said that no company should be an

  18     owner of a bank and of an insurance company.

  19     That should be sufficient for the Federal

  20     Reserve to deny this merger.

  21               Here are one or two examples why

  22     banks should not be able to merge with

  23     insurance companies.  A consumer gives

  24     information to its insurance company that he or

  25     she doesn't have to or doesn't need to give to



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                                                                95
   1

   2     the bank.  If, for example, the insurance

   3     company knows that you are sick or dying and

   4     gives this information to a bank, the bank

   5     could say that you have to repay all of your

   6     loans or may not extend more credit.  That is

   7     only one example.

   8               I'm in search of both credit and

   9     insurance and I would be injured if the Federal

  10     Reserve approved this application.  Our

  11     organization has asked for a more formal

  12     proceeding on the application in which we will

  13     be able to ask questions of the officials at

  14     Citibank, and of the Travelers Group.  In this

  15     proceeding or in that proceeding or later in

  16     court I will provide more information that I

  17     cannot provide today because of shortness of

  18     time.

  19               Citibank has abused the process

  20     forcing various groups, community groups to

  21     come today and to say that Citibank is good,

  22     but that has nothing to do with the fundamental

  23     question on the application.  This proposed

  24     merger is illegal.  The Federal Reserve should

  25     deny the application and the proposed merger.



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   1

   2               Thank you for your attention.

   3               MR. LONEY:  Thank you.

   4               I have one question.  Mr. Ortiz, did

   5     I understand you to say that there is one

   6     branch of Citibank in the South Bronx?  Did I

   7     get that right?

   8               MR. ORTIZ:  Yes, that's correct.

   9               MR. LEE:  They also have one

  10     basically serving only the Hunts Point market.

  11     Below the whole residential area there is one

  12     on 149th and Cortland Avenue, that's it.

  13               MR. LONEY:  Thank you.  Any other

  14     questions of this panel?

  15               MR. ALVAREZ:  I have a question,

  16     Mr. Lee, you mentioned that you think, in fact

  17     all the panelists have mentioned they believe

  18     this merger is illegal because it combines

  19     insurance activities and banking activities.

  20     In the proposal, if Travelers group does divest

  21     its insurance activities within the two year

  22     period provided in the Bank Holding Company Act

  23     do you continue to believe that the transaction

  24     is illegal?

  25               MR. LEE:  Yes, we do, under for



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                                                                97
   1

   2     example the board's own Citibank South Dakota

   3     decision in 1985 it says right in it that the

   4     board is directed by Congress to enforce the

   5     purposes of the Bank Company Holding Act.  See

   6     the difference is it's if two big companies

   7     merge and there is one small piece that's

   8     nonpermissible to give them two years to sell

   9     seems reasonable.  That was the purpose of the

  10     act.

  11               Here the very proposal is directed at

  12     evading the act.  The applicant has no

  13     intention to divest.  They said, I've gone to

  14     the Delaware and New Jersey insurance

  15     departments and heard them say, we'd be very

  16     surprised if we have to divest.  Today

  17     Mr. Prince said, well, if divestiture turns out

  18     to be necessary.  The point is I'll say this, I

  19     think given that the size of the business

  20     they're trying to keep as nonpermissible and

  21     given the open goal of changing the law, their

  22     goal of two-year waiver is to change the law.

  23     It's not to looking to divest in that case the

  24     commitment, and there is another, in our

  25     written submission there is a citation to a '92



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                                                                98
   1

   2     Bank of America decision where they bought a

   3     savings bank where the board required

   4     divestiture prior to consummation.  I honestly

   5     believe the problem is even getting into that,

   6     the communications that took place before they

   7     announced the deal were absolutely improper.

   8     So it's sort of late in this process to say

   9     well, maybe the way you clean the taint is to

  10     say, I say that then we get into this area, if

  11     they were to commit up front to divest all

  12     nonpermissible things prior to consummating the

  13     merger, no two-year waiver I guess that's the

  14     purpose and then you get as a fall back

  15     position there is two years they are assuming

  16     that they can cross sell and share data in the

  17     two years and it's our understanding from the

  18     letters we received under FOIA that the Fed's

  19     general counsel says that's fine, that's what

  20     really bothers us.

  21               It's contrary to what the Fed has

  22     done in the past.  It's horrible to the people.

  23     It's contemptuous of the legislative process,

  24     so we're against it.

  25               We're asking to dismiss, and if you



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                                                                99
   1

   2     refuse to dismiss, to deny and to leave the

   3     period open.  I'm sorry for the long answer.

   4               MR. ALVAREZ:  Thank you.

   5               MR. LONEY:  Ms. McCall, any

   6     questions?

   7               MS. MC CALL:  No.  Thank you very

   8     much for your contribution this morning.

Last update: December 3, 2010