Home > Banking Information & Regulation > Public Meeting Transcripts > PMT - Agendas June 25-26, 1998
Public Meeting Transcripts
Public Meeting Regarding Citicorp and Travelers Group
Thursday, June 25, 1998
Transcript of Panel Eight
236 25 The next panel is panel 8 Hubert Van . 237 1 2 Tol, Phyllis Salowe-Kaye, Rashnmi Rangan, Ruhi 3 Maker, Gail Burks, and Alan Fisher from 4 California Reinvestment Committee has asked 5 that the letter that he propose be read into 6 the record as has Mr. Van Tol of the Wisconsin 7 Rural Development Center. 8 Mr. Ortiz, are you going to read both 9 of those letters? 10 MR. ORTIZ: No. I'm going to read Mr. 11 Fisher's letter. 12 Dear Mr. Loney: The California 13 Reinvestment Committee regrets it cannot be 14 present for this testimony in person. We 15 authorize the Inner City Press/On the Move to 16 enter our testimony into the record and request 17 it consent on the matter. 18 We would like to extend our 19 appreciation to the Federal Reserve for 20 inviting public comment on the Citicorp 21 Travelers proposed merger. 22 I am Ernesto Ortiz representing the 23 California Reinvestment Committee from San 24 Francisco, California. 25 We regret that we cannot attend in . 238 1 2 person and with our coalition members, who 3 represent two hundred community-based 4 organizations around California. 5 For a number of critical reasons 6 described below, we urgently request that the 7 Federal Reserve deny Travelers' application to 8 acquire Citicorp. The crux of our argument 9 rests on the record Travelers and Citicorp has 10 established in communities of color and how 11 this merger will adversely affect low-income 12 communities. 13 As you have heard or may hear in 14 testimony from other groups both Travelers and 15 Citicorp have programs supporting community 16 investment and charitable giving. Yet both 17 groups have poor histories of serving people of 18 color and of underserving low-income 19 communities. 20 In addition, the announced $115 21 billion CRA lacks scope, size and detail for an 22 institution the size and scope of the proposed 23 Citigroup. 24 Citibank has one of the worst 25 reinvestment programs for a major California . 239 1 2 financial institution. The bank has a record 3 of severely underserving Hispanics in the 4 State. California is at least 30 percent 5 Hispanic, yet only 12 percent of the 6 applications taken by Citibank in California in 7 1995 were from Hispanics. 8 In 1996 that number plummeted to only 9 4 percent of mortgage applications. Over that 10 same period of time, the number of applications 11 accepted from white applicants increased nearly 12 10 percent. 13 For many years the bank received 14 below satisfactory ratings on it's CRA 15 performance evaluation. Oddly enough, the CRA 16 rating for Citibank improved in 1996 as their 17 lending record to Hispanics was decimated. 18 Just when their rating began to 19 improve, the bank also dropped its commitment 20 to low-income people and began to pander to 21 moderate and high income people. The bank has 22 systematically eliminated low-cost products 23 such as those Citibank competitors offered 24 specifically designed to meet the needs of 25 low-income consumers. . 240 1 2 According to Citibank literature, the 3 Basic Banking Account has a monthly service 4 charge of $6.50 and is only free if you do 5 $10,000 in business with them. 6 The new EZ Checking program is a 7 no-fee account only if you keep a balance of 8 $1500. Clearly, low-income account holders 9 were not in mind when these programs were 10 develop. The Citibank developed the small 11 business loan product which has a minimum loan 12 requirement of $100,000. 13 The minimum requirement prevents most 14 small businesses owned by people of color or 15 businesses that reside in low-income 16 communities from qualifying. 17 Instead, these communities need loans 18 in the amounts of ten to forty thousand. The 19 California Reinvestment Committee has tried 20 unsuccessfully to work with Citibank. Since 21 1992 Citibank has refused to adopt Community 22 Reinvestment recommendations provided by the 23 California Reinvestment Committee. If one 24 looks at Travelers record of serving people of 25 color, the picture is equally harrowing to that . 241 1 2 of Citibank. 3 As you may already know there is 4 outstanding housing discrimination complaint 5 against Travelers Group. The suit alleges that 6 Travelers discriminates in the provision 7 underwriting, and terms and conditions of 8 homeowners insurance to homeowners and homes in 9 African American or Latino neighborhoods. 10 Travelers maintains a minimum policy 11 value of $250,000 in metropolitan Washington, 12 D.C. This excludes more than 90 percent of 13 homes in predominantly African American and 14 Latino neighborhoods from qualifying for 15 Travelers homeowners insurance. 16 In what may be an effort to right the 17 wrong, Travelers and Citicorp has delivered a 18 $115 billion commitment to communities. 19 Unfortunately, this pledge is minuscule for an 20 institution the size of the proposed Citigroup. 21 The California Reinvestment Committee 22 has been working with banks for eleven years to 23 develop community investment goals and in all 24 our times we have not had one bank measure its 25 goals based on the bank's deposit business. . 242 1 2 Banks such as Bank of America, Washington 3 Mutual, Wells Fargo, as well as others, have 4 measured their CRA goals based on a percentage 5 of the bank's assets. 6 Currently, the industry standards is 7 8 percent of assets. If a proposed Citigroup 8 were to revise its goal amount to reflect its 9 assets, as it should, the pledge will need to 10 be increased from 115 billion to 560 billion 11 dollars, nearly a 500 percent increase. 12 But more important than the size of 13 the commitment, is how it would impact the 14 communities. This commitment provides zero 15 assurance that it will benefit low-income 16 people because the commitment lacks details on 17 how the program will be delivered. For 18 example, the proposed Citigroup pledges to 19 quote expand the availability of commercial and 20 homeowners insure coverage and low and moderate 21 income customers, yet does not describe any 22 details on how this program will be developed 23 and delivered. 24 Considering Citibank and Travelers 25 histories of underserving communities of color, . 243 1 2 we are not convinced that this pledge is backed 3 up by a clear understanding of the needs of low 4 in come areas and communities of color, nor a 5 concrete commitment that the proposed Citigroup 6 would indeed serve the chronically underserved 7 communities. 8 MR. LONEY: Thank you, Mr. Ortiz. 9 MR. LEE: We will put it in the 10 record. 11 MR. LONEY: Please do. Mr. Lee. 12 MR. LEE: I don't know if you want to 13 alternate. I'll do it. To whom it may concern 14 at the Federal Reserve: I authorize Matthrew 15 Lee of Inner City Press, or whomever he 16 designates, to read the following comments 17 during my scheduled appearance at the Citicorp 18 Travelers merger hearing on Thursday, June 19 25th, in New York City as a representative of 20 the Wisconsin Rural Development Center. 21 Mr. Lee is also authorized to answer 22 any questions that you may have. We'll see. 23 Don't count on it. 24 I would have preferred to make these 25 comments myself, but unfortunately the Federal . 244 1 2 Reserve has not agreed to use readily available 3 technologies to allow testimony from people who 4 cannot afford to travel to New York. 5 The same goes for Woodstock and I 6 also raise that for the record. Here it is. 7 Wisconsin Rural Development Center testimony to 8 the Federal Reserve on the Citicorp Travelers 9 merger. 10 June 25, New York City. 11 My name is Matthew Lee. Hubert Van 12 Tol of Sparta, Wisconsin has asked me to 13 present these comments today on behalf of the 14 Wisconsin Rural Development Center. 15 Mr. Van Tol also served as a board 16 member of the National Community Reinvestment 17 Coalition and is co-chair of NCRC's Legislative 18 Regulatory Committee. 19 Thank you for the opportunity to 20 testify today. We would have preferred the 21 opportunity to testify in a location more 22 convenient to our membership, but we 23 nevertheless bring this message to you from our 24 members. 25 Don't allow this illegal merger to . 245 1 2 take place. Wisconsin Rural Development Center 3 has been assessing the credit needs of our 4 community and working with banks in Wisconsin 5 for the past five years. WRDC is a member of 6 the National Community Reinvestment Coalition 7 and we endorse NCRC's position on this merger. 8 Our members know that the 9 consolidation in the banking industry has not 10 provided them with benefits that are worth the 11 increased fees. They doubt that further 12 consolidation across the whole range of 13 financial services will bring them any more 14 benefits than banking consolidation has. 15 Our members are primarily from rural 16 and small-town Wisconsin. They are people who 17 work hard, play by the rules and often find the 18 deck stacked against them. Even if they could 19 do so, our members would never dream of making 20 an application to the Federal Reserve for the 21 privilege of breaking the law. They don't 22 think that way, and even if they did, they 23 would have no hope of succeeding. 24 When they hear the details of what 25 Citicorp and Travelers are proposing to do with . 246 1 2 merger they just shake their heads. They know 3 why government regulators are so willing to 4 bend and break the law on behalf of powerful 5 corporations, but they wonder if our democracy 6 really has to be that way. 7 The Bank Holding Company Act makes 8 clear that any bank holding company aquiring 9 another company which is engaged in activities 10 which are impermissible for a bank, has two 11 years to divest themselves of those 12 impermissible activities. 13 The Federal Reserve has ruled very 14 explicitly in previous cases that during the 15 two year waiver period the acquiring 16 institution may not engage in cross-marketing 17 and cross-selling between the bank and the 18 business in question. The two year waiver 19 period is granted in the law solely for the 20 purpose of providing a reasonable length of 21 time for the bank holding company to divest 22 itself of impermissible businesses without 23 having a fire sale. 24 The three additional one year waivers 25 were only intended for use in cases in which . 247 1 2 the bank holding company had made a good faith 3 effort to divest itself during the two year 4 period but was unable to do so. 5 With this application Citicorp and 6 Travelers are throwing the law, Federal Reserve 7 precedent and common sense out the window. 8 They seek what they believe should be an 9 automatic two year waiver, not so they will 10 have time to divest their insurance 11 underwriting business, but so they will have 12 time to integrate the different businesses. 13 They present their application with 14 the assumption that they are automatically 15 entitled to the two year waiver, and it seems 16 the additional three one year waivers as well, 17 even though they have no intention of divesting 18 their insurance underwriting business. 19 They have made it very clear they 20 intend to use the two year period to build and 21 develop their insurance business by 22 cross-marketing and cross-selling between the 23 banking and insurance sides of the business. 24 They are rubbing our faces in their blatant 25 disregard for current banking laws. . 248 1 2 It is clear the Citicorp and 3 Travelers want the Congress to pass a financial 4 modernization bill; it is also clear that the 5 Federal Reserve wants Congress to pass a 6 financial modernization bill, but such a bill 7 has not passed and in fact may not pass in the 8 next two years. The responsibility of the 9 Federal Reserve is to enforce the laws and 10 regulations as they written, not as particular 11 Federal Reserve or arrogant corporate leaders 12 may wish they were written. 13 While we agree that the Citicorp 14 Travelers CRA pledge with nearly half the 15 dollars in credit card lending is a bogus 16 pledge, we are not raising community 17 reinvestment issues or convenience and needs 18 questions at this hearing. 19 Any question of the adequacy of the 20 of Citicorp's CRA record and the future CRA 21 commitments of the merged entities is 22 overshadowed by the legal questions raised by 23 the proposed merger. 24 If corporations like Citicorp and 25 Travelers are allowed to ride roughshod over . 249 1 2 the law in this way it will mean that virtually 3 everything about our democracy is up for sale. 4 We ask the Federal Reserve to do the 5 right thing, deny this application and tell 6 Citicorp and Travelers that if they wish to 7 change the law, they are entitled to do so in 8 the same way that everyone else is in this 9 country by petitioning Congress to change the 10 law. 11 Thank you very much. 12 MR. LONEY: Phyllis Salowe-Kaye. 13 MS. SALOWE-KAYE: You had asked 14 before another speaker to give you the 15 information that they had requested from 16 Travelers that they didn't receive, and I have 17 a letter and I had marked the things that we 18 didn't receive that we requested, so I'll leave 19 it here. 20 Secondly, we received no money from 21 Travelers or Citibank, although Citibank does 22 take a table at our recent annual dinner, but 23 we haven't gotten the check. 24 (Laughter) 25 And I don't know if we'll get the . 250 1 2 check after today. 3 My name is Phyllis Salowe-Kaye and 4 I'm executive director of New Jersey Citizen 5 Action. 6 The testimony I'm going to give today 7 is on our behalf. We are the state's largest, 8 New Jersey's largest consumer watch dog 9 organization with over one hundred affiliated 10 organizations and more than sixty thousand 11 families which pay dues to us. The second 12 group is the New Jersey Affordable Nonprofit 13 Housing Network, and they are the state's trade 14 association representing over one hundred 15 nonprofit organizations. 16 We oppose this merger for the 17 following reason. 18 Number one, the merger is illegal. 19 Two, it's not safe or sound. 20 Three, Citibank comes into this state 21 into New Jersey with a less than impressive 22 record of service to low and moderate income 23 communities. 24 And, four, Travelers activities are 25 not regulated under the Community Reinvestment . 251 1 2 Act, a situation which we believe is a threat 3 to all low and moderate income residents in New 4 Jersey. 5 Speaking to the first point, it 6 almost seems silly to be addressing the 7 illegality of this merger under the current law 8 when we all know that changing the law is what 9 this is all about. Both entities have been 10 lobbying Congress to pass the Financial 11 Services Act of 1998 that would presto-changeo 12 make all of this legal. But until that happens 13 this merger is premature and dangerous. 14 Afterwards, if it happens, this merger will be 15 dangerous. 16 While Citigroup claims that the 17 merger is legal so long as the new entities 18 divest itself of Travelers underwriting 19 business within two years, there is no mention 20 of such divesture and no good faith attempt to 21 share a plan for how this might happen. We 22 don't believe that they've given it a single 23 thought. 24 Clearly, they expect to have one foot 25 out of the gate when the legislation that they . 252 1 2 have lobbied for so heavily is finally passed. 3 Why should you, the Federal Reserve Board, give 4 them the advantage? 5 On the second point, the merger 6 brings up the issue of safety and soundness. 7 No one seems to know what this new 8 sewing-together and it's entity will look like 9 or how it will behave once it has been created. 10 We believe it will be a monster. Now 11 we know that Godzilla is fake, but this new 12 Citigroup will be real, and once it is set in 13 motion with no rules to govern half of its 14 limbs and a part of its brain, it will too 15 late. 16 This merger has the potential for 17 exposing taxpayers to another situation like 18 the S&L bailout. As a result, Citigroup could 19 become dangerously exposed to sudden crises 20 either of their own making, or due to events 21 beyond their own control, that could wipe out 22 assets. 23 Citicorp remember received constant 24 oversight by both your board and the OCC when 25 it overextended itself in developing countries . 253 1 2 in the 1980s. 3 This merger could recreate a company 4 that is too big to be allowed to fail when in 5 times of trouble it would mean costly 6 government bailouts in order to prevent 7 economic catastrophe. We do remember the S&L 8 bailout and will never forget who paid for it. 9 The third issue, which is the poor 10 quality of the Citibank service to low and 11 moderate income people in New Jersey, is a 12 matter of record. 13 While they claim some improvement 14 over the last year, their 1996 record is 15 abysmal. Loans by Citicorp to African 16 Americans were denied 2.4 times more than 17 whites, the number being far higher than the 18 national denial rate. 19 The record shows that the bank is 20 clearly underserving a significant portion of 21 minority and low and moderate income people in 22 New Jersey. They trail their peers in all 23 categories with the exception of having the 24 same denial rate to Hispanics as all lenders. 25 Now Travelers. Citizens Action and . 254 1 2 the Affordable Housing Network have held some 3 promises meetings with Citibank over the last 4 few months about how they could better meet the 5 needs of New Jersey, but nothing has been 6 finalized. 7 Our recent discussions have only 8 emphasized the lack of clarity regarding the 9 intentions of their bride-to-be, Travelers 10 insurance company. Travelers has been a real 11 Neanderthal when it comes to recognizing and 12 understanding their responsibility to low, 13 moderate and minority communities in New 14 Jersey. 15 Here is an example. When questioned 16 about -- and we met with the general counsel of 17 the P and C for the whole country -- when 18 questioned about their Fair Housing complaint 19 filed against Travelers last year which accused 20 them of not insuring homes valued at less than 21 $250,000, the answer was that the property 22 casualty insurers in New Jersey actually has 23 been doing much better, because they market the 24 houses of a lower value, somewhere between two 25 hundred thousand and $225,000. That should . 255 1 2 really make the aspiring homeowners in Newark, 3 Trenton and Camden breathe easier. 4 That's not the worst of it. On a 5 Tuesday we were told that New Jersey was one of 6 the top ten markets for P and C insurance and 7 that they write lots of homeowners insurance in 8 New Jersey. 9 The following Monday we get a call 10 from them telling us that almost all the 11 wonderful things that were announced in the 12 Citigroup press release won't be done in New 13 Jersey because they hardly write any homeowners 14 policies in New Jersey. 15 Two days later they call us and tell 16 us they have 4.9 percent of the market and 17 yesterday we find out from the Department of 18 Banking that they're number 6 out of 77 19 companies in New Jersey that write homeowners 20 insurance. 21 We don't know who they are. We've 22 asked for information from them. This points 23 to why they must be forced to disclose all of 24 the information just like the bank has to. 25 Finally, in their press release, Citigroup . 256 1 2 makes the following pledge and I'm going to 3 quote. They say: They promise to be fair and 4 transparent in dealing with our customers and 5 their communities, so we can earn their trust 6 and support. 7 In light of their lack of clarity and 8 candor regarding the nature of Travelers 9 current business in New Jersey, or its future 10 commitment, or its plan to divest of 11 underwriting business under the current law, I 12 would say that transparent is light years away. 13 In fact, they haven't made it out of opaque 14 into translucent, and the only thing that's 15 transparent here is their clumsiness in trying 16 to avoid making a clear commitment to the 17 people of New Jersey. This merger must be 18 stopped. 19 MR. LONEY: Thank you, ma'am. 20 Ms. Rangan. 21 MS. RANGAN: Good afternoon. My name 22 is Rashmi Rangan. I am the executive director 23 of Delaware Community Reinvestment Action 24 Council. I am also board member of National 25 Community Reinvestment Coalition, a trade . 257 1 2 association of more than six hundred fifty 3 organizations nationwide. 4 I am also a member of Inner City 5 Press/Community On the Move. I'm also a tax 6 paying citizen, and I'm very concerned about 7 this merger. 8 I am testifying today under protest. 9 These proceedings are already tainted because 10 of the illegality of this merger, and the fact 11 that apparently it has already been 12 preapproved. 13 Without taking away the important 14 role that groups who have testified and will 15 testify in favor of this merger, and the 16 support that the banking community rendered 17 Citicorp offered these communities, we still 18 say that we are the community reinvestment 19 experts. We assess a bank's performance 20 exclusive of its subsidiaries and affiliates 21 and other entities locally, nationally and now 22 globally, and what the impact will be on our 23 community. 24 We are a ten-year old nonprofit 25 advocacy organization. We are opposed to the . 258 1 2 merger, proposed merger of Travelers to 3 Citicorp, and there are a number of adverse 4 issues. 5 The announced merger is an illegal 6 proposal. Under the federal Bank Holding 7 Company Act and even under the Federal Reserve 8 Board's own precedents and regulations, the 9 BHCA prohibits a bank holding company from 10 owning insurance underwriter or agency 11 operations. 12 The Act was enacted precisely to 13 prohibit combinations like Travelers and 14 Citicorp. Even Travelers say that under 15 current law it would have to divest its 16 insurance underwriting operation. The 17 announced merger is and unethical proposal. 18 Back in 1956 when the Bank Holding 19 Company Act was enacted the two year waiver 20 made sense to the newly created bank holding 21 company to buy time to come into compliance 22 with the law. 42 years later to ask for it 23 this time does not make sense, particularly 24 when the intent is absolutely clear that 25 lobbying efforts will be stepped up. . 259 1 2 Of much concern to us is the fact 3 that the discussion between applicants and the 4 Federal Reserve System prior to the merger 5 announcement which make a mockery of today's 6 proceedings and tomorrow's proceedings. 7 I also would like to, actually, I 8 have too little time, so I'll skip some. But I 9 have a big packet out there already presented 10 with transcripts from the Delaware Department 11 of Insurance public hearing and I want to 12 request that you get the transcript of the New 13 Jersey Insurance Department hearing, the 14 Delaware Banking Department public hearing, and 15 we testified at all those places. 16 The proposed merger is an expensive 17 bet. We have been led to believe in the 18 doctrine of too big to fail. If the big giants 19 have to be bailed out, we, the taxpayers, will 20 be stuck with that cost. 21 The savings banks will end up paying 22 hefty premiums. Maybe some of you don't 23 remember the S&L crisis. We do. Most megabank 24 mergers today tout the advantage of electronic 25 banking and technology. . 260 1 2 Can you imagine within this 3 environment the impact on safety and soundness 4 when with one stroke on the keyboard you can 5 move your deposit, particularly when the entity 6 which is a large insurer of property in a 7 geographic area struck by a national 8 catastrophe also happens to be your bank? 9 What about the implied subsidies? 10 We're talking about the FDIC insurance. This 11 proposal also raises concerns with the 12 community convenience and need. Travelers 13 Group to our community symbolizes antitrust. 14 We do not trust PrimeAmerica 15 Financial Service in our community. We do not 16 trust Commercial Credit loan officers in our 17 community. We do not trust property casualty 18 insurance insuring our community. We do not 19 trust Travelers Group, period. 20 Relative to that, we remain 21 unimpressed. This application should be 22 dismissed or otherwise denied. 23 Thank you. 24 MR. LONEY: Thank you, Ms. Rangan. 25 Ms. Maker. . 261 1 2 MS. MAKER: Good afternoon. My name 3 is Ruhi Maker, and I am co-convenor of the 4 Greater Community Reinvestment Coalition in 5 Rochester, New York, and I present this 6 testimony on their behalf. 7 We have been in existence since 1993 8 and approximately serving not-for-profit 9 organizations which is actually quite a large 10 number in Rochester, and I would say about a 11 million, and I'm show you some of our 12 demographics later. 13 I also work as a Senior Attorney at 14 the Public Interest Law office of Rochester. 15 Many of our colleagues have spoken 16 about some of the technical legalities and I 17 won't belabor those specific points. I'm here 18 to speak against the proposed merger today. In 19 the name of modernizing the laws governing the 20 financial institutions of this country the CEOs 21 of the largest of those institutions have been 22 lobbying for a number of years to repeal the 23 Act. Despite pouring of millions of dollars 24 into the contributions into the campaigns of 25 the House and Senate Banking Committee, they . 262 1 2 have failed to achieve their goal, and there is 3 still no consent on what financial 4 modernization should look like, despite the 5 version of HR we have before the Senate today. 6 In the face of their failure, the 7 CEOs of Citicorp and Travelers, two of the 8 largest financial institutions in the country, 9 have now decided to simply forge ahead with the 10 merger that takes advantage of a loophole in 11 the existing law trusting that their political 12 and financial clout will insure that there fait 13 accompli is legalized. 14 This is not modernization. It is a 15 reversion to the oligarchies of the past. As 16 someone who grew up in Pakistan, I emigrated to 17 this country about 13 years ago, I know what it 18 is like to live in an oligarchy, where a 19 handful of families control the economy and are 20 free to act as if they were above the law. 21 For the Federal Reserve to approve 22 this merger under these conditions would send a 23 clear signal to the financial elite that their 24 privileged status carries no corresponding 25 obligations to the community. . 263 1 2 True financial modernization would 3 require the systematic revision of the laws 4 governing the financial industry. It cannot be 5 done by granting piece meal exceptions to 6 existing regulations of time there is a new 7 merger application. 8 True financial modernization would 9 require the systemic extension of existing 10 community investment obligation from the 11 banking industry to the securities and 12 insurance industry in line with their recently 13 acquired rights to provide services formerly 14 restricted to banks. 15 True financial modernization would 16 require an increase in the responsiveness of 17 financial institutions to the needs of their 18 host communities. 19 Here I can speak from my own 20 experience as a member of the RC, the 21 coalition. We have had ongoing discussions 22 with four area banks about the credit needs in 23 Rochester. The three banks with the regional 24 or local-decision making authority have been 25 far more responsive than has the megabanks in . 264 1 2 our region. We have had virtually no dialogue 3 with Citibank. 4 When Rochester represents a 5 significant portion of a banks market share the 6 regional presence returns our phone call, and 7 makes sure the deal gets done, even if someone 8 has to work on it over the weekend. 9 When Rochester represents 1 percent 10 of an essentially global bank's market which is 11 probably what we will be if this merger goes 12 through, the needs of a local community are 13 very low priority. 14 As the trend of globalization of the 15 economy proceeds apace, we must ensure that the 16 democratic accountability of those who control 17 the commanding heights of the economy keeps 18 pace, otherwise false modernization is liable 19 to lead us back in the era of robber barons. 20 One of the things that we said when 21 the merger was first announced was that the 22 pledge, the CRA records for me, it's 23 irrelevant. Even if the CRA record was 24 perfect, this for policy reasons that I've just 25 outlined, I would have problems with this . 265 1 2 merger. 3 However, we have analyzed some of the 4 data. We have been analyzing it since 1993. 5 We released reports. You always rank all major 6 nine banks doing business in the Rochester. 7 '93, '94, '95, Citibank has had the worst 8 record of lending in low-income neighborhoods 9 and always the last of all nine banks. 10 I would like to, maybe you can wake 11 us up a little bit, Matt. Matt has agreed to 12 work with me on this in showing the three 13 little maps. 14 I'll first show you the racial 15 composition map which will show what the 16 demographics of Rochester looks like. 17 Turn that on. Essentially the red is 18 poorer, redlining. The yellow is median income 19 indications over there, and the green are the 20 more moderate income neighborhoods and then the 21 little black pie charts show you the rates. 22 The ones that are predominant black are 23 predominantly minority neighborhoods. The ones 24 that are predominantly. 25 So you understand what the racial . 266 1 2 composition looks like, I will then quickly 3 show you two maps of 1996 small business and 4 home mortgage lending. 5 Here is home mortgage, and I don't 6 know how familiar you are with Rochester but 7 basically the red with the black pies and 8 that's black and tends to be poor and you can 9 very quickly see there were no loans in the red 10 center, and if you look at the red, many of 11 them are predominantly minority census tracts. 12 That is clear with the numbers that I could 13 speak to if I have more time. 14 Matt, look at the small business. 15 This is, again, you know very recent data. The 16 red represents the no loans and, again, very 17 graphically the lack of lending occurs in many 18 of the minority low-income neighborhoods and 19 I've submitted copies of the maps along with 20 written testimony. 21 Very quickly, if I may proceed, you 22 know, if you look at 1996 loans to blacks and 23 Hispanics in the entire MSA, Citibank had 11. 24 The person who is number 8, and all of this is 25 again in charts that are submitted in terms of . 267 1 2 market share, had twice, two times as many 3 loans, the nearest competitor. The one who is 4 right at the top, the bank that was right at 5 the top, had eight times as many loans to 6 blacks and Hispanics. Again, looking at low 7 numbers, 21 loans home mortgage loans in the 8 MSA to low census tracts. Bank number 8 had 9 four times as many loans. 10 The bank that was number one had 13 11 times as many loans, and in terms of deposits, 12 they are the second largest deposit in 13 Rochester, so it's not that they are small 14 presence. They have a lot of our money. I 15 don't know what they do with it. So I will 16 conclude at this point. 17 Thank you. 18 MR. LONEY: Thank you. 19 Ms. Salowe-Kaye, I wasn't quite clear 20 what you were saying about the issue of 21 Travelers' present involvement activities in 22 New Jersey. 23 MS. SALOWE-KAY: Sure. 24 MR. LONEY: Is it a mystery to 25 people? I mean it sounded like were getting . 268 1 2 different answers. 3 MS. SALOWE-KAY: When Travelers came 4 down from Connecticut and met with us they told 5 us that they did a whole lot of, they wrote a 6 whole lot of policy for homeowners insurance in 7 the state. They told us they were one of the 8 top ten, they had a great amount of market 9 share. 10 A week later, when we asked that we 11 be included as one of the states that was 12 announced in their press release to receive a 13 bunch of special programs, like their diversity 14 training for ages -- they had a whole bunch of 15 things to increase their policy sales. They 16 had a program where they would decrease the 17 cost of policies for people of lower income. 18 They said, no, now we can't do that 19 in New Jersey because we really write virtually 20 no homeowners insurance in New Jersey. Then 21 we, they called two days later they said, well, 22 our market share is 4.9. By that time, the 23 Department of Banking in New Jersey had gotten 24 back to us with the statistics -- insurance -- 25 and we discovered that in fact they are number . 269 1 2 6 out of 77 in terms of who writes the most 3 homeowners policy in New Jersey. 4 What I'm saying is we asked them for 5 some very specific information about the 6 income, the race, the census tracts as to where 7 they write their policies. They refused to 8 give us that information, plus a whole lot of 9 other information that we requested, and what 10 I'm saying is it seemed that they were less 11 than truthful with us when they met with us 12 about what kind of business they actually were 13 doing in New Jersey, and when we actually found 14 out they in fact were doing a fair amount of 15 market share. 16 MR. LONEY: Okay. 17 MS. SALOWE-KAY: The letter shows you 18 who we met with, also. 19 MR. ALVAREZ: I have a question for 20 Ms. Maker on the charts. 21 Did you do your analysis based on the 22 controlling for income or taking into account 23 income levels? You showed us charts that were 24 based primarily on race. 25 MS. MAKER: The first chart actually . 270 1 2 had race and income on it. It's the red was 3 the low income and the yellow was the median. 4 MR. ALVAREZ: I'm asking a slightly 5 different question. 6 Did you control for the income of the 7 borrower in the area where there were loans? 8 You showed us some areas where there are no 9 loans, and some areas where there are loans and 10 then you break the chart out into various 11 racial groups. 12 Did your analysis go another step to 13 include also an analysis of income levels of 14 the various people who did receive loans to 15 show disparities among income levels? 16 MS. MAKER: Yes, I think I need to 17 refer to -- you're talking about HMDA at this 18 point as opposed to small business? 19 MR. ALVAREZ: I'm just asking if it's 20 in the study you're going to be providing. 21 MS. MAKER: We looked at both. 22 (Continued on next page) 23 24 25 . 271 1 2 MS. MAKER: Low-moderate houses, 3 low-moderate census tracts, I have the previous 4 year's numbers; all of that is provided in 5 there. 6 I can see, for example, in 1996 there 7 were 78 loans in low-mod households in the MSA 8 and, again, that was the last low-mod household 9 that received the least number of loans in the 10 MSA. And the next bank up was, actually, First 11 National Bank, which was a tiny bank in 12 Rochester, which was 130. Again, that persists 13 across income. Yes. That is all in the -- the 14 little charts are attached to stuff that was 15 handed out, and handed out, again, as with the 16 maps. 17 MR. HODGETTS: You say it appears to 18 form better -- I can't hear you. You said the 19 peers perform better than City. Do they 20 perform better in those inner city census 21 tracts? 22 MS. MAKER: In all of the categories, 23 the peers perform. If you look at 1996, for 24 HMDA, Citibank is, I think, last, apart from 25 that bank which now doesn't exist anymore; it . 272 1 2 has merged with a tiny bank. Citibank is last 3 for the MSA. It is last for the City of 4 Rochester. It is last in black Hispanic 5 households in the MSA. It is last in terms of 6 low-mod households in the MSA. It is last in 7 terms of low-mod income census tracts as well. 8 So it is consistently -- I think when we did -- 9 the '96 data hasn't been put into that ranking. 10 But '93, '94, '95, we look at loan to 11 deposit, we have 13 different 12 characteristics -- and, again, that study is 13 also included in the comments. We looked at 13 14 different characteristics, and however you spun 15 the numbers, because I know statistics can say 16 a lot and this is why I have done it, I have 17 spun the numbers every single way and they 18 always came at the bottom. 19 The middle ranks -- sometimes the 20 banks would move depending on how you cut the 21 numbers. Citibank, maybe they could figure out 22 a way to make themselves come out ahead. But I 23 cut the numbers many, many different ways when 24 I did this and they all came ranked ninth. 25 Again, the point is they are the . 273 1 2 second largest depository bank in Rochester. 3 They are not a nonexistent presence. It is 4 Citibank New York State which is, in fact, a 5 subsidiary of the entity you have here. 6 MR. HODGETTS: Thank you. 7 MR. LONEY: Any other questions? If 8 not, I will thank the group, and don't forget 9 your slides.
Last update: December 3, 2010