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Public Meeting Transcripts

Public Meeting Regarding Citicorp and Travelers Group

Thursday, June 25, 1998

Transcript

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       PUBLIC MEETING REGARDING CITICORP AND TRAVELERS
  10                         GROUP

  11               THURSDAY, JUNE 25, 1998

  12                     NEW YORK CITY

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   2               (8:00 a.m.)

   3               MR. MC DONOUGH:  Good morning, ladies

   4     and gentlemen.  I'm Bill McDonough, president

   5     of the Federal Reserve Bank of New York.

   6     Welcome to this very important meeting

   7     regarding the proposed merger between Travelers

   8     and Citicorp.

   9               We are very interested in hearing

  10     public views on this subject, and we are going

  11     to have a very long day today, and very likely

  12     a very long day tomorrow.  The proceeding is

  13     being chaired not by the Federal Reserve Bank

  14     of New York, we are your hosts, but rather by

  15     Glenn Loney of the staff of the Board of

  16     Governors of the Federal Reserve system from

  17     Washington, and I will turn the floor over to

  18     Glenn.

  19               MR. LONEY:  Thank you, Mr. McDonough.

  20     Let me also welcome you to this important

  21     public meeting on the application of Travelers

  22     to acquire Citicorp.

  23               First, let me introduce myself.  I am

  24     Glenn Loney, deputy director of the division of

  25     consumer and community affairs, Federal Reserve



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   2     Board in Washington and I'm presiding officer

   3     for this public meeting.

   4               The other panelists here are Scott

   5     Alvarez to my immediate left who is associate

   6     general counsel from the board's legal

   7     division.  Jim Hodgetts Sr. Vice-President from

   8     the Federal Reserve Bank of New York, and

   9     Elizabeth McCall Acting Superintendent of Banks

  10     of the State of New York Banking Department and

  11     we're pleased to have the State of New York

  12     with us today.

  13               We're here today because Travelers

  14     Group of New York applied for approval to

  15     acquire Citicorp also of New York, New York.

  16     When the federal reserve system considers one

  17     of these applications we look at a number of

  18     factors under the Bank Holding Company Act.

  19     These include financial issues, managerial

  20     issues, competitive issues and the convenience

  21     and needs issues of the communities affected.

  22               In doing so we will particularly look

  23     at the record of the performance of the parties

  24     under the Community Reinvestment Act.  The

  25     Community Reinvestment Act requires the board



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   2     to take an institution's record of meeting the

   3     present needs of its entire community into

   4     account.  In addition, the transaction also

   5     involves the proposed acquisition or retention

   6     of nonbanking companies engaged in activities

   7     permissible for bank holding companies as well

   8     as the proposal to divest or otherwise conform

   9     a number of other activities that are not

  10     permissible for bank holding companies under

  11     current law.

  12               With respect to the proposal to

  13     conduct permissible nonbanking activities, the

  14     board also must determine whether conducting

  15     the proposed nonbanking activities can

  16     reasonably be expected to produce benefits to

  17     the public that outweigh possible adverse

  18     effects, such as undue concentration of

  19     resources, decreased unfair competition,

  20     conflicts of interest or unsound banking

  21     practice.

  22               The purpose of today's meeting is to

  23     receive information regarding these factors.

  24     We will be seeking to elicit this information

  25     and declare issues relating to the application.



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   2     We're very pleased that so many have been

   3     willing to come and testify in your public

   4     meeting.  We will have over 120 groups and

   5     individuals represented during this two-day

   6     meeting:

   7               Let me make a few remarks about the

   8     procedures.  This is what is called an informal

   9     public meeting.  Members of the panel may ask

  10     those who are testifying about their testimony.

  11     This is not a formal administrative hearing, so

  12     we are not bound by rulings regarding evidence,

  13     cross-examination and some of the formal

  14     transaction of that kind of a proceeding.  We

  15     will be here for a full day and a half.

  16               As you can see from the agenda we

  17     need to stick to that schedule very carefully

  18     in order to give everyone a chance to say what

  19     they would like to say.  We're going to ask the

  20     witnesses today to help us stay on schedule.

  21     The panel will be expected to keep within their

  22     allotted time, so please be mindful of the

  23     needs of others.

  24               We have, what I've been told, is a

  25     very dramatic signal system with regard to



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   2     timing.  The time keeper is sitting here with

   3     the signs that she's holding up right here in

   4     the middle of the front row.  The time keeper

   5     will give you a signal when you have two

   6     minutes left to speak, and another signal when

   7     your time is up.

   8               There may have been some individuals

   9     who simply haven't had the chance to sign up in

  10     advance.  To the extent possible we want to

  11     give them a chance to speak as well.  At the

  12     end of the meeting, both tonight and again at

  13     the meeting tomorrow, we will throw the

  14     microphone open to anybody who would like to

  15     make a presentation, time permitting.

  16               Witnesses may submit a written

  17     supplement to your oral testimony by July 2,

  18     and then the record will be closed.  Any

  19     written supplements must be received by the

  20     close of business 5 p.m. on July 2, and

  21     directed to Jennifer J. Johnson secretary of

  22     the board, Board of Governors of the Federal

  23     Reserve System Washington, D.C. 20551.  You may

  24     fax your submission to 202-455-3462.

  25               Also, if you haven't turned in copies



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   2     of your written testimony, or if you have any

   3     other written statements to put into the record

   4     please leave them with the Federal Reserve

   5     staff at the registration table outside.

   6               It is important that we get this

   7     material for the record.  A transcript of the

   8     meeting will be available by June 30th for the

   9     June 25th meeting, and by July 1st for the June

  10     26th portion of the meeting at the Federal

  11     Reserve Bank of New York.

  12               In addition, the official transcript

  13     will be available by close of business on June

  14     29 for the June 25th meeting, and by the close

  15     of business by June 30 for the June 26 meeting

  16     on the board's public website on www.bog.frf.

  17     fed.us.

  18               (Laughter)

  19               I love talking like that.

  20               With that, I would like to turn the

  21     mic over to Elizabeth McCall for a few remarks

  22     before we hear from our first panelist.

  23     Ms. McCall.

  24               MS. MC CALL:  Thank you.  It is a

  25     pleasure for me to be here today and to have



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   2     this opportunity to speak briefly with all of

   3     you.  It seems as if almost everyday we hear

   4     about another proposed merger between banking.

   5     However, the proposed merger between Citicorp

   6     and Travelers Group Inc., is unique in that it

   7     will be a merger between a bank holding company

   8     and a holding company that is a parent of firms

   9     that underwrite insurance as well as provide

  10     numerous securities and other financial

  11     services.

  12               The New York State Banking Department

  13     regulates ten entities that are involved in

  14     this application, including Citibank, New York

  15     State, Smith Barney Private Trust Company,

  16     Commercial Credit Company, and Primerica and

  17     encompasses two banks, two mortgage bankers,

  18     two money transmitters, two sales finance

  19     companies, and one mortgage broker.

  20               The Citicorp and Travelers activities

  21     regulated by the New York City Banking

  22     Department represent a broad array of services

  23     that include local banking mortgage, consumer

  24     credit, corporate trust activities and the

  25     worldwide issuance of redemption of Travelers



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   2     checks and money orders.  The banking board of

   3     the New York State Banking Department must

   4     approve the application by Travelers to become

   5     a bank holding company under New York State

   6     banking law.

   7               After the confirmation of this

   8     application, Travelers will own three banks

   9     that are headquarted in New York State.  These

  10     are Citibank, New York State, Smith Barney

  11     Trust Company and Citibank N A.

  12               In addition, as superintendent, I

  13     must approve five different chains of control

  14     applications pertaining to one of the mortgage

  15     bankers, both sales finance companies, and both

  16     money transmitters that are currently part of

  17     the Citicorp holding company.

  18               Today we are here to listen carefully

  19     to each of you, to learn from you.  The banking

  20     board and I will seriously consider your

  21     comments before deciding on the merits of any

  22     of the applications that come before us.

  23               We recognize the importance that

  24     banks play in neighborhoods, both in terms of

  25     maintaining the existing quality of



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   2     neighborhoods, and in helping those

   3     neighborhoods that require revitalization.  In

   4     this regard, we consider CRA and fair rent an

   5     extremely important aspect of our supervision

   6     of banks and other license centers that come

   7     under the jurisdiction of the Banking

   8     Department.

   9               As such, one of our primary purposes

  10     in being here today is to gain a thorough

  11     understanding of how the proposed merger will

  12     affect CRA, fair lending in communities.

  13               I regret that I will not be able to

  14     stay for the entire day as I am leaving for a

  15     meeting with a bank CEO in Harlem in hopes of

  16     encouraging the branch there.  However, Barbara

  17     Kent, the acting duty superintendent of

  18     consumer affairs division will be here to

  19     participate on behalf of the Banking

  20     Department.

  21               I'm looking forward to a very

  22     productive day.  Thank you.

  23               (Applause)

  24               MR. LONEY:  Thank you, Ms. McCall.

  25     With that we will begin with our first panel



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   2     which is made up of representatives from the

   3     corporations involved in this application.

   4               We have John S. Reed the chairman and

   5     chief executive officer of Citicorp, Pamela

   6     Flaherty, the Sr. Vice-President of Citicorp,

   7     and Charles O.  Prince, executive

   8     vice-president, general counsel and secretary

   9     of Travelers Group.

  10               Mr. Reed.

  11               MR. REED:  Thank you very much.  Mr.

  12     Loney, Ms. McCall, Mr. Hodgetts and

  13     Mr. Alvarez.

  14               I'd like on behalf of my colleagues

  15     first of all, to thank you for the opportunity

  16     to kick off these hearings and to participate

  17     in what is going to be I'm sure an interesting

  18     day and a half.  I really would like to make

  19     some comments first with regard to the merger

  20     and second with regard to the community aspects

  21     that you have highlighted in your own comments.

  22               With regard to the proposed merger

  23     itself I think, as has been correctly

  24     characterized, this is an important merger

  25     because it does bring together two very large



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   2     and I think two very committed institutions.

   3     It is, as you have pointed out, a different

   4     merger, because there is not a consolidation of

   5     like enterprises.

   6               Quite to the contrary, this is a

   7     merger that has at its core a commitment on

   8     both of our parts to try to expand our

   9     business.  In that sense it is a merger about

  10     growth, it is a merger about expansion, and it

  11     is a merger really that focuses on the consumer

  12     throughout the United States, and, more broadly

  13     around the world, and our commitment to serve

  14     the consumer better than the consumer today is

  15     able to be served.

  16               We believe that we can accomplish

  17     this by putting together our two institutions

  18     in such a way that expand the product line that

  19     is available to consumers, but may be even more

  20     importantly, greatly expands the channels of

  21     distribution, and hopefully will allow us to

  22     improve the offering of financial services to

  23     the community, and reduce their costs, make

  24     them more efficient and make them more

  25     effective.  There is a very competitive



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   2     marketplace out there.

   3               Our success is going to require that

   4     this core concept underlying the merger be

   5     successful, and the marketplace will make very

   6     clear whether it is or it is not, because

   7     consumers will of course continue to have the

   8     choice of funding to the traditional suppliers

   9     in a more traditional kind of arrangement.  So

  10     the first thing I'd like to say with regard to

  11     this merger is it speaks to new opportunities.

  12               It is not a merger that speaks to

  13     consolidation or a restriction of

  14     opportunities, but, instead, it speaks to

  15     substantial growth and its success requires

  16     that we get growth and we get growth of revenue

  17     that can only come from serving consumers and

  18     other customers better than we are today doing

  19     it.  I think this is very important in taking

  20     into consideration in our application, because

  21     I think it speaks at a very positive way to

  22     improving the quality of service that will be

  23     available throughout the market areas that we

  24     hope to serve.

  25               Secondly, with regard to the



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   2     community, I wanted particularly to come

   3     personally because I wanted to reiterate our

   4     commitment to the community.  I think, speaking

   5     on behalf of Citicorp and Citibank, the

   6     institutions that I have been associated with,

   7     but prospectively on behalf of Citigroup we

   8     understand full well the centrality of having

   9     to serve the community.

  10               We cannot be successful in our

  11     business if we don't serve the community.  It

  12     is something that the law requires of us, but

  13     frankly, beyond the law, I think common sense

  14     and any sense of business makes very clear that

  15     our success over time requires that we be good

  16     citizens and that we run our business in ways

  17     that are compatible with the values of the

  18     community and I think that that commitment goes

  19     well beyond the specification of the law, and

  20     it speaks more wholesomely, if you will, to

  21     what it takes to build a successful enterprise

  22     to attract good people to work for you, to keep

  23     your customers happy, and so I'm here

  24     personally not only to reiterate the

  25     commitments that we have made and the



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   2     requirements of the law, but also to make

   3     public record of the fact that we believe that

   4     service to the community is central to our

   5     business success.  It has been for many years,

   6     and it will continue to be going forward.

   7               Let me detail a few of the ways that

   8     we think that this is made real.  We have made

   9     a public commitment that says going forward in

  10     this merger we will expand the resources that

  11     are available to the community, particularly in

  12     making available mortgages and community

  13     development funds, and this commitment is real,

  14     and if you tear the numbers apart and Pam

  15     Flaherty, my colleague, is going to do this a

  16     little bit.  It really says this merger will

  17     result in an expansion of our financial

  18     commitment under these kind of numbers to the

  19     community.

  20               But I believe if you look at our

  21     business that the first commitment and the

  22     first contribution we make to the community is

  23     jobs.  We are a company that creates jobs.

  24     They are good jobs.  They are well-paying.

  25     They have good fringe benefits, and these are



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   2     jobs where people could come in at entry levels

   3     and can have a whole career with the

   4     organization.  They can grow, they can be

   5     trained.  They are not dead end jobs.

   6               In community and community across the

   7     United States we are currently today and have

   8     been over the years, big-time hirers of entry

   9     level people, graduates from high school, first

  10     entrance into jobs.  More than 50 percent of

  11     the 110,000 jobs with these two companies.  We

  12     have in the United States more than 50 percent

  13     of those jobs involve employees who earn less

  14     than $40,000 per year.  So this is a company

  15     whose job imprint, if you will, on the

  16     community is strong and important.  We are a

  17     good employer.  We create good jobs with good

  18     fringe benefits that have good careers, and I

  19     think that this is a very important aspect of

  20     our impact on the community.

  21               We are big taxpayers.  We are

  22     important taxpayers in communities across the

  23     country.  This will continue to be the case,

  24     and I think it's an important contribution that

  25     we make to this society, and it's one that you



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   2     can count on, and, obviously, as we are more

   3     successful, we will in fact pay more taxes.

   4               We recognize full well that we have

   5     to make the services that we provide available

   6     broadly within the community.  This merger has

   7     as its core an expansion of distribution

   8     capability well beyond the traditional branches

   9     through which banks have typically operated.

  10               The Travelers Group is a major

  11     provider of services through direct face to

  12     face selling, and the combination will allow us

  13     to make services available not only through

  14     branches, not only over electronic cash

  15     machines, telephones, the Internet and so

  16     forth, but significantly through the expansion

  17     of direct face-to-face selling throughout the

  18     community.

  19               We understand full well that we have

  20     to work hard to make sure that the services

  21     that we provide are uniformly available and

  22     freely available across the community.  We have

  23     a pretty good record on this.  You can count on

  24     us to continue to push it.  I think it's

  25     important.



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   2               We are very conscious of the equal

   3     opportunity requirements.  I would tell you

   4     from a personal point of view I've been

   5     involved in Citibank's equal opportunity

   6     activities.  The policies that we have within

   7     Citibank with regard to equal opportunities,

   8     fair lending, I have personally written because

   9     I was involved in some of the original work in

  10     this area, and I felt that it was very

  11     important that the company understand that our

  12     fair lending policies were more than just

  13     something that had been written by an

  14     administrator, and so I think that we have a

  15     clear record of commitment in this area, and a

  16     recognition that it is a difficult area in

  17     which to consistently perform well, but one

  18     that we are committed to doing.

  19               We believe seriously in transparency

  20     with regard to the services we offer, privacy

  21     for our customers.  We have a privacy statement

  22     that tries to make sure that as the world moves

  23     towards an electronic world that our customers

  24     can be sure that the business we do with it

  25     will maintain the privacy that they would



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   2     expect of a banking institution, and we believe

   3     that is part of our commitment as well.

   4               So I'm here really to reiterate what

   5     has been a long standing commitment of Citibank

   6     and Citicorp.  It's something that we take very

   7     seriously, and I can say that we anticipate

   8     with regard to City Group that if this

   9     application were to be approved, that we would

  10     in fact maintain that commitment and that we

  11     would in fact strengthen it because as a

  12     combined group we will be in a position to

  13     offer more complete services, more broadly

  14     throughout the United States.

  15               I would hope that these facts, plus

  16     the testimony of the many other people that you

  17     are going to hear from during this day and a

  18     half session or this two-day session, would

  19     make clear to you that these commitments are

  20     real, and that they are something that you

  21     could count on going forward.

  22               Thank you very much.

  23               MR. PRINCE:  Thank you.  My name is

  24     Chuck Prince, I'm the executive president of

  25     Travelers Group.  In the short time we have



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   2     today I'd like to make just a few you key

   3     points.  First, the combination of Travelers

   4     and Citicorp is permissible under current law.

   5     Under the express provisions of the Bank

   6     Holding Company Act as it exists today

   7     Travelers is permitted to combine with Citicorp

   8     subject to approval by the Federal Reserve and

   9     other banking authorities, and will have a

  10     period of two years with the possibility of

  11     three one-year extensions in which to come into

  12     conformance with the terms of the bank audit

  13     company act.

  14               In that regard, I would note that

  15     most of the current activities of Travelers

  16     Group are today permissible activities for bank

  17     holding companies.  We are not, for example, in

  18     any businesses commonly referred to as

  19     commercial.  Of those activities which are not

  20     today permissible, most can be modified to

  21     conform to the requirements of banking law. The

  22     activity of insurance underwriting does not

  23     today fit within these requirements, but

  24     frankly, we are hopeful that the current law

  25     will be modernized within the next two years



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   2     I do want to emphasize, however, that we do not

   3     seek and do not require any change in the law

   4     in order to consummate this merger.

   5               This merger will bring together two

   6     well capitalized companies with strong

   7     management teams and the new Citigroup of

   8     banking securities and insurance subsidiaries

   9     will be financially strong and independently

  10     viable whether or not there is any change to

  11     our banking laws.

  12               The second point I would like to

  13     emphasize is that cross-marketing activities

  14     which are important to us in the context of

  15     this transaction exist today.  Banks all over

  16     the United States cross market other financial

  17     service products, including insurance products

  18     today.

  19               What is different here is that

  20     instead of cross marketing the financial

  21     service product of unaffiliated providers, we

  22     will combine the ownership of multiple

  23     companies under one umbrella, and I suggest to

  24     you that there is nothing different about the

  25     cross marketing of affiliated products compared



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   2     to today's widespread cross marketing of

   3     unaffiliated product.

   4               The third point I would make is the

   5     importance to us of customer privacy.  As Mr.

   6     Reed just indicated, both of our companies

   7     recognize the high trust that our customers

   8     place in us when they provide individual

   9     financial data to us.  Citibank has privacy

  10     principles on its Internet web site and the

  11     combined Citigroup will be publishing privacy

  12     guidelines for the combined company in the near

  13     future.

  14               We will treat each individual's

  15     information with the same high privacy

  16     protection that each of us wants for our own

  17     personal data, yours, and mine.  Our policies

  18     and procedures will be fully consistent with

  19     the caution expressed by regulators including

  20     most recently by Ms. Dewey Williams the acting

  21     comptroller of the currency.

  22               Lastly, I want to mention the

  23     commitment Travelers Group has made to increase

  24     the availability of home owners and other

  25     insurance in low and moderate income



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   2     neighborhoods in 1994 we began our urban

   3     availability of insurance program to improve

   4     the availability of insurance in these areas.

   5     Under Travelers underwriting guidelines

   6     coverage on residential properties in urban

   7     areas is issued and renewed regardless of

   8     location, regardless of value, and regardless

   9     of the age of the property.

  10               Recently Travelers property casualty

  11     insurance voluntarily joined in Citigroup a

  12     community commitment to expand the urban

  13     availability of insurance.  Our program will

  14     provide special education, enhanced

  15     availability and special pricing to Citibank's

  16     low and moderate income customers.  We will

  17     over time expand this important program to

  18     additional cities where we have a significant

  19     presence.

  20               Our program also includes aggressive

  21     efforts to recruit and develop minority agents

  22     who can represent our insurance company.

  23               I want to emphasize that all of the

  24     current banking subsidiaries of Citicorp and

  25     Travelers Group will remain subject to the



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   2     Community Reinvestment Act and other fair

   3     lending and consumer protection laws and

   4     regulations just as they are today.  The

   5     commitment of the banking subsidiaries to their

   6     communities will remain strong.

   7               More importantly, we believe that the

   8     high level of community involvement that

   9     already exists within our companies will

  10     increase as a result of our merger.  The reason

  11     for this is simple.

  12               The purpose of the merger is to bring

  13     more and better product to a greater number of

  14     people.  The various businesses within the

  15     newly created Citigroup are innovative

  16     producers of these products as are banking and

  17     nonbanking organization work together to bring

  18     better products to more people.  Citigroup as a

  19     whole will better serve the needs of its entire

  20     community, including low and moderate income

  21     and minority individuals.

  22               With that, I will thank you for the

  23     opportunity to be here today and turn to my

  24     colleague, Pam Flaherty.

  25               MS. FLAHERTY:  Thank you, Chuck.  My



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   2     name is Pam Flaherty, and I'm responsible for

   3     Citibank's community involvement.

   4               Add to Pamela Flaherty.

   5               Thank you.  My name is Pamela

   6     Flaherty.  As John Reed explained, I am

   7     responsible for Citibank's community

   8     involvement.

   9               This merger breaks new ground in its

  10     combination of insurance and banking services.

  11     While many of our community partners are

  12     excited by the opportunities this suggests,

  13     some are concerned that this will somehow

  14     diminish Citibank's community commitment.

  15     Nothing could be further from the truth.

  16               I want to make three points this

  17     morning.  1.  Our lending record is good and

  18     improved dramatically in 1997, particularly in

  19     terms of lending to low and moderate-income

  20     consumers and to minorities.

  21               2.  We provide a broad range of

  22     products and services and access to consumers

  23     of all income levels, and, 3, we intend to do

  24     even more in the future, as evidenced by our

  25     community commitment.



.
                                                                26
   1

   2               Let me first address lending.  In the

   3     eight areas around the country where we serve

   4     the local retail banking market, we have a

   5     strong record of lending to all segments of the

   6     community.  In 1997 in those markets we

   7     provided $9 billion of credit to low and

   8     moderate-income consumers, to small businesses

   9     and to organizations engaged in community

  10     economic development.

  11               We are particularly proud of our

  12     commitment to our local neighborhoods.  Since

  13     their emergence thirty years ago, we have

  14     partnered with local community development

  15     organizations, combining their knowledge of

  16     local community needs with our human and

  17     financial resources.

  18               Today our program is significantly

  19     expanded, and Citibank's community development

  20     lending supports affordable and special needs

  21     housing, small business and economic

  22     development, health and human services, as well

  23     as the educational and cultural activities in

  24     LMI communities.

  25               New community development lending



.
                                                                27
   1

   2     originations in 1997 in all US Citibank markets

   3     totaled $238 million versus $146 million the

   4     year before, up 63 percent.

   5               Of the 1997 lending, 42 percent was

   6     in metropolitan New York, Citibank's largest US

   7     marketplace.  Here in New York our lending

   8     commitments have doubled over the last two

   9     years to $100 million in 1997.

  10               We apply a comprehensive strategy

  11     based on building strategic partnerships with

  12     nonprofit, government and other financial

  13     partners to respond to the specific needs of

  14     local communities.  In addition to lending,

  15     Citibank employees a range of investment tools.

  16               In 1997, our community investment

  17     portfolio totaled $47 billion, while we made

  18     $26 billion in grants to community and

  19     educational programs.  Citibank has also long

  20     provided the financing that addresses small

  21     business credit needs.  In 1997, nationwide,

  22     Citibank lent approximately $1.9 billion to

  23     small businesses, a total of more than 13,000

  24     loans.  We are especially proud that 10,000 of

  25     these loans were for less than $100,000, the



.
                                                                28
   1

   2     loan size most often needed by small

   3     businesses.

   4               What's more, 29 percent of the

   5     dollars lent were in LMI census tracts.  In New

   6     York we provided $768 million in credit to

   7     small businesses.  35 percent of our loans were

   8     for less than $25,000, and 30 percent of the

   9     dollars lent were in LMI census tracts.

  10               Communities are also stabilized

  11     through home ownership.  As early as 1978,

  12     Citibank began to reach out to LMI families

  13     eager to purchase homes through our stretch

  14     mortgage piloted in Brooklyn, the first 10

  15     percent down payment product in New York.

  16               Until 1991, Citibank was a leader in

  17     mortgage financing, but the economic downturn

  18     in the early '90s and the collapse of the real

  19     estate market forced us to restructure and cut

  20     back on our lending.  We regained momentum in

  21     1996 and 1997.

  22               In 1997, Citibank made a 3,000

  23     HMDA-reportable loans for a total of $9.5

  24     billion, almost a 50 percent increase from the

  25     prior year.  Our lending to LMI consumers and



.
                                                                29
   1

   2     communities grew even faster, at $1.2

   3     billion -- nearly doubling.

   4               During 1997, Citibank also

   5     dramatically increased its lending to

   6     minorities with $1.5 billion in HMDA-reportable

   7     lending.  Lending to African-Americans doubled

   8     as did lending to Hispanics.

   9               Let me now turn to access to

  10     financial services.  Citibank has made a deep

  11     commitment to the use of technology to increase

  12     choice and convenience for all customers.  We

  13     introduced the first ATMs in 1977.  Since then,

  14     we have expanded the use of telephone access as

  15     well as PC banking.

  16               Our data on customer usage patterns

  17     show that across all income levels, customers

  18     increasingly perform their financial

  19     transactions outside a branch, on the phone,

  20     through a PC or at an ATM.

  21               Customers who live in low and

  22     moderate income census tracts do not differ

  23     significantly in their usage from the rest of

  24     our customers.

  25               Our data show that these customers



.
                                                                30
   1

   2     perform 76 percent of their transactions

   3     outside a branch, versus 80 percent for all

   4     customers, and 25 percent on the phone or the

   5     PC, versus 30 percent for all customers.

   6               Because consumers use the branch less

   7     frequently, the quality has to be uniformly

   8     great.  Our branches have been recently

   9     upgraded with better training for our people,

  10     better and more user friendly technology and

  11     longer hours.

  12               Two years ago, in New York we closed

  13     a number of branches and converted several to

  14     Citicard Banking Centers, while renovating and

  15     upgrading the remaining branches.  When we

  16     started this process, 16 percent of our

  17     branches were located in LMI census tracts.

  18     Today, 22 percent of our branches are located

  19     in LMI tracts.

  20               And we continue to open different

  21     kind of specialized stores like our new manned

  22     electronic banking facility on Burnside Avenue

  23     in the Bronx, a loan store in Harlem, both of

  24     which will open this summer, and a retirement

  25     store in Oakland, California.



.
                                                                31
   1

   2               Electronic benefits transfer is

   3     another innovation which has opened a new

   4     opportunity for us to serve low income people.

   5     The most important benefit for EBT recipients

   6     may well be the ability to participate in the

   7     mainstream world of electronic banking and

   8     payments systems.

   9               We're encouraging customers to use

  10     technology and alternative access points in two

  11     ways, pricing and education.  In New York we

  12     eliminated fees for our ATMs, PC banking, and

  13     telephone bill payment.

  14               With regard to education, we have

  15     multilingual hosts to assist us in branch

  16     customers and a unit of full-time educators who

  17     give seminars on banking, credit and

  18     technology.  Each year we conduct roughly four

  19     hundred seminars on sight, with nonprofits and

  20     at schools across New York.

  21               We also support a number of nonprofit

  22     organizations dedicated to improving education

  23     and job skills training through technology in

  24     our schools including Classroom, Inc., City

  25     Tech, and Junior Achievement.



.
                                                                32
   1

   2               Finally, let me talk about our ten

   3     year $115 billion lending and investment

   4     commitment.  Our Citigroup commitment is a

   5     national pledge that responds to our community

   6     partners by focusing on lending and investing,

   7     financial literacy and insurance.

   8               We will execute the commitment by

   9     working with our community partners.  We will

  10     also aggressively market these products

  11     ourselves.  We seek to increase this lending in

  12     all our markets, being responsive to each of

  13     them individually.  We will report publicly on

  14     how we're doing on an annual basis.

  15               Citigroup built its pledge through

  16     conversations with some 300 community

  17     organizations across the country.  They told us

  18     they wanted to ensure that we would remain an

  19     active partner through community development

  20     lending and investing; increasing our small

  21     business and mortgage lending; expanding our

  22     work in financial literacy; and offering

  23     greater access to insurance.

  24               Our pledge was also designed as a

  25     challenge to our business.  To meet our



.
                                                                33
   1

   2     targets, we must grow the areas our community

   3     partners are particularly concerned about,

   4     mortgages, small business and community

   5     development lending, at an average annual rate

   6     of eight to ten percent over the ten-year

   7     period, and social investing must average over

   8     12 percent growth per year.  We believe this

   9     pledge is a very aggressive commitment.

  10               The commitment is more than numbers

  11     and growth rates.  It includes insurance for

  12     the first time, as Chuck Prince described.  It

  13     also addresses financial literacy, a critical

  14     need of consumers of all income levels.

  15               Let me close by saying that we

  16     believe we have done a great job of meeting the

  17     credit and convenience needs of the communities

  18     where we accept deposits, as required by CR A.

  19     And beyond that, we also believe we have met

  20     the test of being an excellent corporate

  21     citizen in all the communities where we do

  22     business.

  23               But we intend to do more.  We intend

  24     to use the resources of the combined company to

  25     improve the financial lives of all customers as



.
                                                                34
   1

   2     well as the communities in which we operate.

   3     We will do this primarily through our business,

   4     offering quality banking services, loans,

   5     insurance, and investments, and participating

   6     in the financing of community improvements.

   7               We will also continue to innovate to

   8     expand access to financial services and

   9     information so individuals and family of even

  10     modest means can improve their economic well

  11     being.

  12               We have listened to our community

  13     partners, those organizations which work

  14     everyday in our communities.  Many of them are

  15     speaking at this meeting, and we thank them.

  16     We intend to continue to listen to them and to

  17     work with them.

  18               Thank you for your time this morning.

  19               MR. LONEY:  Thank you.  Do we have

  20     questions from the panel?

  21               MR. ALVAREZ:  I have a couple of

  22     questions.  Mr. Prince, you mentioned in your

  23     opening remark the requirement of the Bank

  24     Holding Company Act that the organization

  25     combined organizations conform the nonbanking



.
                                                                35
   1

   2     activities to the limitations of the Act.  In

   3     particular you noted that insurance

   4     underwriting is not a permissible activity at

   5     this point.

   6               If the current law is not changed,

   7     can Travelers Group, combined Travelers Group

   8     realistically meet the requirements of the Bank

   9     Holding Company Act and how will the proposed

  10     costs marketing services that you hope to do

  11     affect the ability of the company to meet those

  12     requirements?

  13               MR. PRINCE:  The companies within

  14     Travelers Group and companies within the

  15     combined Citigroup are operated at separate

  16     independently viable company.

  17               Each company is separately staffed,

  18     separately organized, has its own board of

  19     directors.  The company in the insurance

  20     business, Travelers Property Casualty, for

  21     example, is not only separately organized, it

  22     is already publicly held in part.  It's already

  23     listed on New York Stock Exchange, and the

  24     companies will continue to be operated in that

  25     fashion.



.
                                                                36
   1

   2               The cross-marketing activities will

   3     not involve any combination of the company

   4     staff or organizations in a way which would

   5     prevent the orderly restructuring of the

   6     company in the event that were to become

   7     necessary.

   8               So the short answer to your question,

   9     Mr. Alvarez, I believe is that, yes, we would

  10     be able to comply with the requirement even if

  11     the law did not change, and if it became

  12     necessary at some point, for example, to spin

  13     off the insurance companies they would be

  14     strong independently viable companies, and our

  15     company would continue to be strong and

  16     independently viable, and there is nothing in

  17     the cross-marketing that would change any much

  18     that.

  19               MR. ALVAREZ:  I had another question.

  20     A number of comments have been expressed

  21     concerned that the wind Travelers Citigroup

  22     would as far as loan marketing individuals and

  23     communities be concerned perhaps be worse than

  24     the sum of the parts of the two organizations

  25     in part because the new organization might



.
                                                                37
   1

   2     target low and moderate income and minority

   3     individuals in communities from marketing

   4     higher cost lending and higher cost insurance

   5     products.

   6               How is it that Citigroup if this

   7     transaction is improved, would insure that all

   8     individuals in all communities will have access

   9     to the full range of products, including lower

  10     cost products that might be available through

  11     the organization?

  12               MS. FLAHERTY:  I guess I would first

  13     say that the record shows with regard to

  14     Citibank and with regard to Travelers that, and

  15     I can certainly speak more specifically to

  16     Citibank, that we already do today provide

  17     extensive credits to low and moderate income

  18     communities and we have made a pledge to

  19     continue to do that going forward.

  20               MR. ALVAREZ:  Ms. Flaherty, you

  21     mentioned that Citicorp has closed branches in

  22     the past.

  23               Are any branch closing proposed as

  24     part of this transaction?

  25               MS. FLAHERTY:  No.



.
                                                                38
   1

   2               MR. ALVAREZ:  One final question from

   3     me.  Travelers Group made several commitments

   4     and were subject to several conditions in an

   5     order by the OCS when it applied to acquire its

   6     thrift.  What would be the status of those

   7     commitments going forward if this transaction

   8     is approved because Travelers Group would no

   9     longer be subject to the OCS?

  10               MS. FLAHERTY:  We intend to continue

  11     to meet those commitments.

  12               MS. MC CALL:  I have a question.  We

  13     would be very interested in the Department in

  14     receiving a little more detail on the very

  15     large commitment that you made, the breakdown

  16     that is available.

  17               MS. FLAHERTY:  I'll be happy to do

  18     that.

  19               MR. LONEY:  Any other questions from

  20     the panel?  If not, I will thank you very much.

  21               MS. FLAHERTY:  Thank you very much.

  22               MR. REED:  Thank you.

  23               (Continued on next page)

  24

  25



.
                                                                39
   1

   2               MR. LONEY:  Because some of the

   3     people on the panel scheduled to testify next

   4     are not here, we are going to call people from

   5     both Panel One and Panel Two at this time.

   6               If David Nocenti, Robert Elliot,

   7     Stephen Kaufman, Dannel Malloy and Nellie

   8     Santiago-Fernandez could come up, I would

   9     appreciate it.

  10               I will follow the order that is in

  11     the agenda that we sent out.  In doing that, I

  12     will ask Ms. Santiago-Fernandez, who is the

  13     senator from New York State, to begin.

  14               MS. SANTIAGO-FERNANDEZ:  Good

  15     morning.  Thank you very much.

  16               I am speaking today in favor of the

  17     proposed conversion of Travelers Group into a

  18     bank holding company, its acquisition of

  19     Citicorp and the request for an exemption from

  20     divestiture of assets under Section 1842 of the

  21     Bank Holding Company Act.

  22               I am speaking in both my capacity as

  23     an elected official, representing a very poor

  24     community in Brooklyn served by Citibank, as

  25     well as a ranking member of the State Senate



.
                                                                40
   1

   2     Banking Committee and as chair of the Senate

   3     Democratic Task Force on Banking and Community

   4     Reinvestment.

   5               This is a merger of truly historic

   6     significance.  For years, as financial

   7     modernization has been debated in Washington

   8     and in the states, we have heard of these new

   9     all-purpose, one-stop-shopping financial

  10     services corporations which would be emerging.

  11     Now for the first time we have seen one.

  12               This question which must be asked is

  13     if permitting the birth of this particular

  14     prototype is in the best interest of financial

  15     consumers.  I strongly believe that the answer

  16     to this question is yes.

  17               In considering what this new entity

  18     can do, I started by considering what Citibank

  19     already has done.

  20               Citibank maintains several branches

  21     in my own senatorial district.  Through these

  22     branches, the bank not only provides a wide

  23     range of basic financial services to my

  24     constituents, but also a variety of educational

  25     services to help consumers get the most out of



.
                                                                41
   1

   2     their money.  These include both training

   3     courses on how to use the latest innovations in

   4     computer-banking technology and small business

   5     lending seminars targeted to the needs of

   6     low-income neighborhoods.

   7               It is through these same branches

   8     which the new Citigroup will be able to offer

   9     my constituents and people all over New York

  10     City not fewer banking services, as some might

  11     say, but an extended menu of insurance products

  12     through their association with Travelers.

  13     While some condemn Citibank for branch

  14     closings, I have a positive story to tell.

  15               Two years ago Citibank proposed the

  16     closing of a branch in my own district.  My

  17     district, as I mentioned, is a low-income

  18     neighborhood largely underserved by any other

  19     financial institution.  I and members of my

  20     community appealed to the sensitivity of the

  21     bank to preserve this branch, and I am proud to

  22     say that the branch is open today.

  23               Looking beyond Brooklyn to the larger

  24     picture, Citibank has been a rising leader in

  25     providing home mortgage loans to minorities.



.
                                                                42
   1

   2     The Home Mortgage Disclosure Act data from 1990

   3     to 1996 shows that the mortgage loan denial

   4     rates for minorities nationwide has

   5     consistently fallen, meaning more Hispanics and

   6     African-Americans are having mortgage

   7     applications approved at a greater rate than

   8     ever before.

   9               Citibank has also been a national

  10     leader in providing support for building a

  11     self-sustaining community development

  12     infrastructure by providing grants and special

  13     low interest loans for local organizations

  14     specializing in economic development.  Nearly

  15     all of the CBOs in my district have benefitted

  16     from this help, providing us with long-term

  17     stability in the community.

  18               Citibank even pioneered an extremely

  19     innovative form of support for community

  20     not-for-profit financial institutions with its

  21     Equity Equivalent Program, which enables

  22     community development financial institutions to

  23     strengthen their balance sheet's very long term

  24     and very substantiated debt.

  25               It is through all of these activities



.
                                                                43
   1

   2     that the New York City bank has maintained a

   3     satisfactory overall CRA rating with an

   4     outstanding rating in community development.

   5               The new Citigroup gives every

   6     indication that this high level of support will

   7     continue but be greatly enhanced by this

   8     merger.

   9               Citigroup's community reinvestment

  10     pledge of $150 billion represents an amount

  11     twice the bank's current domestic deposits; a

  12     considerable commitment.  But it is not the

  13     sheer quantity of money which should receive

  14     the most attention.

  15               Citigroup's proposed program on

  16     financial and technological literacy is a very

  17     forward-thinking initiative design to help

  18     teach young people how to take the widest

  19     advantage of the possibilities offered by

  20     computer banking.  The program will help

  21     prepare consumers for the realities of banking

  22     in the 21st century.

  23               Another new program, one more

  24     immediately beneficial to low-income

  25     communities, is their Proposed Center for



.
                                                                44
   1

   2     Community Development Enterprise.  This

   3     subsidiary will be making loans and providing

   4     technical support to community development

   5     organizations to provide them with the tools,

   6     resources, and knowledge they need to build

   7     their own economic development programs.  This,

   8     I believe, helps bring about true community

   9     empowerment.

  10               Finally, I have worked on the CRA

  11     issue for many years now and I want to remind

  12     everyone how historic the commitment made by

  13     Citigroup is, especially from the Travelers

  14     side.

  15               Travelers has promised to make a wide

  16     variety of insurance products available in

  17     low-income communities utilizing the extensive

  18     Citibank branch network.  What this will mean

  19     is more insurance products will be made

  20     available to more people in low-income

  21     communities.  This is a very significant move.

  22               The CRA requires Citibank to invest a

  23     portion of its assets in the communities it

  24     accepts deposits from, including poor

  25     communities.  However, there is no similar law



.
                                                                45
   1

   2     which binds insurance companies.

   3               While financial modernization

   4     legislation may ultimately include such

   5     provisions, Travelers has boldly decided to

   6     voluntarily target insurance products to poor

   7     neighborhoods, to poor communities, products

   8     designed specifically to meet their needs.  I

   9     believe that this historic commitment has set a

  10     standard by which future cost industry

  11     financial mergers should be judged.

  12               In closing, let me once again state

  13     that I support this merger.  It represents a

  14     natural trend in the financial marketplace and

  15     has a vast potential to benefit all financial

  16     consumers, poor and otherwise.

  17               Thank you very much.

  18               MR. LONEY:  Thank you.

  19               Mr. Nocenti.

  20               MR. NOCENTI:  Good morning, Officer

  21     Loney, Mr. Alvarez, Mr. Hodgetts,

  22     Superintendent McCaul.  My name is David

  23     Nocenti, and I am the counsel from the Office

  24     of Queens Borough President Clair Shulman.  I

  25     want to thank you for giving us the opportunity



.
                                                                46
   1

   2     to provide our comments this morning.

   3               The proposed merger of the Travelers

   4     Group and Citicorp raises many complex legal,

   5     financial, regulatory, and competitive issues,

   6     and I know that you are going to be hearing

   7     comments from both sides on many of these

   8     issues today.

   9               Our expertise does not lie in the

  10     analysis of competition or the impact of

  11     mergers on markets and so our testimony is

  12     going to be limited to your request for

  13     information regarding the impact of the merger

  14     on the convenience and needs of the community.

  15               Specifically, the Queens Borough

  16     President's Office has worked very closely with

  17     Citibank on numerous issues during the past ten

  18     years, and we will provide some background on

  19     Citibank's community activities in Queens.

  20               Citibank has always been responsive

  21     to the needs of our local residents, and this

  22     history of cooperation and assistance should be

  23     given strong consideration as you evaluate the

  24     benefits of the merger.

  25               Queens County geographically is the



.
                                                                47
   1

   2     largest borough in the City of New York and is

   3     also the second most populous with almost 2

   4     million residents.  If Queens County were a

   5     separate city, we would be the fourth largest

   6     city in the United States behind New York, Los

   7     Angeles and Chicago.

   8               Queens is also the most ethnically

   9     and culturally diverse county in the world with

  10     Kennedy Airport serving as the new Ellis Island

  11     for the past 50 years.  Queens County is the

  12     first stopping point for immigrants all over

  13     the globe.  Over 35 percent of Queens residents

  14     were born outside the United States and they

  15     come from over 150 countries and speak over 120

  16     languages.

  17               Queens is primarily a working-class

  18     borough.  We do not have the conspicuous wealth

  19     of Manhattan, and we have the specific needs,

  20     economic needs, as in all areas of New York

  21     City.  There is a tremendous need for

  22     affordable housing in Queens, and we also have

  23     some of the most overcrowded schools in the

  24     country.

  25               The borough president is the highest



.
                                                                48
   1

   2     elected official in Queens, and as a result our

   3     office is involved in economic development,

   4     housing, education and community projects

   5     throughout the borough.

   6               We work very closely with our

   7     financial institutions and other private

   8     businesses and, thus, are uniquely qualified to

   9     evaluate the civic participation of these

  10     private entities.

  11               Citibank has been one of the most

  12     active and effective businesses working towards

  13     improvements in the borough of Queens.  In the

  14     area of economic development, Citibank has

  15     provided important assistance to small

  16     businesses throughout the borough.  They have

  17     worked closely with the Queens County Overall

  18     Economic Development Corporation, the Greater

  19     Jamaica Development Corporation, the Jamaica

  20     Business Resource Center, the Rockaway

  21     Development and Revitalization Corporation, and

  22     many other local community development

  23     entities.

  24               Citibank has provided project grants,

  25     has offered technical assistance and has led



.
                                                                49
   1

   2     the way to helping these organizations and

   3     other small businesses to develop and grow in

   4     Queens County.

   5               Citibank has also been a leader in

   6     the area of housing development.  As previously

   7     noted, Queens County has a great need for more

   8     affordable housing, and Citibank has provided

   9     the financing necessary for many such projects.

  10     Our office has undertaken major efforts to spur

  11     the creation of more low-income and

  12     moderate-income housing in Jamaica, the

  13     Rockaways, and elsewhere in the borough, and

  14     Citibank has provided invaluable financial and

  15     technical assistance in this effort.

  16               Although there are many one-family

  17     and two-family homes in Queens, in other areas

  18     of the borough the predominate housing stock is

  19     apartment buildings.  In the early 1980s, many

  20     buildings converted from rental units to

  21     cooperative ownership, and these co-ops became

  22     the only available form of home ownership for

  23     many residents in the area.

  24               Unfortunately, the New York City real

  25     estate market collapsed in the late 1980s.  It



.
                                                                50
   1

   2     left many of these co-ops with serious

   3     financial problems.  Virtually every bank had

   4     lent funds based on overvaluations of the

   5     properties, and most of these financial

   6     institutions simply stopped lending any money

   7     for these co-ops, leaving tens of thousands of

   8     apartment owners stranded in apartments they

   9     could not sell.

  10               The Queens Borough President's Office

  11     immediately formed a Co-op and Condo Task

  12     Force, comprised of building owners, lending

  13     institutions, apartment owners, government

  14     agencies, and others, to address the problems.

  15               Working with Fannie Mae and Freddie

  16     Mac, we brought the necessary parties together

  17     and achieved work-outs that allowed the co-ops

  18     to avoid defaulting on their loans.  Although

  19     several financial institutions chose not to

  20     participate in this collaborative effort,

  21     Citibank was an integral player in the process

  22     and helped us to save the homes of tens of

  23     thousands of individuals.

  24               In addition to its active role in

  25     economic development housing, Citibank has also



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                                                                51
   1

   2     been a good corporate citizen working closely

   3     with not-for-profit groups throughout Queens

   4     County.  Indeed, Citibank was instrumental in

   5     saving several financially-troubled

   6     organizations, included in the Jamaica Arts

   7     Center and the Queens Symphony Orchestra.

   8               Citibank provides technical and

   9     financial assistance to many community groups

  10     and cosponsors many events held in the borough.

  11     In addition, for the past several years

  12     Citibank has sponsored a bus tour for

  13     foundations and other charitable organizations

  14     which has helped our Queens group to access

  15     additional funding sources that traditionally

  16     have been providing grants only to

  17     Manhattan-based organizations.

  18               Citibank is also very active in

  19     education issues.  Citibank has formed

  20     partnerships with several New York City

  21     elementary schools.  They work closely with the

  22     City University of New York and St. John's, and

  23     Citibank employees act as mentors to individual

  24     students.

  25               Moreover, a Citibank employee was



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                                                                52
   1

   2     recently named as the borough president's

   3     appointee to the seven-member New York City

   4     Board of Education, which is responsible for

   5     overseeing the education of over 1 million

   6     school children in New York City.

   7               Finally, it is important to note that

   8     Citibank is one of the largest employers in

   9     Queens County with over 3,500 employees in the

  10     borough.  The construction of the Citibank

  11     Tower, which opened in 1990, helped to initiate

  12     a revitalization of the Court Square area, and

  13     they have provided funding for amenities above

  14     and beyond what were initially requested of

  15     them.

  16               In sum, the Borough President's

  17     Office has had a close working relationship

  18     with Citibank for many years, and we have found

  19     them to be excellent corporate citizens.  They

  20     are very responsive to the needs of the

  21     community.  They have been eager to join in

  22     public-private partnerships and have provided

  23     tremendous financial and technical assistance

  24     which has helped us to revitalize significant

  25     areas of the borough.



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                                                                53
   1

   2               Thank you once again for providing

   3     this opportunity to testify today, and we hope

   4     that the Federal Reserve Board's evaluation of

   5     the benefits of this merger will include

   6     consideration of Citibank's long history of

   7     working to assist and improve businesses,

   8     housing, education and cultural institutions

   9     throughout Queens County.

  10               MR. LONEY:  Thank you.

  11               Mayor Malloy.

  12               MR. MALLOY:  I am Mayor Dannel

  13     Malloy.  I'd like to begin by thanking you for

  14     the opportunity, as the Mayor of Stamford,

  15     Connecticut, to testify on behalf of Citibank.

  16               Stamford is the Connecticut

  17     headquarters for Citibank.  Since the bank

  18     opened its first of seven branches only four

  19     years ago, I have been impressed with the

  20     bank's commitment to be a major community force

  21     in Stamford and within the State of

  22     Connecticut.

  23               As the Mayor of the fourth largest

  24     city in Connecticut, with the third largest

  25     concentration of Fortune 500 corporate



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                                                                54
   1

   2     headquarters in the country, I know firsthand

   3     that corporate partners like Citibank are vital

   4     to continued urban growth.

   5               If such Citibank current activities

   6     are a reflection of broader available resources

   7     that result from the Citicorp/Travelers Group

   8     merger, then I can only look forward to

   9     stronger partnerships with the proposed

  10     Citigroup in Stamford and throughout the state.

  11               To illustrate the depth of the bank's

  12     commitment to the community, I would like to

  13     highlight three key areas of creative

  14     initiatives that Citibank has led.

  15               First of all, I'd like to speak about

  16     education.  Citibank and the City of Stamford

  17     share a personal commitment to the excellence

  18     of public education for children of all ages.

  19     Citibank has partnered to spearhead two

  20     Stamford school readiness programs.  These

  21     programs promise that all Stamford children

  22     will have an opportunity to be ready to learn

  23     before entering school.

  24               The initiatives are the Hillandale

  25     Child Development Center.  This will be the



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                                                                55
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   2     first program in the State of Connecticut to

   3     fully integrate state-of-the-art learning

   4     strategies with health, nutrition, and

   5     parenting modules in a childcare environment

   6     for preschool children.  In fact, the City of

   7     Stamford will guarantee all of its 4-year-olds

   8     pre-K experience, that is, prior to the time

   9     they would enter our kindergarten.

  10               Secondly, Success By 6.  Citibank is

  11     a key member of the Leadership Council.

  12     Success By 6 will ensure that all children

  13     entering kindergarten do, in fact, enter with

  14     the foundation needed to prepare them to

  15     succeed in school.

  16               In addition to the above educational

  17     activities, Citibank has adopted the Hart

  18     Magnet School Read-A-Loud program; received

  19     major awards for junior achievement of

  20     Southwestern Connecticut in connection with

  21     their educational activities; funded Connect

  22     '96, which established Internet access for both

  23     of our high schools in Stamford; and developed

  24     and implemented a summer associate program with

  25     The Urban League of Southwestern Connecticut,



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                                                                56
   1

   2     which is based in Stamford.

   3               The second key area is human and

   4     social services.  Citibank helped plan and fund

   5     with the City of Stamford United Way and

   6     Infoline, the Infoline Referral Center.  The

   7     center is a unique staffed storefront operation

   8     offering community agency information, access

   9     to caseworker services and job shopping through

  10     a Department of Labor kiosk.

  11               The referral center is the result of

  12     the partners concern that people moving from

  13     welfare to work needed a place to connect with

  14     local, regional and statewide agencies that can

  15     help them become self-sufficient.

  16               Secondly, Cheryl Adkins Green,

  17     Citibank F.S.B. president, will serve as the

  18     chair of the United Way of Stamford, 1998-99

  19     fund-raising campaign, which will raise over 2

  20     million for local agencies.  This is another

  21     example of the personal commitment Citibank

  22     senior management demonstrates in our community

  23     every single day.

  24               The third key area, access to credit

  25     for low- and moderate-income areas and



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                                                                57
   1

   2     household.  Citibank is an active lender in all

   3     Stamford neighborhoods.  The bank has made

   4     substantial inroads in the enterprise zone with

   5     small business loans to help retain jobs and

   6     help businesses grow.

   7               Additionally, the leadership of the

   8     community development loan program is

   9     well-recognized.  The bank became a pacesetter

  10     two years ago for new Connecticut banks, which

  11     it committed $1 million to the Housing

  12     Development Fund for affordable housing in the

  13     city and directed more than $2 million in

  14     community development investments to

  15     Bridgeport, Norwalk, and Stamford.

  16               Citibank loans have extended to

  17     statewide initiatives, including a $2 million

  18     loan for the Connecticut Preservation Loan Fund

  19     and an approval to fund $3 million for a

  20     childcare loan fund this month.

  21               Citibank knows that money alone

  22     cannot build neighborhoods.  Therefore, in 1995

  23     the bank helped establish the Fairfield County

  24     Local Initiative Support Corporation office,

  25     located in Bridgeport, and serving all of the



.
                                                                58
   1

   2     state, in particular Fairfield County and the

   3     City of Bridgeport, Norwalk and Stamford.

   4               I would like to conclude my testimony

   5     with the benefits of the proposed merger for

   6     the community of Stamford and the State of

   7     Connecticut.

   8               Unlike the traditional in-market bank

   9     merger that I have seen in Connecticut, where

  10     physical locations overlap and savings are

  11     achieved by consolidation, the formation of

  12     Citigroup is different.  The merger will not

  13     eliminate available resources as other mergers

  14     have; rather, the combination will greatly

  15     increase the value and convenience for

  16     customers through offering access to a broader

  17     range of high-quality financial services and

  18     products, all from one convenient location in

  19     Stamford and other Connecticut locations.

  20               Additionally, the wide range of

  21     products and services offered by the combined

  22     company will add breath and depth to the career

  23     opportunities in Connecticut.  The stronger

  24     company will mean more jobs to my community.

  25               As I stated at the beginning of my



.
                                                                59
   1

   2     testimony, I believe that the merger of

   3     Citicorp and Travelers Group will only enhance

   4     the bank's deep commitment of human and

   5     financial capital to the City of Stamford and

   6     to the State of Connecticut.

   7               Thank you.

   8               MR. LONEY:  Thank you.

   9               Assemblyman Kaufman.

  10               MR. KAUFMAN:  Good morning.  I am

  11     Assemblyman Steve Kaufman.  I represent the

  12     82nd Assembly District in the Bronx, which

  13     includes Co-op City, Throgs Neck, Westchester

  14     Square and Eastchester Gardens.

  15               I am here today to tell you that

  16     Citibank has demonstrated again and again its

  17     commitment to the social and economic

  18     well-being of the Bronx, and as the borough

  19     undergoes a renaissance in many of its

  20     neighborhoods, Citibank has been there to play

  21     a major role.

  22               Citibank has focused its resources,

  23     technical assistance, leadership, and grants to

  24     foster the business development, home

  25     ownership, comprehensive economic development



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                                                                60
   1

   2     and educational programs to school children,

   3     high school students, and college students, as

   4     well as welfare-to-work participants.

   5               Citibank fervently seeks to ensure

   6     that the unique needs of senior citizens are

   7     not only met, but also exceeded through

   8     superior service and customer satisfaction.  In

   9     fact, Citibank's work with legislators like

  10     myself and community leaders have led to

  11     innovative and creative initiatives that have

  12     resulted in safer, more convenient alternatives

  13     to accomplish their banking.

  14               For example, while responding to the

  15     need for greater education around direct

  16     deposit and familiarity with using the phone

  17     for banking, Citibank also discovered and

  18     responded to the need for transportation

  19     services and protection against con games.

  20               In response to concerns expressed by

  21     seniors in the Pelham Manor/Co-op City area,

  22     Citibank offered to present its consumer

  23     education series to seniors on a range of

  24     issues from how to use ATMs and PC Banking; how

  25     to access basic checking; how to call into its



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                                                                61
   1

   2     phone service and speak with a representative;

   3     and how to protect themselves from con games.

   4               Citibank consumer educators worked

   5     one-on-one with seniors to teach them what to

   6     watch for and how to protect themselves.

   7               Through the consumer education

   8     program, Citibank has also worked one-on-one

   9     with senior citizens who travel to Puerto Rico

  10     and Florida.

  11               Many seniors were not aware that

  12     Citibank offers free bill payment service

  13     through its 1-800 service line.  In one

  14     instance, a senior was able to avoid surcharges

  15     on her rent when she was in Puerto Rico by

  16     having Citibank pay her bills.

  17               Overall, Citibank consumer educators

  18     have conducted over 600 seminars in English and

  19     Spanish, 20 percent of which were conducted in

  20     the Bronx in senior citizen centers, schools,

  21     hospital and locals businesses.

  22               Beyond the bricks and mortar of its

  23     branches, however, Citibank uses the strength

  24     of its human resources to invest time,

  25     leadership, and technical assistance to



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                                                                62
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   2     community groups and residents.

   3               In my own district, Citibank's staff

   4     has volunteered for the 45th precinct Night Out

   5     Against Crime, and other health fairs in Co-op

   6     City and Throgs Neck, assisting the creation of

   7     KidCare ID cards for hundreds of area school

   8     children.  Citibank has also cosponsored with

   9     me a wonderful bus trip for senior citizens who

  10     are brought to an all-day picnic and barbecue

  11     in Sunken Meadow Park.

  12               As another example of Citibank's

  13     responsiveness, the staff at the Castle Hill

  14     Avenue branch found out that I was sponsoring

  15     the city teddy bear drive for physically and

  16     emotionally abused children who were brought

  17     into Montefiore Child Protection Center and

  18     immediately took up my cause and collected over

  19     200 teddy bears for these children.  These are

  20     the kind of wonderful people that are the

  21     backbone of this institution.

  22               Citibank has worked hand-in-hand with

  23     many community associations in my district on

  24     numerous different issues.  Citibank has also

  25     participated in Read Aloud programs in schools



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                                                                63
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   2     in my district and has also taken part in a

   3     clothing drive for people making the transition

   4     from welfare to work.  In my community,

   5     Citibank has surely made a difference.

   6               In the Bronx last year, through its

   7     Partnership In Progress program, Citibank

   8     committed 150,000 to the three creative and

   9     innovative community development corporations

  10     for the creation of affordable housing,

  11     commercial stores and community revitalization.

  12               In conclusion, for 25 years Citibank

  13     has had a long-standing commitment to improving

  14     the quality of life in the communities it

  15     serves.  It is clear from these activities in

  16     my assembly district and also those throughout

  17     the Bronx that Citibank demonstrates its pledge

  18     to CRA by providing access to the highest

  19     quality financial services and products, making

  20     them available to everyone regardless of where

  21     they live and how much they earn.

  22               I look forward to continuing my

  23     office's participation with Citibank to effect

  24     positive change in the Bronx.

  25               MR. LONEY:  Thank you.



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                                                                64
   1

   2               Mayor Robert Elliot.

   3               MR. ELLIOT:  I would like to briefly

   4     add my comments with respect to Citibank's

   5     community development activities.

   6               I am Bob Elliot and Mayor of

   7     Croton-on-Hudson; until a few weeks ago,

   8     president of New York Conference on Mayors.  I

   9     am here as the chairman of an eleven-community

  10     organization known as Historic River Town.

  11               Historic River Town is a

  12     representable eleven communities, extending

  13     from the New York City border northward nearly

  14     50 miles, from the City of Yonkers to the City

  15     of Peekskill, representing a population of

  16     nearly a quarter of a million people.

  17               A number of years ago, these

  18     communities came together in the midst of a

  19     severe recession to address economic problems.

  20     We couldn't wait for the state or the federal

  21     government to help us wrestle with these

  22     problems, particularly with the limited

  23     resources that we had.  We were wrestling with

  24     a recession unlike no other that we had

  25     encountered in the past.  We had both blue



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                                                                65
   1

   2     collar workers and white collar workers out of

   3     work, facilities such as GM closing, and IBM

   4     downsizing, affecting our community.  We needed

   5     to build on what we had, address our downtown

   6     and mainstream problems, and our focus became

   7     tourism.

   8               Beneath this was the broader economic

   9     development and the regional planning, and we

  10     formed Interest Municipal Agreement, a

  11     nonprofit organization, and a number of

  12     public-private partnerships which have now

  13     become models for other areas throughout the

  14     State of New York.

  15               From the very beginning, Citibank's

  16     community development division understood what

  17     we were doing.  They grasped the concept when

  18     no others did.  They understood the

  19     complexities and the interdependencies of our

  20     economy, with such issues as transportation and

  21     housing as relates to the environment and

  22     relates to our community.

  23               Citibank's assistance extended way

  24     beyond the grants for a number of programs,

  25     programs which involved a number of the area



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                                                                66
   1

   2     branches, programs which involved community

   3     planning, community meetings and several

   4     planning conferences which, for example, last

   5     week ended up at a planning conference using a

   6     bottom-up process where we laid out nearly 50

   7     miles of waterfront development plans along the

   8     Hudson River coastline, Westchester County.

   9     More important was the expertise and technical

  10     assistance that Citibank gave us and,

  11     particularly, the high standard to which they

  12     have held us, a standard to which we are still

  13     trying to reach.

  14               Citibank's community development

  15     efforts made a tremendous difference in our

  16     eleven communities and a significant difference

  17     in the Hudson Valley.

  18               I thank you for the opportunity to

  19     testify this morning.

  20               MR. LONEY:  Thank you.

  21               Are there any questions for the

  22     panel?  Thank you very much.

  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



.
                                                                67
   1

   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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                                                                68
   1

   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



.
                                                                69
   1

   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.



.
                                                                70
   1

   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



.
                                                                71
   1

   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.



.
                                                                72
   1

   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



.
                                                                73
   1

   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.



.
                                                                74
   1

   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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                                                                75
   1

   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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                                                                76
   1

   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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                                                                77
   1

   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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                                                                78
   1

   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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                                                                79
   1

   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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                                                                80
   1

   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



.
                                                                81
   1

   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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                                                                82
   1

   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



.
                                                                83
   1

   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.



.
                                                                84
   1

   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



.
                                                                85
   1

   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



.
                                                                86
   1

   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



.
                                                                87
   1

   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



.
                                                                88
   1

   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



.
                                                                89
   1

   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.



.
                                                                90
   1

   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.



.
                                                                91
   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



.
                                                                92
   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



.
                                                                93
   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



.
                                                                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



.
                                                                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.



.
                                                                96
   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



.
                                                                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



.
                                                                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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   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.

   9               Could I ask.  Some of the folks who

  10     missed testifying on panel two and are here,

  11     could I call Glenn VanNostritch, Walter

  12     McCaffrey, Peter Rivera and Dennis Walcott.

  13               Why don't we start from left to

  14     right, Mr. VanNostritch.

  15               MR. VAN NOSTRITCH:  Thank you.  My

  16     name is Glenn Van Nostritch and I'm research

  17     director for public advocate Mark Green.  He

  18     was supposed to be on the 9:35 panel.  As you

  19     know there were a few delays and he had another

  20     meeting he had to get to.

  21               If you approve the Travelers Group

  22     application you will be giving a green light to

  23     the structuring of the bulk of the nations

  24     financial services industry into a handful of

  25     massive financial services conglomerates.  I



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   1

   2     urge you to reject this application because

   3     such restructuring would occur in the absence

   4     of crucial laws to protect consumers and expose

   5     taxpayers to substantial liability.

   6               First, I'd like to talk about the

   7     cross-marketing and de facto product tie-in

   8     concern.

   9               Although Citicorp and Travelers had

  10     stated that the chief motivation is to

  11     cross-market their wide array of financial

  12     services and products, they haven't provided

  13     you with any actual cross-marketing plan.  They

  14     said that these plans will quote unquote

  15     develop over time.  But since cross-marketing

  16     presents serious consumer pitfalls it is

  17     important to know now, not after you've reached

  18     your decision, how Citigroup is going to

  19     cross-market among its affiliates.

  20               One of these pitfalls is product

  21     tying -- the de facto requirement for a

  22     customer buying one financial product to

  23     purchase another at the same time.  Consider

  24     the position of someone applying for a car loan

  25     from one Citigroup affiliate who is handed a



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   1

   2     credit insurance application to another

   3     Citigroup affiliate.

   4               It would be very understandable if

   5     she believed that not completing the insurance

   6     application would hurt her chances for a loan

   7     approval, even if no one directly told her that

   8     there was a quid pro quo.

   9               The same holds true for the hopeful

  10     home owner waiting word on a mortgage

  11     application to get the call from Citigroup

  12     insurance affiliate about applying for a

  13     homeowners insurance.  The resulting harm is

  14     that the individuals might well have purchased

  15     the insurance elsewhere at lower cost had they

  16     not felt compelled to buy everything under the

  17     Citigroup umbrella.

  18               The applicant that says that as part

  19     of it's cross-marketing will use quote unquote

  20     relationship pricing in which discount is

  21     granted if you buy a package of financial

  22     products and that relationship pricing has

  23     numerous consumer advantages such as

  24     convenience and more personalized service.

  25               Experience with Citibank's



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   1

   2     relationship pricing illustrates how it can

   3     discourage comparison shopping and raise

   4     consumer costs. According to the consumer bank

   5     scorecard of 50 banks that is issued annually

   6     by Mark Green, Citibank has consistently ranged

   7     amongst the five most expensive banks in New

   8     York City like services like checking accounts

   9     and a six thousand dollar minimum balance of

  10     free checking is far higher than it's major

  11     competitors.

  12               Recently Citibank had added mortgages

  13     and other credit card products to this

  14     relationship to reach a six thousand dollar

  15     minimum.  The down side of consumers is that

  16     mostly Citibank's products including mortgage

  17     and credit cards could be obtained somewhat

  18     less expensive by shopping around and it's

  19     deposit accounts pay less than most other

  20     banks.

  21               So even should a consumer get a

  22     seemingly good deal on one Citibank product the

  23     savings could easily be offset by high prices

  24     for the other services.  For instance, savings

  25     from the free checking could be offset by the



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   1

   2     comparatively high annual finance charge in

   3     most Citibank credit cards.

   4               In short, cross-marketing as

   5     encouraged by relationship bank pricing is

   6     anti-competitive from shopping around for

   7     better pricing.

   8               Then there is the issue of product

   9     tie-in.  Last month Nations Bank paid a $7

  10     million federal fine for misleading its

  11     customers, many of them elderly people who have

  12     been investing in federally insured CDs about

  13     the risk of investing in mutual funds.  This

  14     case illustrates the dangers and temptations of

  15     putting securities in banking businesses under

  16     one roof.  Yet common ownership every

  17     securities and banking affiliates should only

  18     increase the motivation to cross-market these

  19     products.

  20               Representative John Dingell has

  21     proposed giving the SEC more power to regulate

  22     brokerage activities in banks because current

  23     protections are insufficient.  The Travelers

  24     Group acquisition of Citicorp would occur

  25     without such necessary protection.



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   1

   2               Nationsbank is not an

   3     isolated case.  A May, 1996, study by the FDIC

   4     found that more than one-fourth of the banks

   5     surveyed failed to tell on-site customers that

   6     products are not insured and 55 percent failed

   7     to inform telephone customers.

   8               Consumers regrettably are vulnerable

   9     to misinformation and manipulation.  A 1994

  10     survey conducted for the American Association

  11     of Retired Persons found that fewer than one in

  12     five bank customers understood that products

  13     such as mutual funds and annuities are

  14     uninsured.

  15               The board should not approve

  16     Travelers application until new privacy

  17     protections applying to financial services

  18     conglomerates are enacted into law.

  19               Primerica, Credit Corporation,

  20     Citibank and Salomon Smith Barney possess

  21     intimate, private information about tens of

  22     millions Americans.  Through loan applications

  23     they know about the jobs many people hold, from

  24     credit card records they know about recent

  25     purchases, from mortgage applications they know



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   1

   2     the age and value of their residences, from

   3     auto insurance files they know about driving

   4     records, and from banking files they know if

   5     there was recently a large deposit in an

   6     account.

   7               Travelers promised to adopt the quote

   8     unquote opt-out system by which consumers

   9     affirmatively indicate that they do not want

  10     their personal information shared.  Recently

  11     one of serious problems the opt out method were

  12     currently used such as the opt out disclosure

  13     are buried in the middle or near the end of a

  14     multi-page agreement.

  15               A much better approach is to

  16     affirmatively opt in to approve dissemination

  17     of personal information among Citigroup

  18     affiliates.

  19               The rest of our testimony discusses

  20     how taxpayers will be put on the line by such a

  21     merger because of the dangers of under

  22     regulation of insurance affiliates and the

  23     inadequacy of the overall regulatory structure

  24     for such a large multifaceted conglomerate.

  25               Thank you.



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   1

   2               MR. LONEY:  Thank you for your

   3     consideration of our time restraints and we

   4     will certainly put the rest of your testimony

   5     in the record.

   6               Before we go to Mr. McCaffrey I want

   7     to introduce Barbara Kent from the New York

   8     State Banking System.

   9               MR. MC CAFFREY:  Thank you very much.

  10     I am counsel member Walter McCaffrey

  11     representing the people of the 26th council

  12     district in western Queens.

  13               I come today with an experience in

  14     dealing with Citibank borne not just during my

  15     position as an elected official, but having

  16     served as a chair of a community board in

  17     western Queens and district chief of staff to a

  18     member of the House of Representatives.

  19               In 1985 Citibank originally came to

  20     Long Island City with a proposal to build what

  21     is now their fifty story headquarters in

  22     Queens.  The facility at that time was

  23     obviously going to be something significantly

  24     and dramatically different from that which is

  25     in the community.



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   2               Queens did not have such a skyline as

   3     it has now.  But Citibank came not to be in

   4     Long Island City but rather to be part of Long

   5     Island City.  Through the process the bank

   6     ended up agreeing readily to the request of the

   7     community to participate in a whole host of

   8     activities.  For example, Citibank has set up

   9     over the years an amenities package.  The

  10     amenities package that was agreed to by the

  11     bank and developed in cooperation with the

  12     community became in many ways quintessential

  13     example of amenities packages not really in

  14     this city but around the nation.

  15               Programs for senior citizens,

  16     programs for the youth in the community,

  17     housing funds were all readily available and

  18     there was a set period of time in which the

  19     bank had a legal obligation to provide those

  20     resources.

  21               At the expiration of that period of

  22     time, however, the bank could have walked away

  23     and said wealth we have discharged our

  24     responsibility but rather they chose to

  25     continue that financial involvement with the



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   1

   2     community over the years without any sort of

   3     obligation whatsoever.

   4               The institution also as it was going

   5     up was one of the first private construction

   6     sites in the City of New York to aggressively

   7     have an MBE, a minority business employee

   8     enterprise component, and a WB, a woman

   9     business enterprise component in the

  10     construction phase, and that was something in

  11     that period of time that was not seen really in

  12     the private sector.  It was something that had

  13     been looked at and used in terms of development

  14     of public projects.

  15               So the bank over the years has had

  16     that type of involvement.  It is one of the two

  17     institutions in the City of New York that has

  18     really moved forward in the development in

  19     terms of programs to deal with elder abuse.

  20               Other banks in the city did not live

  21     up to their obligation after it was pointed out

  22     that the banking community generally had a poor

  23     record.  They stepped forward and aggressively

  24     so.  In terms of the ATM law in the City of New

  25     York which is the toughest law in the United



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                                                                109
   1

   2     States, and having been the author of that, I

   3     have to say that Citibank did not come into

   4     that process dragging its heels but rather

   5     aggressively moved, with only a few exceptions

   6     of those members of the banking company.  Sad

   7     to save that the State of New York has tried to

   8     gut that law.  The fact of the matter is we

   9     have seen that Citibank has been aggressive in

  10     terms of customer safety and ATM.

  11               I understand that we look at this in

  12     a perspective of national context, but

  13     certainly I want you to understand what the

  14     context is in terms of the specific community.

  15               We've heard testimony from people

  16     today as to some policies but I wanted to give

  17     you a specific example, and it would have been

  18     very easy for that institution to come in to

  19     use its power to be able to get approval and

  20     not do anything for the community.

  21               Matt Lee rightly points out that

  22     there is uncertainty as to whether or not

  23     federal law will change in terms of that which

  24     has been considered a firewall for many years

  25     in terms of financial institutions.  But I



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                                                                110
   1

   2     think at the time in which it was passed we had

   3     a much different type of financial institution

   4     at hand.

   5               Nearly 70 percent of the investment

   6     and financial institutions at that time was in

   7     banks.  It is now down to under 30 percent.  We

   8     never saw the development of credit unions at

   9     that time.  We now see that and we see now

  10     billions of dollars invested in the

  11     metropolitan area in other institutions and

  12     certainly on the national basis we see that the

  13     credit union concept is something that has a

  14     major impact now and as an alternative source.

  15               I understand the position of our

  16     distinguished public advocate in terms of

  17     concerns, and there are legitimate concerns in

  18     terms of privacy, but I think from the consumer

  19     point of view we now see entities in the City

  20     of New York who are banks that came from afar

  21     for New York's customers who are now here.  We

  22     see that type of diversity, and, again we see

  23     that type of competition and the competition is

  24     out there.

  25               Now, some consumers will choose not



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                                                                111
   1

   2     to be savvy and some will choose to be able to

   3     watch very, very closely and to be able to make

   4     competitive decisions.  The fact of the matter

   5     is I think with education out there that that

   6     is something that can be addressed.  So I would

   7     suggest that this is a good proposal on

   8     balance.  It is not a perfect one, but it is

   9     one which I think will benefit.

  10               MR. LONEY:  Thank you.  Mr. Walcott.

  11               MR. WALCOTT:  Good morning to you.  I

  12     should say good afternoon probably to all of

  13     you who are here since morning.  You started

  14     early.

  15               I want to approach this both as

  16     president of the New York Urban League as well

  17     as a former member of the City of New York city

  18     board of education and talk about the

  19     opportunities that are presented before us

  20     right now with this potential merger and I want

  21     to focus on several items included in the

  22     potential merger.  One, taking a look at the

  23     merged opportunities for investment in the

  24     office of financial literacy, and creating the

  25     advisers panel on financial literacy, also



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                                                                112
   1

   2     Citigroup initiative dealing with education

   3     both at a student level and an elementary level

   4     as well as middle and high school level.

   5               Talk about the area of developing the

   6     financial skills of young Americans and how the

   7     Citigroup will be responsive in developing

   8     that, and also talk about their public

   9     awareness campaigns in trying to deal with both

  10     the literacy and math initiatives within the

  11     New York City public school system.

  12               It is proposed that 25 million

  13     dollars will be developed for the banking

  14     education initiative making sure that children

  15     regardless of their families' income become

  16     computer literate.  Also talk about the

  17     development of the new technology that's being

  18     proposed with the merger as well.

  19               In addition to that, I want to talk

  20     about the center for community development

  21     enterprise that's being proposed with the

  22     merger, and I think there are a lot of great

  23     opportunities with the potential merger.  One

  24     of the other things that I think is extremely

  25     important to talk about that I really have not



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   1

   2     heard dealt with at all this morning is the

   3     corporate involvement on the part of the

   4     leadership of both Travelers as well as

   5     Citibank as well.

   6               For example, Citibank vice-president

   7     has become the newest member of the New York

   8     City Board of Education on the Travelers side.

   9     One of their members it's now on the New York

  10     State board of regents.  Former vice-president

  11     of Citibank was a former president of the New

  12     York City board of education who is now the

  13     state comptroller of the State of New York.

  14               So they have an active involvement as

  15     far as making sure that they are involved as

  16     corporate citizens as well, and I must be very

  17     honest with you in that my own board treasurer

  18     is a member of Travelers, as he has been I

  19     think a very responsive Travelers person who

  20     has been there for us.

  21               We are one of those organizations

  22     that do not receive monies from Citibank, not

  23     because of Citibank.  We just never approached

  24     Citibank.  So we are not there and here as a

  25     result of Citibank as indicated earlier forcing



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                                                                114
   1

   2     nonprofits to be here.  We're here because we

   3     see a potential opportunity that will increase

   4     the diversity in New York City as well as

   5     opportunity for investment in the education of

   6     New York City making our students brighter as

   7     far as computer literacy and also getting into

   8     the financial industry.

   9               I thank you for this opportunity to

  10     testify before you.

  11               MR. LONEY:  Thank you, Mr. Walcott.

  12     Assemblyman Rivera.

  13               MR. TRAYLOR:  Good morning.  My name

  14     is Peter Rivera.  I'm a member of the New York

  15     State assembly.  I represent the 76th assembly

  16     district in the Bronx which is comprised of the

  17     communities known as Parkchester, Castle Hill,

  18     Fordham Road and westbound.  The ethnic makeup

  19     of my district is 35 percent Hispanic.  25

  20     percent African American, 20 percent white.

  21               My purpose here is to express my

  22     opinion saying the Citibank my district in fact

  23     was a district that was affected when Citibank

  24     closed the branch that was the Parkchester

  25     branch.  However, the closure of that branch



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                                                                115
   1

   2     have very little adverse impact on my district

   3     due in large part to the good work that

   4     Citibank did in one, notifying the residents of

   5     the district that they were closing the branch,

   6     two, providing an ATM machine, three providing

   7     alternative ways for the seniors in the

   8     district to be able to get to the closest

   9     available branch, and, four, the assistance

  10     that Citibank gave to educate many residents of

  11     my district to banking at home.

  12               Citibank has always had a commitment

  13     to the communities it serves, particularly to

  14     the residents of the 76th assembly district.

  15     It starts with the faces that greet you

  16     whenever I visit one of their branches.  As you

  17     know the Hispanic community has become quite

  18     sensitive as of late as a result of an episode

  19     on Seinfeld and as a result of other articles

  20     that have been written characterizing the way

  21     that Hispanics are viewed on the media as

  22     suspect rather than as potential purchasers.

  23               However, the corporate responsibility

  24     at Citibank has indicated that they really have

  25     gone out and attempted to reach and attempted



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                                                                116
   1

   2     to hire people from every segment of the

   3     communities that service New York City.  It's

   4     community development program have helped

   5     tremendously in improving the quality of life

   6     in the communities in which it has a strong

   7     presence.

   8               For example, the community

   9     development program is a comprehensive strategy

  10     that is built upon partnership with nonprofits,

  11     government agencies and other strong financial

  12     partners.  In the 76th assembly district they

  13     helped two major important programs that I want

  14     to refer to.

  15               One is NETS which works with senior

  16     citizens and the other is the East Bronx Hunger

  17     Program.  The East Bronx Hunger Program is the

  18     only food pantry in the east side of the Bronx

  19     servicing approximately a half a million people

  20     and sponsored basically by the churches in the

  21     area.  About two years ago they had a deficit

  22     of $10,000 and if it wasn't for the assistance

  23     of Citibank in trying to overcome that deficit

  24     the East Bronx Hunger Program would have gone

  25     out of business.



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                                                                117
   1

   2               Last year alone Citibank committed

   3     one hundred fifty thousand dollars to community

   4     development corporation for the creation of

   5     affordable housing commercial stores and

   6     community revitalization.

   7               In the district that I represent this

   8     type of commitment is truly important.  The

   9     76th assembly district is primarily populated

  10     by low to moderate income families.  These many

  11     families deserve every opportunity to fulfill

  12     dreams such as obtaining credit, owning a home

  13     and starting their business.

  14               Citibank has enabled many families in

  15     my district to realize these goals.  For

  16     example, Citibank is the largest lender in

  17     Parkchester here.  My working close to

  18     community groups after the Castle Hill branch

  19     closed has been able to identify and meet the

  20     needs of the community.

  21               Just recently over one hundred

  22     members of the Crossroads Congregation attended

  23     Citibank seminars on budgets and home

  24     ownership.  The seminar was just one of the

  25     many that Citibank offers on a regular basis.



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                                                                118
   1

   2     These have been offered in English and in

   3     Spanish so as to meet the needs of every

   4     consumer, Citibank has also consistently

   5     created commitments to the community by paying

   6     close attention to every detail that will make

   7     it bond to the community stronger.

   8               The staff at Castle Hill are deeply

   9     committed to their community whether its

  10     reading to third grade, through their read

  11     aloud program or conducting clothing drives for

  12     the less fortunate in our community.

  13               Citibank has supported after school

  14     programs.  As a result I have contacted

  15     Citibank right now because we hope to be able

  16     to establish the first Internet cafe in

  17     Parkchester due in large part through the

  18     cooperation of Citibank.  St. Helen's is a

  19     small private group school that services for

  20     the most part, parents have programs that allow

  21     them to work with their assurance that their

  22     children are taken care of in a safe and

  23     nurturing environment.

  24               Citibank has always positioned itself

  25     as a leader in the area of technology with its



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                                                                119
   1

   2     plans for opening up a new state-of-the-art

   3     electronic banking facility in the Bronx.

   4               They will have the opportunity to

   5     establish itself as an even stronger partner in

   6     the community.  Citibank uses its human

   7     resources strength to invest time and

   8     leadership to community groups and residents.

   9     This past April I had an opportunity to

  10     participate in a program called Christmas in

  11     April, a project that Citibank has been a long

  12     supporter.  In the Christmas in April project

  13     Citibank and I chose a house owned by a senior

  14     citizen approximately 75 years of age who was

  15     blind and who was living alone, and we cleaned

  16     out the house.  The cleaning up was done with

  17     their employees.  We cleaned out the house.  We

  18     took out all the garbage from the house.  We

  19     repainted the house.  We put it in a new stove

  20     and a new refrigerator.

  21               You can see how it is from these

  22     activities in my district and throughout the

  23     entire Bronx that Citibank demonstrates its

  24     pledge to provide access of the highest quality

  25     and financial services and products and make



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                                                                120
   1

   2     these available to everyone regardless of where

   3     they live or how much they make.

   4               I look forward to continuing my

   5     office's partnership with Citibank and I am

   6     confident that we will be able to effecutate

   7     positive changes in my district and throughout

   8     the entire Bronx.

   9               I thank you very much for your time

  10     and attention and hope that the consideration

  11     of all of this testimony that will be presented

  12     here today will lead to the obviously

  13     beneficial rewards that this merger will

  14     provide.

  15               MR. LONEY:  Thank you.  Any

  16     questions?

  17               MR. ALVAREZ:  I have one question.

  18     There has been a lot expressed by this panel

  19     and earlier panels about protecting customer

  20     information particularly.  Are there any state

  21     or local laws here that govern the sharing of

  22     customer information and protect customer

  23     information?

  24               MR. MC CAFFREY:  We in the City of

  25     New York are precluded in terms of that.  That



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                                                                121
   1

   2     is a function of the State and obviously you

   3     would be able to have information readily

   4     available as to the State.

   5               If I can just indulge one other

   6     thing, let me say that one of the assets that

   7     Citibank did in a community that had no library

   8     whatsoever built at the expense of two and a

   9     half million dollars a library fully equipped,

  10     turnkey, gave it over to the Queensborough

  11     library system as part of the commitment to the

  12     community.  That was a fairly significant

  13     contribution and I'd be derelict if I didn't

  14     mention it.

  15               MR. RIVERA:  I'm not aware of any

  16     specific section of state law that prevents,

  17     I'm sure that it does, although I really can't

  18     recite it.

  19               MR. ALVAREZ:  Mr. Van Nostritch.

  20               MR. VAN NOSTRITCH:  I believe one of

  21     their motivations is to be able to share all

  22     kinds of information among affiliates to

  23     develop a large database on the customers so

  24     certainly that is what they are planning to do

  25     and apparently there is no law that can stop



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                                                                122
   1

   2     them from doing that.

   3               MR. WALCOTT:  If I can just make one

   4     modification to my testimony, because normally

   5     as a not-for-profit we always think of

   6     receiving grants from corporations or

   7     foundations.  I do want to say with Citibank we

   8     have recently established the New York Urban

   9     League a cash reserve with Citibank and that

  10     has been tremendously helpful to us.

  11               I do want to modify my testimony to

  12     say that while we never have pursued them for

  13     any grants whatsoever or corporate support for

  14     dinners, at the same time they have been very

  15     helpful as far as the cash reserve, and that

  16     will help us during emergency times if the city

  17     council and the mayor are at odds at times and

  18     holding up budgets for not-for-profit.

  19               I do need to put that on the table.

  20     That's been extremely helpful to an

  21     organization like us.

  22               MR. LONEY:  Thank you.  Any other

  23     questions?  We'll takes a ten minute break, and

  24     reconvene at 10:30.

  25               (Recess)



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   2               MR. LONEY:  The next panel will be

   3     comprised of Bill Traylor, Jacqueline O'Garrow,

   4     Michael Lappin, Edward Reed, Suzanne Israel

   5     Tufts.  We will start with Mr. Traylor from

   6     LISC.

   7               MR. TRAYLOR:  Before I begin I want

   8     to thank you for the opportunity to speak

   9     today.  My name is Bill Traylor.  I am the Sr.

  10     program director for the Local Initiative

  11     Support Corporation.  I run our New York

  12     program office, and I am also the managing

  13     director of our New York equity fund which

  14     invests in affordable housing projects

  15     developed through the federal low income

  16     housing and tax credit program.

  17               I'd like to give you a little bit of

  18     background on LISC before I move too far into

  19     my discussions of our relationship with the

  20     Travelers Group and Citibank.

  21               LISC is the national organization.

  22     We have forty offices in major urban centers

  23     across the country.  We also work in 63 rural

  24     counties.  We are an intermediary, a financial

  25     and technical assistance intermediary.  We are,



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   2     we'd like to see ourselves as a bridge between,

   3     if I can for downtown and midtown sources of

   4     capital and uptown community grass roots

   5     organizations.

   6               We operate community development

   7     corporations which are grass roots indigenous

   8     locally directed or neighborhood directed

   9     organizations that have a comprehensive plan to

  10     revitalize poor and distressed communities.

  11     They are poor and distressed communities both

  12     through or through a variety of different

  13     mechanisms, first and foremost through the

  14     redevelopment and development of housing stock

  15     within their neighborhoods through economic

  16     revitalization activities, including the

  17     generation of new small businesses as well as

  18     the construction or rehabilitation of

  19     commercial space.

  20               We've over the last 18 years have

  21     enjoyed a tremendous amount of success through

  22     this vehicle and being a conduit for capital to

  23     the communities more than three billion dollars

  24     has been invested in the nation's poorest

  25     communities resulting in more than 75,000



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   2     affordable homes being constructed and more

   3     than 3 million square feet of commercial space

   4     and numerous new jobs being created.

   5               Important to what we do obviously is

   6     partnerships with corporations like Travelers

   7     and Citibank for they are the ones who provide

   8     the capital that we can funnel into local

   9     communities, and they are the entities that

  10     fund our technical assistance operations as

  11     well.

  12               Our relationship with Citibank and

  13     the Travelers Group has been substantial over

  14     the last 18 years.  Travelers Group Salomon

  15     Brothers has invested more than forty million

  16     dollars with us to develop affordable homes

  17     that I spoke about before, that forty million

  18     dollars all for the City of New York.

  19               Our relationship with Citibank has

  20     been more complicated and more diverse and

  21     becoming broader over the course of time.

  22     Citibank has been a consistent lender to us on

  23     the bridge, to bridge our equity investments

  24     which generally come in over time from

  25     corporations so that we can begin immediately



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   2     to construct or finance the contribution and

   3     rehabilitation of the affordable homes that I

   4     spoke about.

   5               Citibank, and this is I think because

   6     Citibank joined us very early on in the bridge

   7     financing, when our product was new, when the

   8     community groups with whom we were working were

   9     untested and untried, and when the

  10     neighborhoods we were working in were much more

  11     distressed than they are today that Citibank's

  12     involvement with us early on involvement is

  13     very significant, and I think fairly

  14     substantial indicating their ability and

  15     willingness to take risks.

  16               While it has taken sometime for

  17     Citibank to fund our endeavors other than

  18     through bridge lending and to achieve a level

  19     of involvement in our work commensurate with

  20     their asset side, Citibank is where it should

  21     be today when benchmarked against other

  22     financial institutions that are based in New

  23     York City.

  24               Beginning in 1995, Citibank became

  25     one of our larger investors with a 25 million



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   1

   2     dollar commitment to affordable housing to be

   3     funded through our New York equity fund and has

   4     recently made another commitment to fund $30

   5     million for the development of that housing.

   6               Citibank has also provided extensive

   7     philanthropic support to us.  Just one more

   8     word before I conclude, that philanthropic

   9     support all passes through us to community

  10     based organizations.

  11               They recently gave us $340 million to

  12     support our neighborhood homes program which

  13     will construct and renovate affordable homes

  14     for first-time home buyers and that type of

  15     philanthropic support is extremely important

  16     and extremely hard to find.  Given this level

  17     of substantial support both by Travelers and by

  18     Citibank, we support the proposed merger of the

  19     organization.

  20               MR. LONEY:  Thank you, Mr. Traylor.

  21     Ms. O'Garrow.

  22               MS. O'GARROW:  Good morning.  My name

  23     is Jacqueline O'Garrow and I am deputy director

  24     of the New York partnership office of

  25     FannieMae.  As many of you are undoubtedly



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   1

   2     aware FannieMae is America's largest supplier

   3     of conventional home mortgage funds, since its

   4     creation by Congress in 1939, and its evolution

   5     into a shareholder-owned accompanied in 1968

   6     FannieMae's mission has been to provide

   7     financial products and services that increase

   8     the availability and the affordability of

   9     housing for low, moderate and middle income

  10     Americans.  FannieMae has established 31

  11     partnership offices throughout the United

  12     States.  One such office is the New York

  13     partnership office.

  14               We work closely with city government

  15     officials, community based organizations and

  16     members of the professional real estate

  17     community to structure a series of creative and

  18     flexible products that are necessary to meet

  19     the home financing needs of New York's low to

  20     moderate income home buyers.

  21               The products and programs also

  22     warrant the support of strong lenders committed

  23     to affordable housing on the premise that

  24     everyone is entitled to decent affordable

  25     housing both rental as well as home ownership.



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   2               Citicorp is one of several major New

   3     York lenders that have demonstrated a

   4     commitment to partnering with us to assure that

   5     these principles are achieved, and that

   6     products meet their intended concern.

   7               FannieMae's valued relationship with

   8     Citicorp of course predates the establishment

   9     of the partnership office.  However, it is also

  10     quite clear that the introduction of our

  11     programs could only be enhanced with the

  12     support of a lending source like Citicorp in

  13     New York City and Long Island.

  14               With respect to affordable housing

  15     Citicorp's participation in our city homes

  16     financing program is one such program that

  17     brings us closer to achieving our overall

  18     objective.  This program was developed to

  19     support the city's efforts to transform vacant,

  20     abandoned and neglected in rem once poor family

  21     housing stock into rehabilitated housing, low

  22     to moderate income first time home buyers.

  23               Citicorp is also a lender partner in

  24     the New York City housing partnership new homes

  25     program.  Another program for which FannieMae



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   1

   2     has negotiated flexible underwriting guidelines

   3     which serves to facilitate the opportunity for

   4     home owners of the thousands of New York City

   5     low to moderate income first time home buyers.

   6               Further, their overall performance in

   7     the origination and delivery of co-op housing

   8     units utilizing our co-op pilot has added

   9     considerable options to the co-op market.  In

  10     1997 Citicorp was one of three lenders who

  11     worked closely with us to structure a secondary

  12     market program that would compliment federal,

  13     state and local agencies in supporting the

  14     ground breaking City Lights at Queens Landing

  15     development.  The successes of these programs

  16     requires the experience of a skilled

  17     organization staff, sensitive to underwriting

  18     affordable housing loans.

  19               Citicorp has been a willing partner

  20     in taking the lead to facilitate partnerships

  21     among nonprofits and for profit developers to

  22     seek solutions to some of New York City's

  23     housing issues.  The spirit of working

  24     collaboratively with FannieMae's New York

  25     housing and neighboring housing service very



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   1

   2     low down payment, gut rehabilitation,

   3     convention financing program commonly known as

   4     the neighborhood pilot has been noted in our

   5     company as a model for other parts of the

   6     company to date.

   7               Until Citicorp's involvement this

   8     initiative sat dormant for five years waiting

   9     for a willing partner to bring a leveling of

  10     commitment necessary to have us realize the

  11     success in an urban setting.  The features of

  12     the program reach to the very issues home

  13     buyers face when purchasing or repurchasing one

  14     of New York's aged housing stock.

  15               With the added complexity and the

  16     issues of affordability this product offers a

  17     very low down payment feature with an

  18     aggressive form of rental underwriting to help

  19     low and moderate income families qualify.

  20               By working very closely with

  21     FannieMae to structure secondary market product

  22     that could be replicated in other cities when

  23     neighborhoods organizations operate Citicorp

  24     has contributed significantly to this product a

  25     availability and accessibility.  Their



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                                                                132
   1

   2     commitment to New York City is further

   3     demonstrated through a partnership with LISC,

   4     HPD and FannieMae to provide a financing

   5     structure to address the needs of existing one

   6     to four in rem occupied housing through the

   7     neighborhood homes program.

   8               Unlike other City of New York

   9     reconstruction efforts of in rem housing this

  10     program brings new challenges since existing

  11     rental families occupy all of these units.

  12     Citicorp has stepped to the plate to explore

  13     with FannieMae a financing structure that will

  14     allow low to moderate income families to

  15     purchase these occupied rehabilitated one to

  16     four unit properties.

  17               They have also been a significant

  18     partner of FannieMae as a source for

  19     identifying home ownership and the creation and

  20     development of products and programs and

  21     financial literacy tools to assist minorities

  22     and immigrants simulation to our social

  23     structure and achieve what most American

  24     strives for, home ownership.

  25               Citicorp recently participated as a



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   1

   2     partner in a community needs round table.  This

   3     round table assembled in Chicago on June 1 and

   4     was comprised of significant community lending

   5     and government partners from five major cities.

   6               The purpose of the round table was to

   7     bring the partners together to share

   8     experiences, best practices and identify

   9     solutions which will guide FannieMae to

  10     structure lots and experimental programs that

  11     will assist minority and immigrant communities

  12     gain greater access to affordable housing.

  13               From the perspective of the New York

  14     partnership office Citicorp is a major player

  15     in the New York City housing market.  Their

  16     commitment to housing issues and providing

  17     access to our flexible and affordable housing

  18     programs are all directed to addressing the

  19     complex housing needs of New York City.  We

  20     continue to work with Citicorp as we strive to

  21     reach our mutual objective which is to provide

  22     affordable financing access to low and moderate

  23     minority and immigrant community in New York

  24     City.

  25               MR. LONEY:  Those of you who didn't



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   1

   2     get to finish all they had to say, you can

   3     leave a copy with the folks at the registration

   4     table.  The entire thing will be put into the

   5     record.

   6               MS. ISRAEL TUFTS:  Thank you.  My

   7     name is Suzanne Israel Tufts and I am president

   8     and CEO of the American Women's Economic

   9     Development Corporation, the nations oldest

  10     not-for-profit organization providing in-depth

  11     counseling training and supportive services for

  12     womens business owners.

  13               I want to thank the Federal Reserve

  14     and the State Banking Commission for the

  15     opportunity to testify today, and to speak to

  16     community that while not defined by the

  17     traditional neighborhood and geographic bounds

  18     or racial bounds in the regulatory framework

  19     nevertheless represents the growing single

  20     largest customer base of the two companies at

  21     issue here, Citibank and Travelers.

  22               In our twenty-year history and over

  23     twenty year collaboration with Citibank and

  24     Travelers has worked with over one hundred

  25     thousand entrepreneurial women and we have



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   2     spearheaded the creation and development of

   3     similar organizations throughout the country.

   4               We serve women from all income

   5     levels, all neighborhoods, all demographic

   6     background and all industries.  When we first

   7     started and Citibank first came to our help,

   8     women were just entering the small business

   9     market and were a negligible factor in that.

  10               Today women-own businesses account

  11     for over one third of all businesses in the

  12     United States, and it is estimated by the year

  13     2000, half of all small businesses will be

  14     owned by women.  Today they employ one out of

  15     every four US workers which is approximately

  16     18.5 million people.  They generate close to

  17     2.3 trillion dollars in sales and even in this

  18     bull market their growth outpaces overall

  19     business growth by nearly two to one.

  20               At the same time the largest

  21     demographic group of growth in the country is

  22     55 and older group.  In that group women make

  23     up the largest portion of that group.  So as

  24     women's credit needs are growing both

  25     professionally and personally their insurance



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   1

   2     needs and their retirement needs are growing.

   3     Whether from the standpoint of a business owner

   4     or from the standpoint of looking at their life

   5     and their financial planning as one uniform

   6     process, it is our belief that merger will

   7     represent for women efficiency, effectiveness

   8     and improvement of the services that they can

   9     render.

  10               WEDC and Citibank have as I've said

  11     in over twenty year history of strong creative

  12     collaboration on behalf of women business

  13     owners.  The burst in their growth is due to

  14     many market and social factors, but it is due

  15     to very much increased educational opportunity

  16     open to women, and this education simply would

  17     not have been available or affordable if it

  18     were not for Citibank's commitment to WEDC a

  19     commitment evidenced by financial support and

  20     also and most importantly by extraordinary time

  21     expertise and in depth involvement.

  22               Many employees in this organization,

  23     in particular Pamela Flaherty's familiarity and

  24     her team.

  25               Based on their work, Citibank has



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   1

   2     helped us, as I say, start and grow our

   3     organization at a time when people do not have

   4     faith that women could do it.  They helped

   5     reach out, have educated Congress, Small

   6     Business Administration, and women throughout

   7     the country to open similar offices which now

   8     exists all over the country.

   9               They have provided general operating

  10     support, the life blood of any organization.

  11     They have provided health in times of deficit

  12     and help wean us away from federal government

  13     funding to be predominantly private sector

  14     supported.

  15               They have helped in funding access to

  16     capital programs at a time when now women

  17     business owners are coming in to their own and

  18     Citibank is the one of the first to recognize

  19     the need for education that has to provide a

  20     good credit application, a good credit standing

  21     and a vibrant and growing business.

  22               Travelers has been involved with us

  23     focusing on women as insurance agents and

  24     people who are at this point under insured and

  25     need more education and protection towards



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   1

   2     their old age insurance product.

   3               What we have found is that time is

   4     womens most precious commodity and trust their

   5     most important asset, and when they can deal

   6     with one organization, with one person, be it

   7     their broker or their insurance broker or when

   8     they form trust in that person, they will put

   9     the repository of their trust there.  They will

  10     want the efficiency of one stop shopping.

  11               They do not have the time in their

  12     life to be dealing with older arcane systems of

  13     corporate structure.

  14               Today, for example, our organization

  15     is hosting an on-line marketing, on-line

  16     banking seminar with a group called Web World

  17     and we have over a hundred of the latest

  18     growing firms in the high tech community.

  19     These women represent the future and what they

  20     want is efficiency, speed and one stop

  21     shopping.

  22               They and we are grateful for the

  23     support Citibank and Travelers have shown as

  24     they were getting there and now that they are

  25     becoming successful again across all



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   2     boundaries, no matter how that's defined, it is

   3     our belief that that merger will only help them

   4     continue, thank you.

   5               MR. LONEY:  Thank you.  That was well

   6     timed.  Mr. Reed.

   7               MR. REED:  Good morning.  My name is

   8     Edwin Reed.  I am here as chairman of the board

   9     of the Jamaica Business Resource Center.

  10               I'd like to thank the Federal Reserve

  11     Bank and the State banking of New York for

  12     giving me this opportunity to come before you

  13     today on what I think is a very critical

  14     development in the banking industry.

  15               The Jamaica Business Resource Center

  16     was established over three years ago to serve

  17     as the national power for President Clinton one

  18     stop capital shop initiative.

  19               This program which is administered by

  20     the US Small Business Administration has been

  21     replicated in 16 major urban cities across the

  22     United States.  Since its inception, JBRC has

  23     assisted approximately 748 businesses in

  24     creating or retaining over one thousand four

  25     hundred fifty nine jobs, has secured over 15



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                                                                140
   1

   2     million dollars in financing for small

   3     businesses resulting in over six hundred

   4     additional jobs, has provided high quality

   5     in-depth training to over five hundred

   6     entrepreneurs, has provided training to two one

   7     stop capital shops in Harlem and Detroit and

   8     provided orientation and in over one hundred

   9     LDCRs, CDCs, EDCs, bank and other public

  10     private sector organizations on the JBR team

  11     model and have initiated internal welfare to

  12     work and minority college intern programs.

  13               Citibank has played a pivotal and

  14     important role in the development in

  15     establishing JBRC.  Fairly early on three years

  16     ago it was a major sponsor, and in fact, lended

  17     its resources and expertise to meetings which

  18     helped develop the model for JBRC.

  19               Citibank has also provided grants of

  20     $25,000 per year to help support the programs

  21     and operations of JBRC.  In addition, Citibank

  22     has been a leader in establishing a new forum

  23     by which nonprofit organizations, specifically

  24     religious institutions, were trained in

  25     computer development.  This resulted in a



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                                                                141
   1

   2     partnership with Citibank, JBRC, Southeast

   3     Queens Clergy, York College and others, so that

   4     we could take advantage of the many

   5     opportunities that exist.

   6               In regard to this merger it is

   7     important to note that we are looking at an

   8     opportunity to make a significant and historic

   9     change in the way we do banking and financial

  10     services.  The people at JBRC welcome this

  11     opportunity because we have had a relationship

  12     with Citibank for the last three years and we

  13     believe that they have the innovative

  14     management technique and style to fully take

  15     advantage of this new horizon.

  16               The key element to success in this

  17     arena, we believe are going to be an effective

  18     response to the market by the combined company,

  19     the management, and its focus on the

  20     opportunities presented for community

  21     development and historically underserved

  22     community, and a role for the regulators which

  23     is oversight.  That oversight must be

  24     coordinated, consistent, and contain effective

  25     rule making so that the market is able to



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   1

   2     function efficiently.

   3               As we look at Citibank and the

   4     potential for this merger we believe that we

   5     have an example of where the development of the

   6     financial markets will go.  It is an

   7     opportunity for Citibank and Travelers to

   8     expand into markets that have been underserved

   9     before, but also represent the opportunity for

  10     future growth here in the domestic arena.

  11               We believe that Citibank is up to the

  12     challenge, and we as JBRC would like to join in

  13     that partnership so that we can successfully

  14     rebuild urban communities by entrepreneur and

  15     small business development.  Thank you very

  16     much.

  17               MR. LONEY:  Thank you.  Mr. Lappin.

  18               MR. LAPPIN:  Good morning, and thank

  19     you for this opportunity to speak.  My name is

  20     Michael Lappin.  I'm the president of the

  21     Community Preservation Corporation known as

  22     CPC.

  23               We are an affordable housing lending

  24     consortium that operates throughout New York

  25     State and will shortly open an office to serve



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                                                                143
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   2     New Jersey.  Our mission is to provide

   3     financing, to help preserve low and moderate

   4     income communities throughout these areas.

   5               (Continued on next page)

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   2               MR. LAPPIN:  We are one of the

   3     largest affordable housing lenders in the

   4     country, having to date invested over $1.8

   5     billion for the rehabilitation, development and

   6     preservation of almost 62,000 housing units.

   7               We have had a long history with

   8     Citibank.  Citibank was one of our founding

   9     members back in 1974.  Citibank has been

  10     unwavering in its commitment to CPC.  It has

  11     had a senior level executive serve on our

  12     board, as well on our investment committee.

  13     Currently, Pam Flaherty serves on our board,

  14     our audit committee, and our strategic planning

  15     committee, and Bernice Giscombe serves on our

  16     mortgage committee.  Both are highly valued

  17     participants in CPC and give freely of their

  18     time and experience in guiding our company and

  19     our investments.

  20               Citibank's standing financial

  21     commitments to our company total over $26

  22     million, and these revolve.  Additionally, they

  23     have made investments and grants in the many

  24     projects the CPC is involved with.

  25               The representative from Fannie Mae



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                                                                145
   1

   2     spoke of the City Home program, which we are

   3     very heavily involved in, and most recently

   4     Citibank has made a commitment with us in the

   5     Nehemiah housing projects, where they have made

   6     a sizable no-interest loan to help rebuild this

   7     blighted community with 600 new homes.

   8               Citibank has always been among the

   9     first institutions to sign up for new

  10     initiatives, which we have sponsored and have

  11     encouraged others to do the same.  They have

  12     truly been a leader in helping to serve the

  13     affordable housing market.  They will be a

  14     founding participant with us in our expansion

  15     into New Jersey.

  16               Citibank is also providing support

  17     for our efforts to revitalize the 12,000-unit

  18     housing complex in Parkchester in the Bronx.

  19     They have signed an expression of interest to

  20     provide $20 million of financing -- that is

  21     over and above the commitments I already spoke

  22     to -- to renovate this property that is now

  23     experiencing a certain amount of decline.  They

  24     are also working with us closely to provide end

  25     loans to condominium loaners and to refinance



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                                                                146
   1

   2     existing end loans that they have at the same

   3     complex.

   4               The bank has provided through its

   5     directors long-standing support for our public

   6     initiatives in the legislative arena on a

   7     variety of issues concerning affordable housing

   8     and have attended and been very much involved

   9     in these efforts, both on the city, state and

  10     federal level.

  11               In closing, Citibank's 24 years of

  12     support for CPC have been a crucial

  13     underpinning to our success in helping the

  14     affordable housing needs and helping us serve

  15     the affordable needs of the low- and

  16     moderate-income neighborhoods where we lend.

  17               Thank you very much.

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

  19               Are there any questions from the

  20     panel?

  21               MR. ALVAREZ:  I have one question.

  22               Ms. Tufts and Mr. Reed, you both

  23     represent small business areas, and we have

  24     heard a lot of concern this morning that

  25     one-stop shopping from the individual side



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                                                                147
   1

   2     could cause some difficulties because of

   3     sharing of customer information.  A lot of

   4     folks were concerned that sharing customer

   5     information might actually lead to a cutback of

   6     services.

   7               That one-stop shopping, you think, is

   8     very helpful to the small business community.

   9     Do you think with your experience with small

  10     businesses that they would be concerned about

  11     sharing of information, calling an insurance

  12     company and a bank in the effort to provide

  13     one-stop shopping?

  14               MS. TUFTS:  Based on the businesses

  15     that we deal with, we see that they have really

  16     two concerns.  One is a general social privacy

  17     concern, and that is going to exist no matter

  18     what kind of corporate structures exist.  So as

  19     long as there are environments where they have

  20     knowledge of what is going on, that would just

  21     be a general concern, not specific to this

  22     issue.

  23               What we see as a greater concern is

  24     really -- I didn't mean to trivialize it -- is

  25     very truly one of time and one of trust.  When



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   1

   2     I say "trust," it is very hard for a small

   3     business person to approach a bank and bring

   4     their credit concerns to them.  Once they have,

   5     particularly in terms of the women's market and

   6     the way women work with their bankers or with

   7     their service providers, once they have formed

   8     that repository of trust, that is the person

   9     and that is the place where they want to

  10     discuss things in, frankly, a more holistic

  11     fashion.  I realize these are not banking terms

  12     necessarily, but those are how our customers,

  13     how the small businesses, look at that.

  14               Their business plan is not that

  15     different from their life plan and their

  16     concerns they have to bring together in their

  17     desire to approach things in a more integrated

  18     fashion, but, yes, with protecting dignity and

  19     privacy.  Nothing that we see would be

  20     precluded.  The two are not precluded.

  21               MR. REED:  My experience has been

  22     that, as it relates to privacy concerns and

  23     one-stop-capital shopping, I agree with

  24     Ms. Tufts that the most overriding issue for

  25     small businesses is the ability to get it done



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   1

   2     effectively and efficiently all at one time.

   3               As it relates to the issue of

   4     privacy, I think the regulators are the ones

   5     who are going to be very important in that.

   6     From a small business and from an individual

   7     standpoint, one of the most important things

   8     that one has is your credit report, which is a

   9     very public document, and if we have safeguards

  10     to be sure that the information that is being

  11     shared is accurate, reliable, if questioned can

  12     it be corrected, those are the things that will

  13     make sharing of information a viable

  14     opportunity.

  15               The other side of that issue is

  16     simply one of sharing information, not for

  17     making business decisions, but sharing it for

  18     marketing purposes.  And on that issue, the

  19     individual must have the right to understand

  20     how that information is being used and whether

  21     or not they should be the final one to

  22     determine whether or not they want that

  23     information in the overall marketplace, and

  24     guidelines must be set up in order for that

  25     process to work, in our opinion.



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   1

   2               MR. LONEY:  Thank you.

   3               Any other questions?  If not, I will

   4     thank the panel.

   5               MR. REED:  Thank you.

   6               MR. LONEY:  At this point we will

   7     move to Panel Five, Josh Zinner, Karen Thomas,

   8     Shanna Smith, Mark Silverman, Sarah Ludwig and

   9     Hilary Botein.

  10               It appears to me that you folks have

  11     just changed the order.

  12               Ms. Thomas.

  13               MS. THOMAS:  Good morning.  My name

  14     is Karen Thomas, representing the Independent

  15     Bankers Association of America.  Thank you for

  16     the opportunity to present our views.

  17               The IBAA strongly opposes the

  18     Travelers/Citicorp application.  The proposed

  19     merger carries serious adverse consequences for

  20     consumers, community banks, and the entire

  21     financial services industry.

  22               The merger is the largest in American

  23     business history and portends awesome

  24     restructuring of the financial landscape.

  25     There are a lot of problems with this union,



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   1

   2     but the gratuitous way it treats U.S. banking

   3     law and regulation is, perhaps, the most

   4     unsettling.  It is an illegal merger, announced

   5     with the express intent of pressuring Congress

   6     into making it legal.

   7               First, it violates the Bank Holding

   8     Company Act by seeking to combine insurance

   9     underwriting and banking, under the guise of a

  10     conditional promise to divest the prohibited

  11     insurance activities.  Second, it violates the

  12     Glass-Steagall Act by invading the barriers

  13     between investment and commercial banking

  14     established by Congress 65 years ago.

  15               With a hubris not often exhibited to

  16     the Federal Reserve Board, the merger parties

  17     have admitted they are well aware that existing

  18     law prohibits the insurance activities.  They

  19     ask the Board to allow the merger anyway, in

  20     the hope that Congress will change the law.

  21               Contrary to their belief, the

  22     divestiture provisions of the Bank Holding

  23     Company Act do not allow Citigroup up to five

  24     years to warehouse its insurance activities.

  25     The provisions are intended to allow orderly



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                                                                152
   1

   2     disposition of impermissible activities within

   3     two years.  It is not available to a bank

   4     holding company with no bona fide intent or

   5     plan to divest, and is vigorously lobbying to

   6     change the law to avoid divestiture.

   7               Despite thousands of pages filed with

   8     the Fed, Citigroup fails to offer even the

   9     beginnings of an approach to divestiture.

  10     Nowhere do they say it will divest its

  11     underwriting companies, precisely because it

  12     has no such intention.

  13               On April 6, Travelers CEO Sanford

  14     Weill dismissed the need for divestiture

  15     saying, "I don't think we have to spin anything

  16     off to make this happen; maybe what we are

  17     doing will cause the legislation to change."

  18               Citicorp's CEO John Reed added he

  19     "reasonably believes there will not be a legal

  20     problem," but noted that pending legislation

  21     would make this merger, in fact, quite legal.

  22     They can't have it both ways.

  23               The Federal Reserve's policy

  24     statement on divestiture says an affected

  25     company should "submit a divestiture plan



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                                                                153
   1

   2     promptly" and "complete divestiture as early as

   3     possible during this specified two-year

   4     period."  Extensions are not to be granted

   5     unless the company "has made substantial and

   6     continuous good faith efforts to accomplish the

   7     divestiture within the prescribed period."

   8     Even if divestiture were available, Citigroup

   9     has no intention of complying with this policy

  10     because it has no honest intent to divest.

  11               Equally unprecedented is the scope of

  12     the merger's combination of banking and

  13     securities activities in violation of Section

  14     20 of the Glass-Steagall Act.

  15               The new Citigroup's Section 20

  16     subsidiaries would have combined capital of $23

  17     billion, making it the second largest

  18     securities firm in the nation behind Merrill

  19     Lynch.

  20               The unprecedented impact and size of

  21     these securities activities render the Fed's

  22     current 25-percent-of-revenues test ineffective

  23     and an inappropriate measure of what

  24     constitutes "engaged principally" in securities

  25     underwriting.  Indeed, back in 1988 when the



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                                                                154
   1

   2     Second Circuit reviewed the then

   3     5-percent-of-revenues cap, the court said that

   4     size alone could contravene Section 20.  The

   5     court specifically rejected one interpretation

   6     of "engaged principally" because it would have

   7     allowed a bank to be affiliated with one of the

   8     nation's largest investment bankers, Merrill

   9     Lynch, a result, the court said, is

  10     inconsistent with congressional intent.  If

  11     Salomon Smith Barney and Robinson-Humphrey are

  12     permitted to coalesce into commercial banking,

  13     Section 20 of Glass-Steagall has no meaning at

  14     all.

  15               Finally, approval of the application

  16     would violate the separation of powers doctrine

  17     embodied in the Constitution.  Approval would

  18     improperly usurp the powers of Congress at the

  19     very time Congress is considering

  20     legislation -- supported by the Fed -- that

  21     would amend both the Bank Holding Company and

  22     Glass-Steagall Acts to permit the proposed

  23     transaction.

  24               This unique deal would create a new

  25     bank holding company with $700 billion in



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                                                                155
   1

   2     assets, engaged at the outset in a number of

   3     activities Congress has thus far prohibited for

   4     bank holding companies.  The transaction is

   5     essentially too big to unravel.  As such,

   6     approval of the application would effectively

   7     coerce Congress to amend a law to legitimize

   8     the transaction.

   9               The Board is being asked to tie

  10     Citigroup to the railroad tracks and as the

  11     time for divestiture approaches, Congress will

  12     have little practical choice but to save the

  13     day by amending the law.

  14               The Federal Reserve has always

  15     recognized the importance of the rule of law as

  16     the law exists, not as some might wish it to

  17     be.  We urge the Board to resist the temptation

  18     to advance a legislative agenda by preempting

  19     Congress.  The Board should deny the

  20     application.

  21               Thank you.

  22               MR. LONEY:  Thank you, Ms. Thomas.

  23               Mr. Silverman.

  24               MR. SILVERMAN:  Hi.  Good morning.

  25     My name is Mark Silverman.  I am speaking today



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                                                                156
   1

   2     on behalf of Citicorp-Travelers Watch.

   3               Citicorp-Travelers Watch is a

   4     coalition of advocates and community groups

   5     concerned about the impact of the proposed

   6     merger on communities and consumers.  We formed

   7     this coalition because we believe the proposed

   8     merger is one of such unprecedented magnitude

   9     and complexity that it warranted special

  10     scrutiny.

  11               Citicorp-Travelers Watch is opposed

  12     to this proposed merger for several reasons.

  13               First, the merger is illegal.  The

  14     affiliation between Citibank, as a member bank

  15     of the Federal Reserve Board and Travelers'

  16     subsidiaries that are engaged principally in

  17     securities dealings is simply prohibited by the

  18     Glass-Steagall Act.  Further, the proposed

  19     Citigroup would be in violation of the Bank

  20     Holding Company Act by continuing to hold

  21     Travelers' subsidiaries dealing in insurance.

  22               As we discussed this morning,

  23     Citicorp and Travelers are relying on the

  24     two-year grace periods under the law to divest

  25     themselves of their impermissible insurance



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                                                                157
   1

   2     holdings.  I want to say a couple of things

   3     about that.

   4               First, that is of no help to the

   5     securities holdings insofar as it does violate

   6     Glass-Steagall.  To the extent that the

   7     reliance of the two-year provision has any

   8     merit whatsoever, and it has none for all the

   9     reasons discussed, it is of no help for the

  10     securities holders.  There is no grace period

  11     in Glass-Steagall, and Mr. Prince this morning

  12     failed to address that, and the application

  13     nearly fails to address that.

  14               Further, Citicorp and Travelers, with

  15     respect to its insurance holdings, have so far

  16     put forward no plan for divestitures.  And as

  17     they candidly admit in their application, their

  18     willingness to use the grace period is to get

  19     the law changed so they don't have to divest.

  20     Indeed, they have already begun to lobby

  21     Congress about it.

  22               The Board should not allow Citicorp

  23     and Travelers to follow the strategy for at

  24     least three reasons:

  25               First, this is not what the two-year



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                                                                158
   1

   2     provision was designed to do.  It is supposed

   3     to give newly-formed bank holding companies

   4     time to conform to the law, not time to force

   5     the law to conform to them.

   6               Second, the law may well not change

   7     within that time, and if not, the proposed

   8     Citigroup hardly could simultaneously divest

   9     from, and integrate into itself, the various

  10     impermissible insurance holdings.  It is more

  11     likely that in the absence of a change in the

  12     law Citigroup will be forced into an

  13     ill-conceived, hurried divestiture that would

  14     threaten the health not only of itself, but

  15     given its would-be status of the world's

  16     largest financial institution, the health of

  17     the financial markets as well.

  18               Third, in deciding whether to pass

  19     financial modernization legislation, Congress

  20     should be concerned only with legitimate policy

  21     arguments regarding what is best for

  22     communities and the economy.  If the Board

  23     approves this merger prior to any change in the

  24     law, Congress, pressured by Citigroup and

  25     concerned about the consequences of a forced



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                                                                159
   1

   2     divestiture, can enact one of the most

   3     embarrassingly blatant pieces of

   4     private-interest legislation in recent memory.

   5     In short, by serving as an accomplice to

   6     Citicorp's and Travelers' strategy of

   7     manipulating the law to ends not originally

   8     within its contemplation, the Board risks

   9     undermining the legitimacy of itself and the

  10     legislature, and robs the public of a

  11     policy-focused debate of what is being called

  12     financial modernization.

  13               Further, as documented in

  14     Citicorp-Travelers Watch's written comments to

  15     be filed with this Board, Citicorp's extremely

  16     poor service and lending record is in clear

  17     violation of the Community Reinvestment Act

  18     and, as such, on its own requires denial of

  19     this merger application.  In addition, the

  20     proposed activities of Citigroup clearly fail

  21     the public benefits test of the Bank Holding

  22     Company Act, and thereby similarly require

  23     denial of the application.

  24               We are also concerned that our

  25     repeated and reasonable requests for



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                                                                160
   1

   2     information from these companies have been

   3     largely met with delay and denial.  Travelers

   4     has been particularly unresponsive, providing

   5     us with almost none of the information

   6     requested.

   7               Citicorp, while responding somewhat

   8     more to our request than Travelers, took until

   9     just yesterday to do so, and still is

  10     unresponsive to certain crucial elements of our

  11     request from these companies.  Of course, in

  12     response to the Board's own request for

  13     information, Citicorp and Travelers continue,

  14     on their own authority, to deem certain

  15     information confidential and simply to not turn

  16     it over.

  17               The public must be given the

  18     opportunity to adequately analyze all aspects

  19     of this merger by having full access to

  20     information, and the Board should be cognizant

  21     of its role in ensuring that access.

  22               Finally, Citicorp-Travelers Watch

  23     requests that the Board asks all parties

  24     testifying before it at this meeting to

  25     disclose any financial contributions they may



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                                                                161
   1

   2     have received from Citicorp or Travelers.  We

   3     believe that such disclosures are crucial to

   4     preserving the legitimacy and propriety of this

   5     public meeting.

   6               In sum, the poor service records of

   7     these companies, the clear legislative mandates

   8     of Glass-Steagall and the Bank Holding Company

   9     Act, and the cynical strategy of these

  10     companies in manipulating the law, all require

  11     denial of the application to merge as a matter

  12     of both law and policy.

  13               Thanks very much for your time.

  14               MR. LONEY:  Thank you, Mr. Silverman.

  15               Ms. Botein.

  16               MS. BOTEIN:  Thank you.

  17               My name is Hilary Botein, and I am

  18     the associate director of the Neighborhood

  19     Economic Development Advocacy Project or NEDAP.

  20     But I'd just like to point out it is advocacy,

  21     not advisory.  I don't know why it appears that

  22     way in this schedule.  NEDAP is also a member

  23     of the coalition Citicorp-Travelers Watch.

  24               I'd like to thank the Federal Reserve

  25     Board for holding this hearing because I think



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                                                                162
   1

   2     it is a very important one, one very important

   3     step in soliciting broad public input on a

   4     merger that is this big and this complex.

   5               NEDAP is a resource center for groups

   6     and advocates working on economic justice

   7     issues in low-income neighborhoods and

   8     communities of color all over New York City,

   9     and thus we have a unique perspective on

  10     community reinvestment issues as they affect

  11     neighborhoods all over the city.  Accordingly,

  12     my testimony today is going to focus on the

  13     impact of Citicorp and Travelers' practices on

  14     local economies and residents and the

  15     neighborhoods where NEDAP works.

  16               It is worth noting that many

  17     organizations testifying in support of the

  18     merger are recipients of Citibank grants, and

  19     we urge you to ask all testifiers if their

  20     organizations receive funding from Citibank.

  21               My comments here are limited by time,

  22     but they are also limited by the complexity of

  23     the merger.  We simply haven't had enough time

  24     to digest all of the material in the

  25     application and elsewhere.  And we have urged



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                                                                163
   1

   2     the Board, and urge you again, to extend the

   3     comment period.

   4               Furthermore, as my colleague stated,

   5     Citicorp and Travelers have been barely

   6     responsive to our request that they provide

   7     basic information about their companies, and

   8     that has hindered our ability to analyze the

   9     impact of the merger.

  10               Travelers, in particular, has been

  11     unforthcoming, and that is one of the reasons

  12     why my testimony today is going to focus

  13     primarily on Citibank's record.

  14               As a threshold matter, NEDAP's

  15     position is that the proposed merger is

  16     illegal, as it will create an affiliation

  17     between a bank holding company and securities

  18     and insurance companies that is prohibited by

  19     the Glass-Steagall Act and the Bank Holding

  20     Company Act.  If the Board approves the merger

  21     without developing standards to be applied to

  22     such an unprecedented transaction, it will make

  23     a mockery of the regulatory process, by

  24     allowing Citicorp and Travelers to brazenly

  25     violate existing law.



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                                                                164
   1

   2               In addition, and the focus of my

   3     testimony, Citibank has violated the Community

   4     Reinvestment Act by failing to meet the credit

   5     needs of low-income communities.  From the

   6     neighborhood perspective, Citibank is an

   7     elusive entity with scant presence in terms of

   8     bank services, loans, or community reinvestment

   9     personnel.

  10               Citibank's retail banking services

  11     utterly disregard the needs of low-income

  12     communities and consumers.  Only six of

  13     Citibank's 200 New York City branches are

  14     located in low-income neighborhoods.

  15               In 1996, Citibank closed and

  16     downgraded to ATM service a total of 55

  17     branches, harming low-income neighborhoods

  18     disproportionately.  The bank is now

  19     promoting -- we heard this morning about

  20     them -- two new video branches in low-income

  21     neighborhoods where customers will have no

  22     opportunity to speak to a teller or loan

  23     officer in person.  This plan is an insult to

  24     residents, who might wonder why this special

  25     new technology is not appearing in upper-income



.
                                                                165
   1

   2     neighborhoods.

   3               By raising its minimum deposit amount

   4     for free checking to $6,000 in linked accounts,

   5     Citibank sent a further message it is not

   6     interested in the business of low-income

   7     people, as does its increased emphasis on

   8     computer banking, despite the bank's absurd

   9     claim in its application to the Board that

  10     Citibank-sponsored research shows that a large

  11     percentage of this population plans to buy a

  12     computer in the near future.  Meanwhile,

  13     ironically, a Citicorp subsidiary, Citibank EBT

  14     Services, will soon be profiting from

  15     electronic delivery of public assistance

  16     benefits and food stamps to New York State

  17     recipients.

  18               There has been a lot of talk,

  19     actually, about this this morning and how it is

  20     wonderful because it is going to bring

  21     low-income people into the banking mainstream.

  22     I just want to point out that EBT is not going

  23     to give the public a real bank account.  It is

  24     more like a Metrocard or something that they

  25     can put in the ATM machine to get their public



.
                                                                166
   1

   2     assistance benefits out of that.  So I don't

   3     really see how that brings low-income people

   4     into the banking mainstream.

   5               Citibank's own reported Home Mortgage

   6     Disclosure Act data demonstrate that the bank

   7     targets its home mortgage lending to affluent

   8     white borrowers and communities.  For example,

   9     in 1996, Citibank made only six loans to

  10     low-income neighborhoods in the New York City

  11     metropolitan area.

  12               As ACORN stated, Citibank rejected

  13     African-American and Latino applicants for

  14     conventional home purchase mortgages

  15     two-and-a-half times more frequently than white

  16     applicants.  And in Manhattan, predominantly

  17     white neighborhoods received 75 percent of

  18     Citibank's loans in 1996.

  19               This redlining of low-income and

  20     minority neighborhoods and communities of color

  21     sets the stage for predatory lenders such as

  22     Travelers' subsidiaries Primerica and

  23     Commercial Credit, to target their high-rate

  24     low products at low-income communities,

  25     stepping into the credit void created by



.
                                                                167
   1

   2     Citibank.

   3               In 1996, Citibank made no permanent

   4     direct loans for purchase of multifamily

   5     housing in all of the New York City

   6     metropolitan area, where most residents -- at

   7     all income levels -- live in multifamily rental

   8     housing.  Instead, the bank has financed

   9     multifamily housing only through large

  10     intermediary organizations, many of which are

  11     testifying here today.

  12               Given Citibank's failure to provide

  13     retail banking services or loans to low-income

  14     neighborhoods, it is perhaps not surprising

  15     that the bank's community reinvestment staff --

  16     the people who are charged with ensuring that

  17     Citibank meets the credit needs of all

  18     communities that it serves -- display very

  19     little familiarity with communities and their

  20     needs.  Groups have commented to us that

  21     Citibank is reluctant to send high-level staff

  22     to community meetings, and that staff, when

  23     they do appear, are defensive and combative.

  24               In closing, I'd just like to say, if

  25     the Board approves this merger, it will be



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                                                                168
   1

   2     approving the unprecedented creation of a

   3     financial services giant that subscribes to a

   4     separate and unequal philosophy.  Affluent

   5     customers will continue to avail themselves of

   6     Citibank's loans, private-banking services, and

   7     electronic innovations.  Low-income customers

   8     will be served by Primerica, Consumer Credit,

   9     and Citibank EBT Services.

  10               NEDAP joins with the other nine

  11     members of Citicorp-Travelers Watch in urging

  12     the Board to deny the application.

  13               MR. LONEY:  Thank you.

  14               Ms. Ludwig.

  15               MS. LUDWIG:  Thank you for the

  16     opportunity to testify today to register our

  17     absolute opposition to the proposed merger of

  18     Travelers Group and Citicorp.  I am testifying

  19     in my capacity as coordinator of the New York

  20     City Community Reinvestment Task Force.

  21               The task force was established in

  22     1995 to promote meaningful reinvestment in

  23     affordable housing preservation and

  24     development, microenterprise, and community

  25     development institutions in New York City's



.
                                                                169
   1

   2     low-income neighborhoods.  Since then, the task

   3     force has grown to more than 100 community and

   4     citywide organizations throughout New York

   5     City.

   6               Through its Regulatory Working Group,

   7     the task force has engaged in meetings over the

   8     past eight months with each of the federal

   9     banking agents, including representatives of

  10     the Federal Reserve Bank of New York, to

  11     discuss deficiencies community group and

  12     advocates see in regulators' enforcement of the

  13     Community Reinvestment Act.

  14               It will be impossible to convey all

  15     of the grave concerns we have concerning the

  16     proposed Citicorp-Travelers merger in the five

  17     minutes allotted.  I will keep it simple and

  18     refrain like every other panel.

  19               The Federal Reserve Board must not

  20     approval Travelers' application because the

  21     proposed transaction is illegal.

  22               To sign off on the merger will

  23     constitute an affront to the public, and

  24     underscore that large and powerful corporations

  25     influence government decision making even to



.
                                                                170
   1

   2     the point of obtaining approval on illegal

   3     transactions.

   4               Some would argue, and some have

   5     argued this morning, that structural changes in

   6     the financial services industry are well

   7     underway, and that our laws are antiquated and

   8     need to be revamped to reflect these changes.

   9     The Glass-Steagall and Bank Holding Company

  10     Acts are still on the books, however, and the

  11     task force's firm position is that as long as

  12     laws forbid this merger, the Fed would be

  13     grossly overstepping its bounds to approve it.

  14               Second, approving the application

  15     would constitute hideously unsound policy on

  16     the part of the Federal Reserve Board.

  17               Travelers and Citicorp would have us

  18     think that the proposed merger is simply a

  19     routine application to create a bank holding

  20     company and that no special scrutiny is

  21     warranted.  As we all know, the planned

  22     Citigroup would be the first of its kind in

  23     this country, a new and mammoth holding company

  24     that engages in banking, securities, and

  25     insurance business.



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                                                                171
   1

   2               The largest in the country's history,

   3     the proposed merger has implications for people

   4     and economies at local, regional, national and

   5     global levels.  It presents serious new

   6     regulatory questions, contrary to what

   7     Travelers and Citicorp purport, for which the

   8     Federal Reserve has yet to develop a set of

   9     standards.

  10               It is not surprising that many regard

  11     this proposed merger not only as a fait 

  12     accompli, but also as a brazen attempt by

  13     powerful corporations to take advantage of

  14     regulatory and legislative processes to create

  15     a giant company organized to maximize profits,

  16     at whatever expense the communities and

  17     consumers.

  18               Then there is Citibank and Travelers'

  19     respective records.  The task force in the last

  20     three years has frequently heard reports

  21     concerning Citibank's illusory presence in

  22     low-income communities throughout New York

  23     City, as well as a host of concerns over

  24     Citibank's remarkably heavy investment and

  25     intermediaries in lieu of or absence of more



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   1

   2     direct lending programs.

   3               We first heard about Citibank's

   4     practices in the sort of concerted way when the

   5     bank engaged in aggressive bank branch closings

   6     and conversion to ATM service only, a few years

   7     ago.  Most task force members see a direct

   8     correlation between Citibank's presence in

   9     low-income communities and the bank's failure

  10     to engage in direct lending in low-income

  11     neighborhoods.

  12               You will hear today and tomorrow from

  13     a long list of people representing

  14     intermediaries and other organizations who will

  15     testify on behalf of Citibank and the proposed

  16     merger -- even though we have heard from some

  17     directly and some indirectly that many of them

  18     personally agree that the merger is legally

  19     impermissible.  Many are even keenly aware that

  20     Citibank is notorious for its illusory presence

  21     in the very neighborhoods their organizations

  22     serve.

  23               We understand that the proposed

  24     merger -- and the bank's public relation

  25     efforts surrounding it -- results in sometimes



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   1

   2     even unspoken pressure on groups to register

   3     with regulators.  The situation we find at this

   4     public meeting is problematic and disturbing,

   5     because -- correct me if I'm wrong -- every

   6     single person and organization that testified

   7     on behalf of the merger or the proposed merger

   8     is a beneficiary of Citibank, and in a few

   9     instances Travelers.

  10               We also request that you ask each

  11     panelist, as part of his or her testimony,

  12     first, to disclose all benefits received from

  13     Citibank and Travelers, and, second, to

  14     indicate whether or not he or she was asked to

  15     testify on behalf of the application or in

  16     favor of the application.

  17               Task force members have been

  18     flabbergasted by Citicorp and Travelers' $115

  19     billion commitment, which dedicates more than

  20     half of the ten-year pledge to student loans,

  21     credit cards and consumer finance, making the

  22     commitment among many local groups a farce.

  23               The task force has also been, since

  24     its inception, greatly concerned about the

  25     banking industry for communities and for the



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   2     CRA.  In the instance of the proposed

   3     Citigroup, we see numerous contradictions.

   4     Citigroup would constitute an enormous

   5     concentration of economic and political power,

   6     with both companies working to reduce their

   7     on-the-street operations, and instead using

   8     their networks to cross-market products.  By

   9     definition, the proposed entity is too big to

  10     address local community needs.  We have already

  11     seen Citibank limiting its presence in

  12     low-income communities.

  13               One part of the -- well, these things

  14     have been said and I hear the beeper.

  15               We urge the Federal Reserve Board to

  16     hold off on deciding this application as long

  17     as the transaction is illegal.  We also request

  18     that you ensure that Citicorp and Travelers are

  19     not improperly withholding information from the

  20     public by improperly deeming material

  21     confidential, and that the public is included

  22     in all relevant communications.

  23               We take for granted that Citicorp and

  24     Travelers will push for all they can get.  It

  25     is up to the Federal Reserve Board to do what



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   1

   2     is right.

   3               MR. LONEY:  Thank you, Ms. Ludwig.

   4               Mr. Zinner.

   5               MR. ZINNER:  I run the foreclosure

   6     projection project for seniors at South

   7     Brooklyn Legal Services.  We represent

   8     low-income seniors who have been ripped off by

   9     high-rate finance companies, and in this

  10     capacity I see daily the effects of redlining

  11     and reverse redlining on low-income

  12     communities.

  13               I have come here this morning to

  14     register my absolute opposition to the

  15     Citicorp-Travelers merger.  This opposition is

  16     based on a number of reasons, but in the short

  17     amount of time given this morning, I am going

  18     to focus on one.

  19               This would be the record of the two

  20     companies in low-income communities.  You have

  21     heard a lot of testimony this morning about

  22     Citicorp's record of -- Citibank's record of

  23     lending and low-income communities.  What I am

  24     going to do is focus on the Travelers Group.

  25               Now, it is hard to get information



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   1

   2     about Travelers' record of underwriting in

   3     low-income communities because Travelers is not

   4     forthcoming with that information, and there is

   5     no legal requirement that they provide it.

   6     There is a requirement in five states that

   7     insurance companies provide zip code data of

   8     their underwriting.  In one of those states,

   9     Massachusetts, there was a study done by the

  10     Massachusetts Affordable Housing Alliance in

  11     which Travelers was found "fair poorly in

  12     anti-regulatory ranking."  In fact, it had the

  13     worst record of any of the insurance companies

  14     in the state.

  15               You heard testimony from ACORN this

  16     morning about Travelers' agent location.

  17     Again, 71 percent, just in New York, 71 percent

  18     of the agent offices are located in communities

  19     that are over 85 percent white, and of the 109

  20     agent offices in the New York metropolitan

  21     area, only 20 are in New York City; almost all

  22     of those cluster around the two Manhattan

  23     business districts.

  24               There was recently two Fair Housing

  25     complaints filed with HUD regarding Travelers'



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   1

   2     redlining practices.  The complaints found that

   3     Travelers maintains policies and practices that

   4     serve to discriminate against low-income

   5     communities and minority communities in the

   6     provision of home owner's insurance, using such

   7     policies as minimum policy values, again agent

   8     location, disparate treatment of low income and

   9     minority -- low income and minority people

  10     seeking insurance, higher rates in low-income

  11     communities, pricing their home owner's income

  12     products out of low-income markets and the

  13     markets in minority communities, limiting

  14     replacement coverage on older homes, using

  15     credit to determine eligibility, and the list

  16     goes on.

  17               In other words, these comprehensive

  18     studies, using testers and research, found that

  19     Travelers systematically had policies and

  20     practices that served to discriminate against

  21     low-income and minority communities.

  22               Now I raise this issue in particular

  23     because Citicorp and Travelers have been

  24     touting consistently in the press, or

  25     consistently, publicly, this one-stop shopping.



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                                                                178
   1

   2     Really what this one-stop shopping is is a

   3     two-tier shopping system, in which affluent

   4     white communities are privy to conventional

   5     Citigroup products, potential Citigroup

   6     products, in which low-income and minority

   7     communities are, in effect, only given access

   8     to inferior and higher cost products.

   9               We haven't heard a lot of testimony

  10     today about Primerica Financial Services.  In

  11     fact, Primerica Financial Services is the real

  12     profit engine of the Travelers Group.

  13     Primerica Financial Services has its roots in

  14     the AO Williams Organization, which was a very

  15     controversial evangelical-type pyramid scheme

  16     in which lots of high-cost term insurance was

  17     pawned off on low-income and middle-income

  18     communities.  Now the AO Williams Organization

  19     has become Primerica, and now Primerica is part

  20     of the Travelers Group.

  21               What Primerica Financial Services

  22     does is it uses this part-time army of very,

  23     very loosely-regulated salespeople to push the

  24     high-price term insurance, often replacing cash

  25     value policies with high-price term insurance



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                                                                179
   1

   2     that is more expensive than most term insurance

   3     that is in the market.  They use exaggerations,

   4     misrepresentations, to push these products,

   5     particularly in low-income and minority

   6     communities, in communities where there are a

   7     lot of immigrants, in communities where there

   8     are less-sophisticated consumers.

   9               This is very important to note

  10     because these are the same communities in which

  11     Travelers, in their insurance practices, are

  12     redlining.  In other words, this is not

  13     one-stop shopping.

  14               What is happening is that Travelers

  15     is offering conventional home owner's insurance

  16     in affluent white communities and offering

  17     high-priced -- in fact, aggressively marketing

  18     through this sort of evangelical-pyramid

  19     scheme -- high-priced term insurance in

  20     low-income communities.

  21               I am going to try and rush through,

  22     but I want to mention one other important point

  23     before I close.

  24               Again, we haven't heard any testimony

  25     today about Commercial Credit Corporation.



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                                                                180
   1

   2     That is an entity of the Travelers Group.

   3     Commercial Credit Corporation primarily works

   4     in what is called the BC&D, or subprime market,

   5     providing low equity loans in a low-income

   6     community.  Home equity loans are extremely --

   7     when compared to Citibank's conventional loans

   8     are very high closing costs, very high rates

   9     and, basically, only appeal to people who are

  10     desperate for credit.  In fact, companies that

  11     provide high rate loans produce -- do so in

  12     communities that have been redlined by

  13     conventional banks.

  14               It is a vicious cycle, because when

  15     communities are redlined by conventional banks

  16     they have to turn to high-rate lenders when

  17     they need credit.  Because they are turning to

  18     high-rate lenders, the default rates are

  19     higher, and then the conventional banks have an

  20     excuse to redline them.

  21               This type of high-rate lending that

  22     Commercial Credit does can often lead to

  23     foreclosure, if abusive, and, in fact, the

  24     Primerica Financial Services is selling

  25     Commercial Credit loans in the billions of



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                                                                181
   1

   2     dollars using this completely,

   3     loosely-regulated sales force with the same

   4     sort of AO Williams evangelical fervor.

   5               Again the data shows, and this data

   6     will be submitted with a comment that

   7     Commercial Credit does high-rate lending in the

   8     same communities that Citibank has been

   9     redlining.

  10               I will just sum up in saying there is

  11     a great danger in this merger.  Basically what

  12     could happen is Citibank -- and this is borne

  13     out by the record of the two companies --

  14     Citibank would actually have a profit incentive

  15     to redline low-income communities because this

  16     would fuel the market for high-rate lending,

  17     and this is particularly dangerous because the

  18     engine for marketing Commercial Credit loans is

  19     an unregulated pyramid scheme, that I have

  20     discussed before.

  21               Again, the two corporations have

  22     given no indication that they won't take full

  23     advantage of any profit opportunities that take

  24     place even when they encompass taking advantage

  25     of low-income communities.



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   2               So, again, I'd like to register my

   3     absolute opposition to this merger.

   4               MR. LONEY:  Thank you.

   5               I have a couple of questions.

   6     Ms. Botein, did I understand you to say that

   7     Citicorp has made no loans, no mortgage loans,

   8     in the New York City area?

   9               MS. BOTEIN:  No multifamily.  I was

  10     talking about permanent multifamily direct

  11     loans, which is the kind of housing that most

  12     people, as I said, of all income levels live in

  13     in New York City.  They have made those loans

  14     through intermediaries by giving money to large

  15     housing intermediaries.

  16               MR. LONEY:  I got that part.  When

  17     you say the New York City area, how far --

  18               MS. BOTEIN:  The MSA.

  19               MR. LONEY:  Mr. Silverman and, I

  20     think, Ms. Botein raised concerns about getting

  21     information from Citicorp and Travelers.  What

  22     kind of information have you asked for and not

  23     gotten?

  24               MS. BOTEIN:  I am going to turn the

  25     mike over to Mr. Silverman because he has kind



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                                                                183
   1

   2     of been designated the point person on that

   3     issue.

   4               MR. SILVERMAN:  I regret to say that

   5     I don't have the list with me of which things

   6     we asked for.  Some of it was, I believe,

   7     deposit information that Citicorp didn't turn

   8     over; all kinds of information from Travelers.

   9     Really nothing that we asked for from Travelers

  10     did we get back.  To a certain degree of data,

  11     we didn't get information on what loan services

  12     are offered at individual banks from Citicorp.

  13     Off the top of my head, I can't remember.

  14               MS. BOTEIN:  One of the things I want

  15     to point out is we have copied the Fed on all

  16     of our correspondence to Citicorp and

  17     Travelers, so you should have our letters.

  18               The way that -- we didn't hear any

  19     response for a long time, and then we just kind

  20     of were deluged with boxes and boxes of papers,

  21     of which was completely, completely

  22     unresponsive to our request.  But then, you

  23     know, we had all these boxes stacked up in our

  24     offices and we had to spend time, of which we

  25     don't have much, and research, of which we have



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                                                                184
   1

   2     even little, kind of sifting through.  And the

   3     letter said that some of the information you

   4     requested is in here, find it.

   5               So we were kind of put in the

   6     position of sifting through this material to

   7     try to find pieces of it that might be

   8     responsive to our request.

   9               MR. SILVERMAN:  Then we wrote again,

  10     and cc'd the Fed, and said this is what we

  11     didn't receive.  Almost everything from the

  12     initial letter was duplicated in the second.

  13               Just yesterday I got some partial

  14     response from Citicorp, not to the rest of it,

  15     and still almost nothing from Travelers.  So we

  16     were concerned about that.

  17               MR. LONEY:  Thank you.

  18               Any other questions from the panel?

  19     If not, it is very interesting.  We thank you

  20     for coming.

  21               Our next panel is Panel Six.  Howard

  22     Sommer, George Schmitz, Eric Powell, John

  23     Ferrandino, Mark Emmert and Howard Banker.

  24               Mr. Sommer.

  25               MR. SOMMER:  Yes.  Are you ready for



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                                                                185
   1

   2     my remarks?  Fine.

   3               I am Howard Sommer.  I am president

   4     and CEO of the New York Community Investment

   5     Company.  I am pleased to have this opportunity

   6     to briefly share with you the activities of the

   7     New York Community Investment Company, commonly

   8     referred to as NYCIC, an investment and loan

   9     fund located in Manhattan and servicing the

  10     capital needs of small businesses throughout

  11     the City of New York, as well as comment this

  12     morning on the important role played by

  13     Citibank in that effort.

  14               MR. LONEY:  Could we have quiet,

  15     please.

  16               MR. SOMMER:  NYCIC was created in

  17     1995 as a New York clearinghouse association

  18     multibank effort to meet the lack of

  19     institutional sources of equity capital and

  20     subordinated debt to the small business

  21     community.  Traditional sources of such funding

  22     venture capital funds, SBICs, and investment

  23     banking firms, almost exclusively focus on

  24     larger companies with relatively high-funding

  25     requirements, and with potential to convert to



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                                                                186
   1

   2     public ownership within a few years.

   3               The overwhelming share of small

   4     businesses, privately owned, with sales of

   5     $500,000 or, perhaps, $5 million, whose funding

   6     need is $100,000 or even $1 million, with no

   7     near-term IPO potential, but with potential for

   8     revenue growth and employment gains, have no

   9     choice but to rely on limited personal funds,

  10     excessive debt levels or, as is often the case,

  11     conclude that they are unable to pursue

  12     expansion opportunities.

  13               This problem is even more acute among

  14     women and minority-owned businesses and those

  15     located in and near the city's low- and

  16     moderate-income areas, as these companies tend

  17     to be smaller, newer, and more

  18     undercapitalized.

  19               A related goal of NYCIC is to provide

  20     similar types of risk capital to nonbusiness

  21     economic development efforts, including private

  22     sector initiatives launched by not-for-profit

  23     groups and other community-based activities

  24     related to fostering entrepreneurial energies.

  25               For the past two-and-one-half years,



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                                                                187
   1

   2     NYCIC has been identifying growing small

   3     companies with a need for patient, risk capital

   4     in the range of $50,000 to $1 million.  We are

   5     close to funding our twentieth deal, pushing

   6     our investment level past the $5 million level.

   7               Equally important is the fact that

   8     NYCIC's moneys have leveraged an additional $8

   9     million in coinvestor and bank support, thereby

  10     causing over $13 million of investment funds to

  11     support New York City's small businesses.

  12               I should also add that close to 80

  13     percent of closed deals were to companies

  14     either women-owned, minority-owned, or located

  15     in LMI census tracts.

  16               Citibank's active role in this

  17     success story has been most impressive.

  18     Citibank's Mary Cosgrove played a pivotal and

  19     leading part during the concept and planning

  20     stages, as evidenced by Ms. Cosgrove's election

  21     to the position of vice chairman.  This

  22     leadership role has been further enhanced by

  23     Citibank's financial support where the bank

  24     participated at the highest of levels of bank

  25     investment at over $1 million.



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                                                                188
   1

   2               Citibank Community Development

   3     continues in an ongoing basis to offer its

   4     financial, creative and personnel resources to

   5     advance NYCIC's mission.  Examples include

   6     referrals of small business clients and

   7     prospects in need of long-term capital and

   8     access to and funding of a variety of NYCIC

   9     sales or marketing activities.

  10               Equally important has been Citibank's

  11     commitment to the spirit of NYCIC's mission.

  12     My personal working experience with

  13     Ms. Cosgrove and other Citibank personnel has

  14     been clearly evidenced by a devotion to the

  15     cause of community development, and in NYCIC's

  16     particular case to the advancement of economic

  17     development throughout the five boroughs of New

  18     York City.  I see I have just a few seconds

  19     left.  Let me consolidate my final comments.

  20               Just coincidentally, more recently I

  21     have had an opportunity to work on a same and

  22     similar mission with the other partner in this

  23     merger, Travelers.

  24               New York State recently passed new

  25     legislation for the creation of certified



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                                                                189
   1

   2     capital companies, where moneys raised from the

   3     insurance industry is to be used to fund, in a

   4     venture capital format, small businesses

   5     throughout the State of New York.

   6               Without hesitation I can tell you

   7     that without the efforts of Travelers Insurance

   8     Group and the Salomon Smith Barney Group we

   9     would never have been successful raising $30

  10     million to be used to support investment

  11     activity for small businesses within the City

  12     of New York and surrounding areas.

  13               Thank you for your time.  I hope

  14     these comments have been helpful.

  15               MR. LONEY:  Yes.  Thank you for

  16     providing them.

  17               Mr. Schmitz.

  18               MR. SCHMITZ:  Thank you.  Good

  19     morning.  My name is George Schmitz.  I am the

  20     executive director of the Leviticus Alternative

  21     Fund in Yonkers, New York.

  22               Leviticus Fund is a certified

  23     community development financial institution

  24     serving the New York, New Jersey, Connecticut

  25     tristate area.  We offer loans to nonprofit



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                                                                190
   1

   2     housing groups, to women and minority-owned

   3     businesses, and recently we are establishing a

   4     niche as a lender in the childcare industry.

   5               I'd like to begin this morning by

   6     speaking of the positive impact that Citibank

   7     has had in the world of CDFIs and, in

   8     particular, to loan funds.

   9               Leviticus Fund is one of 43 members

  10     of the National Community Capital Association,

  11     most of whom are regional or national loan

  12     funds.  Citibank was among the first financial

  13     institutions to recognize the role that CDFIs

  14     play in the delivery of financial services in

  15     underserved geographic areas to nonprofit

  16     community-based organizations and to women and

  17     minority entrepreneurs.

  18               Citibank encouraged the NCCA to help

  19     its members define and conform to industry

  20     standards consistent with its community

  21     development mission and then committed $1

  22     million to provide equity grants to the member

  23     funds.  Citibank has subsequently made an

  24     additional $1 million funding commitment to the

  25     NCCA.  The second commitment is structured in



.
                                                                191
   1

   2     such a way that it increases the leveraging

   3     capability of NCCA and its member funds.

   4               I believe that Citibank, particularly

   5     through its community development unit, has

   6     shown an eagerness to support a variety of

   7     community development efforts, a willingness to

   8     try looking with community development

   9     organizations and community development

  10     financial institutions as to their needs and,

  11     most importantly, Citibank has demonstrated

  12     flexibility and creativity in striving to help

  13     us meet these needs.

  14               Having outlined my very positive

  15     personal impressions, I will tell you that my

  16     personal experience in working with the

  17     Citibank Community Development staff has been

  18     excellent.  Citibank and Citibankers have

  19     provided financial support and valuable

  20     technical assistance to Leviticus Funds.  We

  21     are a stronger organization able to reach a

  22     wider range of community development borrowers

  23     because of our relationship with Citibank.

  24               However, the recent history of

  25     mergers and acquisitions in the banking



.
                                                                192
   1

   2     industry does give me pause.  I am concerned

   3     about how these mergers might affect the

   4     delivery of financial services, particularly in

   5     low-income neighborhoods, inner cities, to

   6     minority groups and to immigrants.

   7               I'm aware that the Community

   8     Reinvestment Act has been strengthened in

   9     recent years, but the Community Reinvestment

  10     Act does not apply beyond the banking industry.

  11               I believe that we'd all be better

  12     served if CRA could have a wider reach; in

  13     particular, if CRA could be applied in other

  14     areas of the financial services industry, in

  15     particular to the insurance industry, to

  16     investment brokerage firms, to mutual funds,

  17     and even FCRA could have stronger clout with

  18     some of the GSEs, particularly Freddie Mac.

  19               It is my hope that as the Travelers

  20     Group and Citicorp form Citigroup that Citibank

  21     may play a leading role, as it has in the past,

  22     in educating other sectors of the financial

  23     services industry about the important role that

  24     community development organizations play in our

  25     day-to-day lives.



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                                                                193
   1

   2               I welcome the recent announcement of

   3     the ten-year $115 billion commitment to lending

   4     and investing in low-income and moderate-income

   5     communities and to small businesses.  I look

   6     forward to continuing a positive relationship

   7     with Citigroup, and I anticipate further

   8     dynamic and creative initiatives that will

   9     challenge other financial institutions over a

  10     range of industries to follow suit.

  11               I also hope that many of the issues

  12     that arise around this merger would also

  13     challenge Congress and the regulatory agencies

  14     to relook at the Community Reinvestment Act and

  15     its impact.

  16               Thank you very much.

  17               MR. LONEY:  Thank you.

  18               Mr. Powell.

  19               MR. POWELL:  Good morning.  My name

  20     is Eric Powell, and I currently serve as the

  21     vice president, director of finance, for the

  22     New York City Housing Partnership.  I am

  23     formerly the executive director for the New

  24     York Mortgage Coalition.

  25               The New York City Housing Partnership



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                                                                194
   1

   2     is a national leader in housing development and

   3     advocacy.  Since 1982, the Housing Partnership

   4     has developed more than 13,000 homes in 50

   5     neighborhoods across New York City.  Working

   6     with the government, community groups for

   7     profit developers and banks, the Partnership

   8     Housing programs have transformed city

   9     neighborhoods and resulted in private

  10     investment totalling nearly $1 billion.

  11               The New York Mortgage Coalition is a

  12     five-year organization administered by the New

  13     York City Housing Partnership.  The coalition

  14     is a consortium of eleven lenders and eight

  15     not-for-profit community-based organizations

  16     providing home ownership counseling to low- to

  17     moderate-income communities throughout New York

  18     City, Long Island and Westchester.

  19               The New York City Housing Partnership

  20     has had a positive working relationship with

  21     Citibank for several years.  Citibank has been

  22     a leader, among leading institutions, in its

  23     commitment to affordable housing and community

  24     development initiatives.

  25               In 1994, Citibank established a $1



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                                                                195
   1

   2     million line of credit to provide low cost

   3     loans for minority builders, contractors and

   4     subcontractors, working in the Housing

   5     Partnerships, New Homes, and Neighborhood

   6     Builders programs.

   7               These loans have enabled small

   8     businesses, enterprises owned by minorities and

   9     women, to gain access to credit and to benefit

  10     from business opportunities generated by

  11     Partnership developments.

  12               Citibank has also provided nearly $17

  13     million in construction loans for several

  14     Housing Partnership developments, including 147

  15     two-family homes at Soundview Village in the

  16     Bronx, five two-family homes in Elmhurst,

  17     Queens, and 31 units at Lakewood Gardens in

  18     South Jamaica, Queens.

  19               This year Citibank is expected to

  20     provide nearly $17 million in construction

  21     financing for 216 units in the Saratoga Square

  22     section of Brooklyn.

  23               In addition, Citibank has provided

  24     permanent mortgage loans for partnership home

  25     buyers in several developments.  The



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   2     partnership has also benefitted from Citibank's

   3     involvement in the Neighborhood Entrepreneurs

   4     program which helps locally-based property

   5     managers renovate and acquire city-owned

   6     buildings.

   7               Citibank has provided loans totalling

   8     nearly $53 million for the rehabilitation of

   9     more than 600 neighborhood entrepreneur units

  10     in Brooklyn, the Bronx and Harlem.

  11               Earlier this year Citibank awarded an

  12     $80,000 grant to the Housing Partnership's new

  13     initiatives program, which administers the

  14     working-capital loans for neighborhood

  15     contractors in both the New Homes and

  16     Neighborhood Entrepreneurs program, and

  17     provides technical assistance to program

  18     participants.

  19               Under new initiatives, the Housing

  20     Partnership is working with the U.S. Department

  21     of Housing and Urban Development to preserve

  22     federally-assisted affordable housing units.

  23               Citibank has been an active partner

  24     in the New York Mortgage Coalition.  As a

  25     member of the New York Mortgage Coalition,



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   2     Citibank has helped the New York Mortgage

   3     Coalition Group provide free purchase

   4     counseling to prospective home buyers in New

   5     York City, Long Island and Westchester.

   6               The bank offers attractive,

   7     affordable housing loan products with low

   8     downpayment and low interest products.  It also

   9     offers flexible financing for two- to

  10     four-family homes, and provides support for

  11     outreach and community group seminars for

  12     first-time home buyers.

  13               Recently Citibank awarded the New

  14     York City Housing Partnership $4,000 as a part

  15     of its community summer intern program.  With

  16     funds from this program, the partnership will

  17     hire an intern to work as an assistant project

  18     manager in the New Homes program.

  19               In closing, our partnership with

  20     Citibank has helped us achieve our mission of

  21     creating affordable housing and assisting local

  22     communities in realizing the benefits of

  23     economic development.  We anticipate the

  24     following approval of its merger with Travelers

  25     Group, Inc.



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   2               Citibank will remain an active

   3     part -- at least we expect Citibank to remain

   4     an active partner in support of the New York

   5     City Housing Partnership as well as the New

   6     York City Mortgage Coalition.

   7               Thank you.

   8               MR. LONEY:  Thank you, Mr. Powell.

   9               Mr. Ferrandino.

  10               MR. FERRANDINO:  Thank you.  Good

  11     morning.

  12               My name is John Ferrandino.  I am the

  13     vice president for the National Academy

  14     Foundation and the national director of the

  15     Academy of Financing at the National Academy

  16     Foundation.

  17               The National Academy Foundation is a

  18     not-for-profit educational organization that

  19     combines the knowledge and experience of

  20     education, business, and government leaders to

  21     better prepare young people in high school for

  22     their future.

  23               The National Academy Foundation uses

  24     a model that involves career academies -- which

  25     are theme-based schools -- within schools



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   2     across the country that provide young people

   3     with the experience and opportunity to combine

   4     a curriculum that is industry validated with an

   5     internship in the financial area, the financial

   6     field, or other fields related to it.  As these

   7     partnerships take place in forming academies,

   8     it is critical to understand that these are

   9     located throughout the country and mostly in

  10     the urban centers of the country.

  11               The first academy, in the area of

  12     finance, opened in Brooklyn in 1982 with 35

  13     students.  As of September 1998, the National

  14     Academy Foundation will have nearly 300

  15     academies in finance, travel and tourism, and

  16     public service in 33 states across the

  17     currently, plus the District of Columbia.  In

  18     just three years, projections say that we will

  19     have over 500 academies in all 50 states.

  20               Through its extensive outreach and

  21     expansion, we are on the forefront of the

  22     school-to-work movement.  It is a focus of and

  23     model for reform within American education.  Of

  24     the more than 20,000 students who have gone

  25     through the academies, at the present time it



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   2     is estimated that 65 percent have been

   3     identified as being at risk of dropping out of

   4     school due to their socioeconomic

   5     circumstances.  Over 65 percent of these

   6     students are also identified as being young

   7     people of color.

   8               The Travelers Group and Sandy Weill

   9     have served as the key factor in the growth and

  10     development of the National Academy Foundation,

  11     from one Academy of Finance in 1982 to a

  12     national leader in the school-to-career

  13     movement.  Roundly acknowledged as the founder

  14     of the Academy of Finance, Mr. Weill has played

  15     a major role with the Travelers Group in making

  16     sure that this program has grown.

  17               It is of important interest to

  18     understand that academies of finance, which

  19     were designed by educators as a replicable

  20     model appropriate for various industries and

  21     geographic regions, with measured benefits to

  22     young people, teachers, schools, and the

  23     corporate community at large.  With this

  24     win-win proposition in place, the academy model

  25     has grown rapidly, with broad corporate support



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   2     nationally.

   3               At the present time the Travelers

   4     Group and its subsidiary companies provides

   5     leadership in the following areas:  There are

   6     over 250 to 300 summer internships provided

   7     across the United States, 100 of which are in

   8     New York City.  There are members of the local

   9     advisory board in every major city of the

  10     country represented by various components of

  11     the Travelers Group.  And in addition to that,

  12     there is major corporate funding that goes into

  13     providing scholarships and direct support for

  14     curriculum-enrichment activities and other

  15     kinds of growth activities for young people in

  16     the country.

  17               From 1990 to the present, the

  18     Travelers Group has donated over 4.5 million to

  19     the National Academy Foundation which has

  20     helped to support the development of

  21     computerized, industry-validated curriculum,

  22     comprehensive staff development programs, and

  23     technical assistance and quality assurance from

  24     the national staff.  This academy program has

  25     been acknowledged nationwide and is now being



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   2     developed to pursue the various other parts of

   3     the urban communities of our country.

   4               In addition to the support provided

   5     to NAF's national activities, the Travelers

   6     Group and its subsidiaries, local offices, and

   7     employees, and the Travelers Foundation

   8     sponsors paid internships, scholarships, grants

   9     to local programs and other services that

  10     directly impact the education and improve the

  11     lives of the young people involved in the

  12     National Academy Foundation programs.

  13               In the New York City area alone, as I

  14     said, there are a hundred student interns.

  15     Together Salomon Smith Barney and the Copeland

  16     Companies -- both Travelers Group

  17     subsidiaries -- provide business advisory board

  18     leadership, paid internships and scholarships

  19     for Academy of Finance students in nearly every

  20     major city of the United States.

  21               Employees from all of these companies

  22     go into classrooms on a regular basis and

  23     discuss with students the future of the

  24     financial services industry and provide direct

  25     content instruction as part of their community



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   2     involvement.

   3               The Travelers Foundation makes grant

   4     funding available to every Academy of Finance

   5     across the country that demonstrates it has

   6     involvement from Travelers Group employees.

   7               While Travelers Group has made a

   8     significant contribution to the National

   9     Academy Foundation and the Academy of Finance

  10     as an individual corporation, its impact on

  11     broadening the base of NAF's support to more

  12     young people has been one of its greatest

  13     contributions.

  14               Under the leadership of Mr. Weill,

  15     who is chairman of the board of directors of

  16     the National Academy Foundation, a base of

  17     support has expanded to include the CEO of

  18     Merrill Lynch, the CEO of Prudential

  19     Securities, the CEO of Bloomberg Information

  20     Services, and the CEO of McGraw Hill companies.

  21               These additional companies coming on

  22     board and becoming partners with the National

  23     Academy Foundation have allowed us to grow and

  24     make sure that every young person who is

  25     involved in the program has access to paid



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                                                                204
   1

   2     internships during the summer that are

   3     educational, experiential within the industry,

   4     and provide young people with career

   5     opportunities for the future.

   6               At the present time, 90 percent of

   7     all the students who have graduated from the

   8     academy programs have gone on to post-secondary

   9     education.  As the Academy of Finance student

  10     population has grown, we presently have 70

  11     percent of these young people are of color and

  12     over 60 percent are female.

  13               In conclusion, I know that this

  14     merger will bring together two major forces

  15     that will continue to support the growth and

  16     development of American urban education.

  17               Thank you.

  18               MR. LONEY:  Thank you,

  19     Mr. Ferrandino.

  20               Mr. Emmert.

  21               MR. EMMERT:  I am Mark Emmert, the

  22     chancellor of the University of Connecticut,

  23     and I'd like to thank you for the opportunity

  24     to testify today in this public meeting.

  25               I'd like to specifically speak to the



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                                                                205
   1

   2     record of the Travelers Group as a corporate

   3     partner in its manifestation of corporate

   4     responsibility and its relationship with the

   5     University of Connecticut and its support of

   6     education and community development in the City

   7     of Hartford in the State of Connecticut.

   8               The University of Connecticut is the

   9     flagship of the Connecticut State higher

  10     education system, with specific

  11     responsibilities for enhancing social, cultural

  12     and educational environments of the state.  As

  13     well as its core mission as an educational

  14     institution, we have to worry a good deal about

  15     economic development of our communities and how

  16     we are participants in that development.

  17     Fulfilling this multifaceted mission requires

  18     us to seek out and join with mutually-supported

  19     partners, such as the partnership that exists

  20     with the Travelers Group and the University.

  21               Let me briefly describe some

  22     manifestations of this partnership.  Earlier

  23     this year the University and Travelers

  24     announced a major agreement under which

  25     Travelers has donated over 30,000 square feet



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                                                                206
   1

   2     of space in Travelers Education Center in

   3     downtown Hartford to the University for three

   4     years.

   5               The Travelers Education Center has

   6     now given the University a high-quality urban

   7     location from which we offer courses and

   8     programs that enhance the vitality of downtown

   9     Hartford.  This space also permits the

  10     University to expand our educational activities

  11     into Connecticut's urban centers, which were

  12     heretofore impossible for us to do.

  13               Under the Education Center agreement

  14     with Travelers, we are now able to offer

  15     undergraduate and general studies courses,

  16     courses on information systems and operations

  17     management, and MBA level coursework.  We have

  18     just also decided to offer our masters of

  19     science in accounting program at the Education

  20     Center.  And in this way we are able to use

  21     educational resources more effectively and to

  22     serve larger and more diverse populations than

  23     we could have otherwise.

  24               The University and Travelers are also

  25     working together to promote the business



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                                                                207
   1

   2     education -- excuse me -- to promote the

   3     education of talented high school students from

   4     inner city Hartford through the continuing

   5     support of the Academy of Finance, which we

   6     just heard so nicely described.

   7               There are two high schools inside the

   8     Hartford community that are involved in the

   9     Academy of Finance, as well as the University,

  10     in this partnership.  The University is now

  11     also matching the scholarship commitments

  12     supported by an endowment that Travelers has

  13     provided for a Travelers' scholarship fund by

  14     offering tuition scholarships to Academy of

  15     Finance graduates that attend the University of

  16     Connecticut.

  17               These most recent actions on the part

  18     of Travelers are an extension of the

  19     University's long history of partnership with

  20     the company.

  21               Travelers has supported numerous

  22     other programs at the University of

  23     Connecticut.  Its nearly $2 million in

  24     contributions to the University -- beyond the

  25     recent Education Center donation -- include the



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                                                                208
   1

   2     Travelers Chair in Geriatrics and Gerontology

   3     at the Health Center, continuing support for

   4     the Travelers Center on Aging, at all of our

   5     campuses, scholarships, and a variety of

   6     contributions to the University's Research

   7     Foundation to assist faculty efforts in high

   8     school writing programs, in math and science

   9     laboratories, in corporate training, small

  10     business development, our pharmacy school, and

  11     evaluation of tutorial programs for Hispanic

  12     students.

  13               I am pleased to testify to Travelers'

  14     well-defined and productive sense of corporate

  15     responsibility toward higher education and to

  16     underline the positive impact it is having on

  17     higher education and community development in

  18     Connecticut.

  19               Let me end by responding to what I

  20     believe was an assertion that I heard earlier

  21     today, that those testifying in support of

  22     Travelers or Citicorp are a direct or indirect

  23     beneficiary of their largess.  On behalf of the

  24     students and faculty and communities who we

  25     serve and who have been supported through



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                                                                209
   1

   2     Travelers philanthropy, I plead guilty.

   3     Indeed, I hope to be guilty for many years to

   4     come of being a recipient of the largess of

   5     these corporations.

   6               Thank you very much.

   7               MR. LONEY:  Thank you, Mr. Emmert.

   8               Mr. Banker.

   9               MR. BANKER:  Thank you and good

  10     morning.  We appreciate the opportunity to

  11     describe and to disclose Citibank's support of

  12     the Low Income Housing Fund, of which I am the

  13     program manager for New York.

  14               LIHF is a 14-year-old national

  15     community development lending institution.  We

  16     have made loans in about 19 states, about $135

  17     million in originations and packages, and I

  18     need to describe a little bit more about LIHF

  19     to properly put into perspective the support

  20     Citibank has rendered.

  21               Our mission is to address problems

  22     created by lack of capital in low-income

  23     neighborhoods by acting as a link between

  24     community-based development organizations,

  25     capital markets, and other sources of financing



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                                                                210
   1

   2     and support.  Our goal, since our creation in

   3     '84, is to increase capital for low-income

   4     communities, primarily by providing funding for

   5     low-income housing and community facilities at

   6     affordable rates and terms.

   7               Our work has contributed to the

   8     creation of almost 14,000 units of housing, and

   9     77 percent of our financed projects serve very

  10     low-income individuals, families or supportive

  11     housing persons, and 20 percent target

  12     low-income families.  So LIHF's name is, in

  13     fact, clear and true in that we seek to finance

  14     the very lowest income, individuals and

  15     families, throughout the projects around the

  16     country that we provide financing for.

  17               Since our inception, Citibank has

  18     provided $715,000 in capital grants from four

  19     banks and affiliates, primarily, they are a

  20     California Savings Bank affiliate, but also

  21     made loans to us from their affiliate in

  22     Nevada, in the mid-Atlantic regions, with fixed

  23     loans in Washington, D.C.  So they have

  24     supported us around the country and have

  25     accepted packaged loans of approximately $4.7



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                                                                211
   1

   2     million.  That is the second largest loan

   3     packaging agreement we have with any lender.

   4               The key to the capital grants for the

   5     Low Income Housing Fund is, over two-thirds of

   6     our operating budget comes from fees and

   7     interest spread, and so capital grants are

   8     critical not only to fund, in an ongoing way,

   9     projects we see before us, but to allow us to

  10     not have to compete with our borrowers for

  11     scarce operating support.

  12               So a capital grant is a better

  13     approach to working with the Low Income Housing

  14     Fund than an administrative grant.  Although,

  15     Citibank has provided about $65,000 in

  16     administrative grants in New York and

  17     California.

  18               It is the policy of the Low Income

  19     Housing Fund, some might say cleverly, to

  20     neither support nor argue against nor provide

  21     for CRA challenges to the lender.  We seek to

  22     act as a true intermediary between the

  23     development, nonprofit development communities

  24     and lenders.  We do that by making loans.

  25               Citibank has been a supporter of the



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                                                                212
   1

   2     Low Income Housing Fund since its inception.

   3     Before we had a $10 million fund balance.

   4     Before our balance sheet didn't look like much

   5     of anything at all, and that is difficult to

   6     quantify, but it is clear to say that their

   7     support has been long-standing, far-reaching

   8     and not in a single approach.

   9               We thank you.

  10               MR. LONEY:  Thank you, Mr. Banker.

  11               Any questions from the panel?

  12               If not, then I will thank the panel.

  13               We are scheduled to take a break

  14     until 12:50 for lunch.

  15               (Luncheon recess)

  16

  17

  18

  19

  20

  21

  22

  23

  24

  25



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   2          A F T E R N O O N    S E S S I O N

   3                       1:00 p.m.

   4               MR. LONEY:  I'd like to call the

   5     meeting back to order.  We're only a few

   6     minutes late from what I originally planned.

   7     We are going to start this afternoon's

   8     proceedings with panel 7, John Shemo, Peter

   9     Libassi, Kathleen Gordon, Ceasar Claro, Paul

  10     Christie, and Carol Aranjo:

  11               We'll start with Mr. Shemo.

  12               MR. SHEMO:  Good afternoon.  My name

  13     is John Shemo and I am here on behalf of

  14     Connecticut Capital Region Growth Council which

  15     is the leading economic development

  16     organization for the 29 town Metro-Hartford

  17     region.

  18               I serve as the agency's executive

  19     vice-president.  I'm pleased to have this

  20     opportunity to testify before you in favor of

  21     Travelers Group proposal to acquire Citicorp.

  22     There are two reasons that we as a Growth

  23     Council support this merger.  The first is job

  24     preservation and growth.  The second is

  25     Travelers' long history of for being a good



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   1

   2     corporate citizen in your community.  The

   3     mission of the Growth Council is to boost the

   4     local economy by fostering job growth in

   5     Metro-Hartford.

   6               It is our opinion that the Travelers

   7     Citicorp merger would not only preserve the

   8     thousands of jobs each company currently

   9     provides in Metro-Hartford but also would

  10     expand the local employment basis of the two

  11     companies.  Travelers has always been a key

  12     employer of Metro-Hartford.

  13               Before the companies earlier merger

  14     with Primerica, about six thousand Travelers

  15     jobs were lost and thousands more were at

  16     serious risk.  Since that merger, the company

  17     has reversed its situation, returned to

  18     profitability, and begun to grow its work force

  19     again.  Travelers Group now employs roughly

  20     seven thousand people in Hartford, plus another

  21     two thousand jobs were saved by Travelers

  22     selling its health benefits operation to

  23     another insurer.  In effect, Travelers

  24     practices of strategic acquisition and

  25     restructuring has preserved nine thousand jobs



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                                                                215
   1

   2     for Metro-Hartford residents.

   3               Separately, the Growth Council

   4     recently completed successful negotiations to

   5     bring the Citicorp in-bound call center to

   6     Metro-Hartford.  This customer service er

   7     center will employ between 550 to 600 people.

   8     We believe that the merger will have a positive

   9     impact on this operation as well, as the two

  10     companies began cross-selling their products

  11     through telemarketing efforts.

  12               The second reason that the Growth

  13     Council supports this merger is as I said

  14     because of Travelers strong track record in our

  15     community.  We believe that as a larger company

  16     its ability to promote the region's economic

  17     development will be enhanced.

  18               Travelers was an original

  19     incorporator of and investor in the Growth

  20     Council, again, funding our efforts this year.

  21               There are several other efforts of

  22     Travelers community support.  Travelers

  23     currently provides the use of its education

  24     center to the University of Connecticut as a

  25     downtown campus.  We view this as the first



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   2     step in creating even a larger downtown

   3     Hartford higher education center, involving

   4     courses offered to many of the local

   5     universities.

   6               The higher education center is high

   7     on our list of projects that would both draw

   8     more people downtown and benefit the city's

   9     current employers and workers.  Riverfront

  10     Recapture, which has revitalized recreational

  11     activities on the Connecticut River also has

  12     been a recipient of Travelers'generosity.  To

  13     date, the company has invested point one

  14     million dollars in Riverfront programs, which

  15     give new life to the region and attract both

  16     residents and visitors to Hartford, East

  17     Hartford and other towns along the river.

  18               It is our opinion that the Travelers

  19     Citicorp merger would serve the best interest

  20     of the Metro-Hartford region.  We urge you to

  21     consider it favorably.  Thank you.

  22               MR. LONEY:  Thank you, Mr. Shemo.

  23     Maybe I should repeat what I said this morning

  24     about the time sequence, because some of you

  25     may not have been here and some of the next few



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                                                                217
   1

   2     panels may not have been here.  The lady in the

   3     middle in the front row here is going to be

   4     holding up signs to tell you when you're down

   5     to two minutes remaining, and then when time

   6     has expired.

   7               I will say that the folks this

   8     morning blazed a trail that will be hard for

   9     this afternoon's group to emulate.  They stayed

  10     very close to on time and I appreciate that,

  11     and it helps us get in everybody's testimony

  12     and I'd like to try to repeat this morning's

  13     success, and I'm taking up too much time saying

  14     that.  Mr. Libassi.

  15               MR. LIBASSI:  My name is F.  Peter

  16     Libassi.  I'm a Travelers retiree and I'm also

  17     a Travelers shareholder.

  18               I'm here today in my capacity as

  19     president of the Childrens Fund of Connecticut

  20     which is a grant making foundation and my

  21     statement will deal with the leadership role

  22     that Travelers played in the establishment of

  23     that foundation, and the public benefits which

  24     have flowed from it.

  25               In 1992 the Newington Children's



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                                                                218
   1

   2     Hospital in Newington, Connecticut which was an

   3     orthopedic hospital decided that due to a

   4     reduction in patient load it would close and

   5     reopen as a specialized childrens' hospital in

   6     the City of Hartford.

   7               In reviewing the health needs of the

   8     children of Hartford, the Travelers thought

   9     that perhaps they were very serious issues

  10     related to childrens health, but they dealt

  11     more with primary and preventive care.  They

  12     dealt with such issues as immunization, well

  13     baby checkups, teen age pregnancy, prenatal

  14     care, issues which were quite different than

  15     those served by a high tech specialty hospital.

  16               As a result, the Travelers in fact

  17     questioned the wisdom of whether a high tech

  18     hospital as proposed actually addressed the

  19     health needs of children in Hartford.  With

  20     that question as its focus the Travelers

  21     decided to initiate a study.  The independent

  22     study as to what were in fact the health needs

  23     of children, and at first other corporations

  24     were curious about the study, and eventually

  25     actually joined with Travelers in sponsoring



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                                                                219
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   2     that study, which was done by Lewin/ICF.  That

   3     study concluded that there was in fact a need

   4     for a childrens' hospital, but a much smaller

   5     hospital than had been originally proposed, but

   6     the study also concluded, as the Travelers had

   7     argued, that the health needs of the children

   8     of Hartford would only be served if a serious

   9     campaign was launched that would focus on

  10     primary and preventive care.

  11               Now, as a result of that the

  12     Childrens' Fund of Connecticut was established

  13     with a leadership grant of one million dollars

  14     from the Travelers foundation.

  15               With that gift as a leadership gift

  16     other corporations and other hospitals in the

  17     area also contributed and the foundation was

  18     established of $17 million to serve the under

  19     served children in the City of Hartford and in

  20     other you are been areas in Connecticut dealing

  21     primarily with preventive and primary care.

  22               The board of that foundation after

  23     exhaustive study of the needs of children

  24     throughout the state, concluded that it ought

  25     to focus on developmental delays and



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   2     developmental deficiencies, and how they might

   3     be prevented.

   4               That led to the decision that what

   5     was needed most in the state was training for

   6     those people who provide care for children.  We

   7     were surprised to learn of the extent to which

   8     pediatric nurses, social workers, child care

   9     providers, day care center people really had

  10     very limited knowledge of primary and

  11     preventive strategy with respect to those

  12     deficiencies, and with that the Childrens Fund

  13     sponsored the first state-wide training program

  14     for child care providers in the State of

  15     Connecticut.

  16               This foundation brought together four

  17     state agencies and three private organizations

  18     all of which contributed $600,000 to the

  19     training and $200,000 from the Childrens Fund

  20     of Connecticut.  So at this time in Connecticut

  21     1600 family child care providers are in the

  22     first training program that has ever been

  23     offered in the State of Connecticut.

  24               The result is that ten thousand

  25     children in September will reap the benefits of



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   1

   2     being under the care of providers who are

   3     receiving the very finest in child care

   4     training.  There is no question that the extent

   5     of training of child care providers in the

   6     State of Connecticut would not now be under way

   7     if it had not been for the leadership and for

   8     the foresight of the Travelers Corporation.

   9     Thank you.

  10

  11               MR. LONEY:  Thank you, Mr. Libassi.

  12     I have next Ms. Gordon.

  13               MS. GORDON: Yes.  I'm Kathleen Gordon

  14     and I'm president founder and board member of

  15     Working Capital Florida which is a nonprofit

  16     community lending organization.  We provide

  17     uncollateralized small loans under $5,000 for

  18     low income people to be self-employed.

  19               I'm here at my own expense, and I'm

  20     also here to attend the micro-credit summit

  21     conference of practitioners which begins

  22     tomorrow.  There are more than a thousand

  23     people that have paid their own way to come to

  24     New York with the commitment of reaching one

  25     hundred million families with credit around the



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   1

   2     world for self-employment.

   3               City Corporation was the first funder

   4     of the micro-credit summit which took place

   5     last February in New York City.  More than

   6     three thousand people came to the summit and

   7     committed to reach one hundred million

   8     families.  We are presenting our action plan

   9     tomorrow to each one of the organizations on

  10     how we're going to reach those families with

  11     credit.

  12               The average loan outside the United

  13     States is around $100 for self-employment and

  14     we're targeting women.  On the domestic side, I

  15     will present tomorrow to the summit members on

  16     how we in South Florida are going to expand and

  17     reach ten thousand low income people in South

  18     Florida with loans under $5,000 for

  19     self-employment.

  20               The chair of our board of directors

  21     is Barbara Manning who is the vice-president of

  22     Citibank in our community.  She has provided

  23     invaluable support and assistance, and also

  24     helped with our loan portfolio for the work

  25     that we're doing in our local community.  We



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   1

   2     have started four hundred businesses in Dade

   3     County in the last two and a half years.  We

   4     provide loans, technical assistance and

   5     business training in 16 of the poorest

   6     neighborhoods in Dade County.  65 percent of

   7     our loans go to people of African descent.  We

   8     have an overall 96 percent repayment rate on

   9     those loans.

  10               Once we borrowed the money from a

  11     consortium of ten banks of which Citibank is,

  12     and Citicorp are one of the funders of our loan

  13     portfolio.  They have also provided operational

  14     support for our organization to expand our

  15     outreach into these low-income communities, and

  16     the business training that we do provide.

  17     They've also provided us again with the

  18     leadership at the local level in expanding the

  19     program.

  20               Dade County, as you know, is a city

  21     of primarily immigrants, and we are now

  22     considered one of the six poorest cities in

  23     America.  So this type of lending where we

  24     provide self-employment, even for welfare

  25     mothers, has been critical in our community,



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   1

   2     and I'll tell you the truth, we could not have

   3     done it without the support of Citibank and

   4     City Corporation.  They were one of the leaders

   5     in coming for providing this kind of

   6     assistance.  So they are providing leadership

   7     at the international level, the global level

   8     and also at the local level which is extremely

   9     powerful.

  10               I don't know about the merger.  I am

  11     impressed with the 115 billion dollar

  12     commitment for community development in this

  13     country, and I do feel as a regulatory board

  14     that we can, that you have a responsibility for

  15     oversight that that money really gets targeted

  16     down to these low-income communities, because

  17     we're growing the businesses, and once the

  18     businesses get up to the $5,000 loan site with

  19     us, the participating banks put in a matching

  20     loan.

  21               So we help people develop a credit

  22     history.  They get a Dun & Bradstreet number

  23     with us.  We also have access development

  24     accounts.  Each one of the businesses to get a

  25     loan also has to have a savings account, a



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                                                                225
   1

   2     group savings account.  So we are promoting

   3     asset development and business loans.  They get

   4     a credit history, and then they move up to bank

   5     loans.  We have ten banks that are

   6     participating with us, and Citibank is one of

   7     those.

   8               We are excited about micro lending.

   9     We feel that it's a program that should be

  10     expanded all across the United States.  Working

  11     Capital is now working in seven states.  We

  12     started more than three thousand businesses.

  13     So our program is the largest nonprofit micro

  14     lending program in America to date, and we hope

  15     to expand it all across the country.  Thank you

  16     so much.

  17               MR. LONEY:  Thank you.  Mr. Claro.

  18               MR. CLARO: good afternoon.  My name

  19     is Ceasar Claro and I am a director of the

  20     Staten Island Economic Development Corporation,

  21     the borough-wide business development agency

  22     for Staten Island.

  23               I am submitting testimony today on

  24     behalf of the board of directors of the Staten

  25     Island DC in support of the proposed Citicorp



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   1

   2     Travelers Group merger.

   3               For the past four years Citibank has

   4     a major support of the SIDC contributing in

   5     exceeds of over sixty thousand dollars to the

   6     organization as well as providing free

   7     technical marketing and legal assistance.  They

   8     have provided much needed counsel on small

   9     business development issues, and on many

  10     occasions have guided our staff in implementing

  11     new programs.

  12               In addition, Citibank frequently

  13     offers free capacity building courses to

  14     not-for-profit organizations throughout the

  15     city.  All in all, they have been a great

  16     corporate citizen to the people in small

  17     business community of Staten Island.

  18               As one who has worked in urban

  19     economic and community development for over

  20     eight years, and in two New York City counties,

  21     I can honestly say that Citibank has been at

  22     the forefront of urban revitalization.  They

  23     have devoted countless manpower hours and

  24     financial support to underserved neighborhoods

  25     and vital community organizations.



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   1

   2               In the outer boroughs of New York

   3     City Citibank's name has become synonymous with

   4     community development.  They have been one of

   5     the leading small business banking institutions

   6     developing model programs to assist start up

   7     firms, and womens-minority-owned businesses.

   8               Unlike recent bank mergers, the

   9     proposed Citibank Travelers merger involves

  10     only one current philanthropic community

  11     development corporation, in this case,

  12     Citibank, thus preventing a negative impact on

  13     the financial support organizations currently

  14     receive.

  15               Once again SIDC wholeheartedly

  16     supports the merger and hopes this board does

  17     as well.

  18               Thank you for your time.

  19               MR. LONEY:  Thank you.

  20               Mr. Christie.

  21               MR. CHRISTIE:  Members of the Federal

  22     Reserve Board panel, my name is Paul Christie.

  23     I'm executive director of Center City Churches

  24     Incorporated.

  25               Center City Churches is a



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   1

   2     not-for-profit nonsectarian human services

   3     agency in Hartford, Connecticut.

   4               It started in 1967.  We are now

   5     comprised of 12 congregations representing ten

   6     religious traditions.  Our mission is to be a

   7     partnership of congregations, institutions and

   8     individuals which cares for the city by finding

   9     innovative and effective ways to help

  10     Hartford's neediest residents work towards

  11     self-sufficiency.

  12               Since our beginning we have relied on

  13     active partnerships to fulfill our mission.

  14     Today with the help of over four hundred

  15     volunteers annually dozens of corporate

  16     foundations, public and private commitments, we

  17     operate six programs.  Among them Peters

  18     Retreat is the first and largest AIDS housing

  19     program in Connecticut, Laurel Street, the only

  20     state licensed group home for the chronically

  21     mentally ill in Hartford, Center for Hope,

  22     offspring of the first soup kitchen in the

  23     city, and Center for Youth, the most

  24     comprehensive school tutoring and enrichment

  25     program in Hartford serving over four hundred



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   1

   2     children weekly.

   3               The Travelers Group Incorporated

   4     plays a pivotal role in helping us fulfill our

   5     mission.  Here are some of the ways Travelers

   6     puts energy into being community partner with

   7     Center City Churches.  Travelers is providing a

   8     three-year grant for the Center for Youth which

   9     enables us to double the number of children we

  10     serve by adding a second school to our program.

  11               Travelers purchased a van so we can

  12     transport our program participants safely.

  13     Travelers donates staff time to find office

  14     space for our agency and secures furnishings

  15     for that space.  It provides consultations to

  16     revise our personnel policies, and upgrade our

  17     pension plan, while excluding themselves from

  18     being considered as a vendor.

  19               Travelers recruits board members and

  20     school tutors.  This spring Travelers developed

  21     an ongoing art gallery in their offices to

  22     display our students work, and that of their

  23     employees and other community groups, thus

  24     building bridges between the neighborhoods and

  25     the board room.



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   1

   2               Already Travelers personnel have

   3     purchased some of the students' work and

   4     underwritten an artist residency see in the

   5     school.

   6               My daughter's crew experience in

   7     college illustrate what I'm trying to say about

   8     college as a community partner.  Every seat in

   9     crew has a name and a task.  The "stroke" is

  10     the team member who sets the pace for the boat.

  11     By example all the other rowers align

  12     themselves with him or her.  The stroke sets

  13     the standard.

  14               In Center City Church's experience

  15     Travelers is the corporate stroke for community

  16     involvement in Hartford.

  17               MR. LONEY:  Thank you very much.

  18     Ms. Aranjo.

  19               MS. ARANJO:  Good afternoon.  My name

  20     is Carol Aranjo and I am chair of the board of

  21     the National Federation of Community

  22     Development Credit Unions.

  23               The National Federation of Community

  24     Development Credit Unions represents 170 credit

  25     unions that specialize in serving low income



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                                                                231
   1

   2     and minority communities in forty states.

   3               Our members are located both in urban

   4     and rural areas.  Many of our members' credit

   5     unions have served their community for some

   6     fifty years.  Our credit unions serve people in

   7     communities who have often been ignored or

   8     neglected, or are unable to be served by banks.

   9               For the most part the members of CDCU

  10     have small needs and need small loans.

  11     Sometimes they have credit histories that would

  12     make them unacceptable to banks.  Serving this

  13     market is not very profitable, which is why

  14     many banks have retreated from our communities.

  15               Our communities' development of

  16     credit unions have decades of experience in

  17     trying to fill the banking gaps and bringing

  18     services to the unserved.  It's not an easy

  19     job.  It can take many years and enormous

  20     sacrifices for community development credit

  21     unions to achieve the level of assets and

  22     capital they need to serve their members

  23     adequately.

  24               Often our credit unions need help

  25     getting to those levels.  Citibank has provided



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                                                                232
   1

   2     that kind of help to the CDC movement.  It has

   3     not always been easy to convince banks, and

   4     especially in today's climate where there seem

   5     to be some real adversarial relationship

   6     between some banks and credit unions to help

   7     institutions that some bankers may call

   8     competitors.  But Citibank looked beyond this

   9     to the needs of low income communities.  They

  10     decided if their bank presence wasn't

  11     sufficient in a community it would be important

  12     for low-income people to have access to a

  13     nonprofit finance institution owned by the

  14     community itself.

  15               Listening to all the testimony today,

  16     as a person of color I would like to say that

  17     too often people of color are brought up when

  18     these type of issues come before you, and often

  19     groups say what they are doing to serve the

  20     people of color, and I'm talking about

  21     intermediaries and advocates, but I would ask

  22     the Federal Reserve to be very careful about

  23     the rainbow effect which I call, a pot of gold

  24     at the end, the banks on one end and the

  25     financial institutions and the adversaries and



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                                                                233
   1

   2     intermediaries on the other.  Both have the pot

   3     of gold.

   4               The community is under need watching

   5     the funds go from one end to the other and

   6     they're not getting it.  Statistics prove that

   7     communities of color are in worse shape today

   8     than they were twenty years ago.  Something is

   9     wrong.

  10               I would like to say that Citibank I

  11     commend them for understanding what a

  12     conglomerate can do and what it cannot.  In not

  13     being able to do it, they are willing to

  14     support those who can do it.

  15               The micro fund, the community

  16     development credit unions, the loan funds, the

  17     community CDC, they are in the community run by

  18     the people of the community making the

  19     decisions to lift themselves up.  People have

  20     been trying to do it for them for twenty years.

  21     It has not worked.  They need to be able to do

  22     it for themselves.

  23               When institutions such as Citibank

  24     recognize this, and are willing to support

  25     those organizations that are in the community



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                                                                234
   1

   2     working to empower themselves and lift

   3     themselves up, then I support this type of

   4     bank.

   5               So I would say that from the CDCU

   6     movement, and I would also like to say someone

   7     mentioned identifying the CDCU received money

   8     from Citibank.  The Federation received a

   9     million dollars from Citibank to deposit into

  10     low income credit unions to help them have the

  11     equity they needed to continue lending to poor

  12     people in the communities throughout the United

  13     States.  And I would say to those groups who

  14     said this, I would ask that they identify

  15     themselves if they plan to be recipients of any

  16     monetary requirement, that the Federal Reserve

  17     would put on a merger of this type.  Oft times

  18     they are complaining about the people who have

  19     already received the money, but they plan to be

  20     on the recipient side if the monetary

  21     requirement is necessary.

  22               I would also ask that you approve the

  23     merger, but that you also keep an eye on any

  24     monetary requirements, that you make sure that

  25     you follow the dollars to make sure that they



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                                                                235
   1

   2     actually get to the communities that are being

   3     represented as being underrepresented and

   4     needing your concern.

   5               Thank you.

   6               MR. LONEY:  Thank you.

   7               Are there any questions from the

   8     panel?

   9               MR. ALVAREZ:  I don't have any

  10     questions, but I have a comment that pertains

  11     to what some of the other speakers on the panel

  12     before have represented people who have done

  13     incredible work in the community like

  14     yourselves and we appreciate you all taking the

  15     time to come and talk to us.  So no matter what

  16     happens in this merger, good luck in continuing

  17     the work you're doing.

  18               MR. LONEY:  I've been remiss in not

  19     worrying about this before.  I guess I was

  20     thinking that everybody has been here all day.

  21     Maybe they have.

  22               So let me just repeat, if you have

  23     written materials that represent your remarks

  24     we would like to have copies if we could get

  25     one before you leave.  Also, if any of you who



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                                                                236
   1

   2     testified wish to supplement your oral

   3     testimony you may do so by close of business 5

   4     p.m. on July 2, by sending in such supplemental

   5     information care of Jennifer Johnson, secretary

   6     of the Board of Governors of the Federal

   7     Reserve in Washington, D.C. 20551.  Also, you

   8     can fax it to 202-452-3462.  So if you have

   9     supplemental information we'd like to have it

  10     by the end of business July 7th.

  11               Also, I'll let you know that there

  12     will be transcripts available by June 30th of

  13     today's part of the meeting, and by July 1st

  14     for tomorrow's part of the meeting that can be

  15     obtained through the Federal Reserve Bank of

  16     New York, and the transcript will be available

  17     by close of business June 29th for today's part

  18     of the meeting and June 30th for tomorrow's

  19     meeting.  The board's public website www.frb.

  20     fed.us.

  21               (Laughter)

  22               So I would be remiss in not saying

  23     this to the afternoon session as well as to the

  24     morning session.  Thank you very much.

  25               The next panel is panel 8 Hubert Van



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                                                                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



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                                                                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,



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                                                                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



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                                                                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



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   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



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   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



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   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.



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   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



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                                                                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



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                                                                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



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                                                                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



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                                                                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



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                                                                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



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                                                                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



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                                                                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



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                                                                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



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                                                                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



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                                                                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.



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                                                                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.



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                                                                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.



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                                                                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



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                                                                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.



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                                                                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



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                                                                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



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                                                                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



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                                                                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



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                                                                269
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   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



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   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



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   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



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   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



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   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.

  10               The next is Panel Nine, Gilbert

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

  12     Peter Elkowitz and William Dorsey.

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

  14     All right.

  15               We will start with Mr. Pinsky.

  16               MR. PINSKY:  Thank you.  Good

  17     morning.

  18               MR. LONEY:  Afternoon.

  19               MR. PINSKY:  Good afternoon.  My name

  20     is Mark Pinsky.  I am the executive director of

  21     the National Community Capital Association,

  22     which is a membership organization representing

  23     more than 210 organizations around the nation,

  24     including 50 member community development

  25     financial institutions or CDFIs.



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   2               Just to give you a sense of who we

   3     are, at year end 1997 those CDFIs managed about

   4     $475 million in predominantly private-sector

   5     capital, had loaned and invested about $710

   6     million, with a cumulative loss rate of about

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

   8     poorest and most distressed communities.  That

   9     lending and investing had created about 4,000

  10     jobs and about 22,000 affordable housing units.

  11               National Community Capital believes

  12     that every financial institution that received

  13     a public benefit should provide a commensurate

  14     public return.  Through its performance and its

  15     practices, Citibank has proven to National

  16     Community Capital that it is committed to

  17     providing a public return more than

  18     commensurate with the benefits it receives at

  19     taxpayer expense.

  20               Over the past six years, Citibank has

  21     been a key player in building and expanding the

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

  23     has done four things that I want to highlight.

  24               First, it's embraced community

  25     development finance as integral to its core



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   1

   2     business.  Second, it's invested invaluable

   3     expertise, as well as capital in its community

   4     development finance work.  Third, it's treated

   5     CDFIs as customers rather than as applicants.

   6     Fourth, it's supported the expanding CDFI

   7     industry without regard to geographic

   8     boundaries.

   9               Citibank has never required National

  10     Community Capital to limit the use of its

  11     equity, debt or operating support to the

  12     Citibank service area.  Citibank understands

  13     that building a strong CDFI industry requires

  14     National Community Capital to pursue market

  15     opportunities where they exist.

  16               Citibank has worked closely with

  17     National Community Capital and many CDFIs, and

  18     a couple are here today.  In its work with

  19     CDFI, Citibank has exceeded every reasonable

  20     expectation.

  21               National Community Capital's

  22     relationship with Citibank began in 1992 when

  23     Citibank made a $1.1 million grant to launch

  24     our National Equity Grants program.  By year

  25     end 1998, National Community Capital will have



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   1

   2     awarded more than $3.3 million in equity grants

   3     to nonprofit CDFIs, including the money that

   4     has been provided to us some years ago.

   5               The success of this program has been

   6     important.  It's influenced three other

   7     major -- three other important initiatives.

   8     First, National Community Capital's experience

   9     providing equity grants helped shape the

  10     federal community financial institutions of the

  11     CDFI.  Second, National Community Capital's

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

  13     grant to the National Federation of Community

  14     Development Credit Unions, that you heard about

  15     earlier, for an Equity Grants program that was

  16     modeled on ours.  And, finally, in 1997

  17     Citibank made 17 equity grants directly to

  18     CDFIs across the nation.

  19               National Community Capital and

  20     Citibank partnered again in 1996 to develop an

  21     innovative equity financing product called the

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

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

  24               Banks win because they make high-risk

  25     equity investments in CDFIs that promise to



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   1

   2     return their principal and because they receive

   3     multiplied CRA credits for making these

   4     investments.  An EQ2-investing bank can receive

   5     lending test credit equal to the pro rata share

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

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

   8     percentage of total equity in the CDFI.  In the

   9     alternative, the bank can receive investment

  10     test credit.

  11               CDFIs win because the EQ2 leverages

  12     debt to fuel the CDFI's lending and investing

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

  14     low-income and low-wealth communities benefit

  15     because more financing is available to them

  16     through CDFIs.

  17               In late 1996, Citibank made a $2

  18     million equity equivalent investment in

  19     National Community Capital to put this

  20     ambitious concept into practice.  Citibank also

  21     has provided substantial financial support for

  22     National Community Capital's human capital

  23     building activities, including our training and

  24     our consulting business.

  25               Let me in the interest of time sort



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   1

   2     of jump to the conclusion and say that the

   3     ultimate goal for CDFIs is to link economically

   4     poor people to the financial products and

   5     services they need to act in their own

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

   7     recognize change and respond with creative,

   8     innovative solutions.

   9               We feel that CDFIs and community

  10     development in general will not succeed if we

  11     get caught up perpetuating CDFI for their own

  12     sake -- because they exist -- defending the

  13     CRA, without acknowledging the revolutionary

  14     changes in the financial services industry, or

  15     justifying the behavior of financial services

  16     companies without regard to their performance

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

  18     communities.  We need a community investment

  19     strategy that builds on the strengths of the

  20     financial services industry as it is, not as we

  21     want it to be.

  22               The industry is in the midst of a

  23     major and rapid transformation which will

  24     reshape how poor people, like most people, use

  25     financial services.  The proposed



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   1

   2     Citibank/Travelers merger is now the cutting

   3     edge of this transformation.

   4               The question before us today is

   5     whether the proposed Citigroup can lead the way

   6     on community development finance in the

   7     financial services marketplace of the future.

   8     Given Citibank's past performance and practice,

   9     particularly, from our perspective, its vision

  10     in helping to develop the CDFI industry as a

  11     distribution system that bridges gaps between

  12     poor people and conventional capital and

  13     financial services, National Community Capital

  14     is confident that Citigroup will continue

  15     Citibank's leadership in community development

  16     finance.

  17               Thank you.

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

  19               Ms. Miller.

  20               MS. MILLER:  Hello.  Good afternoon.

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

  22     the Nonprofit Facilities Fund.  I also chair

  23     the Board of the National Community Capital

  24     Association, and I am an advisory board member

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



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   1

   2     Community Development Financial Institutions

   3     Fund, which together give me a fairly broad

   4     perspective on the field.

   5               I am speaking today, however, from

   6     the perspective of NFF, the Nonprofit

   7     Facilities Fund.  We operate nationally and

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

   9     loans and provide development services to

  10     nonprofit organizations that make broad and

  11     diverse contributions to low- and

  12     moderate-income communities.  We have financed

  13     approximately $90 million in projects, with $25

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

  15     York area, but we have offices now in five

  16     sites throughout the nation.

  17               Small- and medium-sized nonprofit

  18     organizations, especially those serving low-

  19     and moderate-income communities, have a

  20     difficult time accessing capital in general.

  21     Their access to debt is complicated by the

  22     underlying problem of lack of access to money.

  23     The debt is not always the problem in the

  24     growth of these organizations.  They are

  25     frequently engaged in low- or no-margin



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   1

   2     businesses, thus lack retained earnings to fund

   3     their growth needs.  They lack the ability to

   4     raise equity because individual ownership is

   5     not an option for nonprofits.

   6               We at the NFF work in a variety of

   7     ways to improve their access to capital.  One

   8     of the main strategies we have in doing so is

   9     to partner with banks -- as direct lenders to

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

  11     and as partners in innovation, to help us

  12     create new products, understand the industry,

  13     go to scale and provide services to address the

  14     changing needs of our market.

  15               NFF has a long history of bank

  16     partnerships.  Ten banks are direct investors

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

  18     other ways.  With a few, we have relationships

  19     that include a complex mix:  Volunteer

  20     involvement, financial and business advice,

  21     product development, participation in deals and

  22     referrals -- in addition to investment and

  23     grant support.  Citibank has really been such a

  24     partner for us, working with us not only to

  25     fill the capital gap, but to strengthen the



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   1

   2     nature and volume of financial and advisory

   3     services that we can provide to the nonprofit

   4     sector in order to increase its capacity

   5     overall.

   6               Citibank has been a particularly

   7     valuable contributor to innovation in our

   8     sector because of the quality as well as the

   9     size of its investment.

  10               Mark mentioned the EQ2 investment,

  11     which NFF has undertaken as well.  Citibank has

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

  13     in many ways more important than scale, in my

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

  15     of innovative subordinated loan product, and we

  16     are currently working closely with Citibank to

  17     develop a nondebt financial product that helps

  18     build essentially the equity-like part of a

  19     nonprofit organization, even though that is not

  20     really the correct term.

  21               We have found that Citibank is

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

  23     rare and enormously important piece of this.

  24     It looks at the long-term growth needs of

  25     borrowers, including CDFI such as the Nonprofit



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   1

   2     Facilities Fund.  It is curious about and

   3     engaged in the community development market and

   4     understands the broad needs of the market.  We

   5     together are trying to serve, including

   6     management development, non-debt financing and

   7     ongoing financial advice, as well as capital.

   8               Based on our direct experience with

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

  10     proposed acquisition of Citicorp by Travelers

  11     Group will not affect Citibank's proven

  12     commitment and track record in long-term

  13     community investment.

  14               Thank you.

  15               MR. LONEY:  Thank you.

  16               Ms. Gavin.

  17               MS. GAVIN:  Good afternoon.  My name

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

  19     Greater New York, which is the largest YMCA in

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

  21     are a community service organization which

  22     supports positive values, development in

  23     programs that range from spirit, mind and body

  24     activities.  We serve today 144,000 young

  25     people and by the millennium expect to serve



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   1

   2     200,000.

   3               I am here today to strongly support

   4     the merger of Citibank and Travelers as one of

   5     the organizations who today and in the future

   6     will continue to help organizations like the

   7     YMCA serve young and very needy children

   8     throughout our urban areas.

   9               We have had a very long and

  10     supportive relationship with both the Citibank

  11     and Travelers Group.  Over the last decade,

  12     Citibank has contributed well over $200,000 to

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

  14     communities.  Similarly, Travelers, including

  15     Salomon Smith Barney, has also contributed

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

  17     expanded again in areas of youth sports,

  18     character and leadership development, community

  19     service and literacy -- to as many as thousands

  20     of children who otherwise would have gone

  21     unserved.

  22               I am most proud of their support of a

  23     new program we launched in 1997 called the

  24     Virtual Y, which brings afterschool programming

  25     to the poorest and most needy schools.  We have



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   1

   2     sponsors for this program, and early on

   3     Citibank, Salomon Smith Barney and Travelers

   4     were all strong supporters of this program in

   5     three schools in the Bronx, Brooklyn and

   6     Chinatown.

   7               What we do is go in, help children

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

   9     been extremely supportive in all cases.  We

  10     have been very grateful for their support.  And

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

  12     the leadership of the foundations have

  13     demonstrated themselves not only to me, but to

  14     my counterparts, to be extremely strong

  15     supporters of community groups like ours.  I

  16     specifically highlight Paul Ostergard from

  17     Citicorp Foundation, Chip Raymond from the

  18     Travelers Foundation, and Jane Heffner from

  19     Salomon Smith Barney.

  20               I do believe a lot of this turns out

  21     to be people, and these people who are leading

  22     these organizations are pledged to continue to

  23     support community groups like ours.  So in

  24     closing I just want to say thank you for giving

  25     us this opportunity to testify on behalf and in



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   1

   2     support of this merger of Citibank and

   3     Travelers.

   4               Thank you.

   5               MR. LONEY:  Thank you.

   6               Did you say a Virtual Y?

   7               MS. GAVIN:  I did.

   8               MR. LONEY:  And do you serve virtual

   9     children?

  10               MS. GAVIN:  But now the Y is

  11     virtually all over.

  12               MR. LONEY:  Interesting concept.

  13               Mr. Elkowitz.

  14               MR. ELKOWITZ:  Good afternoon.  My

  15     name is the Peter Elkowitz.  I am the executive

  16     vice president and chief financial officer of

  17     the Long Island Housing Partners and its

  18     affiliates.

  19               The Housing Partnership is a

  20     not-for-profit organization whose mission is to

  21     create housing opportunities for those who,

  22     through the unaided operation of the

  23     marketplace, would be unable to secure decent

  24     and safe, affordable home ownerships.

  25               LIHP has been accomplishing its



.
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   1

   2     mission through the development and sale of

   3     homes to persons of very low, low and moderate

   4     incomes as well as through the provisions of

   5     various support services such as mortgage and

   6     financial counseling, technical assistance and

   7     downpayment assistance.

   8               I would like to take this opportunity

   9     to thank the Federal Reserve Bank of New York

  10     for allowing me to speak at this hearing.  On

  11     behalf of the Long Island Housing Partnership

  12     and its affiliates, I would like to express

  13     sincere support of the proposed acquisition of

  14     Citicorp by Travelers Group, Inc. on the

  15     assistance that the Housing Partnership has

  16     received from Citibank/Citicorp Foundation.

  17               LIHP and its various affiliated

  18     corporations have been extremely productive

  19     with various accomplishments relating to

  20     housing production, community development and

  21     supportive programs.  Since its founding ten

  22     years ago, the Partnership has constructed and

  23     sold over 400 units of affordable housing and

  24     has counseled thousands of prospective

  25     first-time home buyers.  In addition, the



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   1

   2     Partnership administers municipal community

   3     development programs and downpayment assistance

   4     programs throughout Long Island.

   5               The Housing Partnership has many

   6     members from business, labor, religious,

   7     education and financial sectors.  Much of our

   8     support, including administrative grants,

   9     construction loans for our affordable housing

  10     programs, and mortgage loans for our

  11     purchasers, comes from our member financial

  12     institutions.

  13               I am pleased to say that the

  14     Citibank/Citicorp Foundation has been an active

  15     member of the Long Island Housing Partnership

  16     and has provided financial support and

  17     expertise over the past ten years.  In fact,

  18     Citicorp has been one of LIHP's most responsive

  19     partners, consistently demonstrating a

  20     commitment to affordable housing and community

  21     development.  Over the years the institution

  22     has provided the Housing Partnership with well

  23     over $179,250 in contributions for various

  24     programs and operating expenses.

  25               Citibank serves as an active member



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                                                                289
   1

   2     of the Long Island Housing Partnership board of

   3     directors and its regional lending consortium,

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

   5     Membership, Minority Outreach, Bablyon,

   6     Nominating and Foreclosure Task Force

   7     committees and the partnership.  Specifically,

   8     Citibank's representative on the Partnership

   9     board, Michelle DiBenedetto, is chairman of the

  10     Mastic/Shirley, Long Beach, Nominating and

  11     Membership Committees.

  12               In addition, Citibank cosponsored

  13     mortgage counseling seminars for very low, low

  14     and moderate Long Islanders.  Citibank has

  15     provided mortgage loans to low- and

  16     moderate-income persons who purchased homes

  17     through the Long Island Housing Partnership.

  18               Citibank is also a member of the New

  19     York Mortgage Coalition, an effort by financial

  20     institutions and community organizations,

  21     including the Long Island Housing Partnership,

  22     who are committed to increasing home ownership

  23     opportunities for persons of low and moderate

  24     income by helping them qualify for mortgages.

  25     As part of the New York Mortgage Coalition,



.
                                                                290
   1

   2     Citibank offer mortgage products that it make

   3     easier for lower income persons to qualify for

   4     loans.

   5               Citicorp Foundation funds were given

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

   7     mortgage counselors in Brooklyn, Queens, and

   8     Long Island, and to assist with the development

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

  10     ownership units in downtown Bayshore.

  11     Specifically, the funds were used to offset

  12     administrative costs associated with securing

  13     public funds and to hire a social worker to

  14     assist with the relocation of current

  15     residents.

  16               Citibank is also an active

  17     participant in the Long Island regional lending

  18     consortium, a group of lending institutions

  19     that pool their funds and share the risk so

  20     that socially and creditworthy affordable

  21     housing can be financed and constructed.

  22               It should also be pointed out that

  23     Michelle DiBenedetto from Citibank was

  24     instrumental in the success of the Federal

  25     Reserve Long Island Home Purchase Process



.
                                                                291
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   2     Initiative.  In addition, as an LIHP board

   3     member, Ms. DiBenedetto kept the Board informed

   4     of the progress made by this initiative.

   5               It is noteworthy that, in

   6     anticipation of the merger, the new Citigroup

   7     has indicated that it would continue to provide

   8     substantial administrative support and special

   9     project grant funds for affordable housing

  10     initiatives to low- and moderate-income home

  11     buyers.  In addition, the Housing Partnership

  12     has been assured that the new Citigroup will

  13     continue to provide both construction and

  14     mortgage loans for its various affordable

  15     housing development programs.

  16               Over the next five years, the Housing

  17     Partnership will be embarking on many of the

  18     affordable housing projects, the largest of

  19     which are redevelopment efforts in the Town of

  20     Islip and Riverhead that are projected to yield

  21     over 150 affordable housing units for families

  22     of low income.

  23               The Housing Partnership also plans to

  24     develop other housing units in Nassau and

  25     Suffolk County will which require both



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                                                                292
   1

   2     construction and end-loan financing.  While it

   3     is difficult to estimate the value of end loans

   4     projected for our affordable home buyers over

   5     the next five years, it is expected that such

   6     values will exceed $10 million.  Based on past

   7     experiences, the Housing Partnership is certain

   8     that the new Citigroup will be an active

   9     participant in the financing of its affordable

  10     housing and community development programs.

  11               The Housing Partnership is grateful

  12     to Citibank for its support through various

  13     community development programs.  Furthermore,

  14     it commends the new Citigroup for its foresight

  15     of the importance of such programs.  Again, the

  16     Housing Partnership would like to express its

  17     support of the acquisition of Citicorp by

  18     Travelers Group.  Based upon our past

  19     interactions with Citicorp, it is our belief

  20     that Citicorp's demonstrated commitment to

  21     development of affordable housing and community

  22     development in this region will continue.

  23               Thank you for the opportunity to

  24     speak to you today.  The Housing Partnership

  25     looks forward to working with the new Citigroup



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   2     to fulfill its pledge of $115 billion for

   3     affordable housing and community development.

   4               Thank you.

   5               MR. LONEY:  Thank you.

   6               Mr. Dorsey.

   7               MR. DORSEY:  Good afternoon.  My name

   8     is William Dorsey.  I am the executive director

   9     of the Grow Bridgeport Fund.

  10               The Grow Bridgeport Fund is a capital

  11     access program designed to provide credit to

  12     small- and medium-sized businesses in the

  13     greater Bridgeport region.  GBF is a

  14     partnership made up of the City of Bridgeport,

  15     the State of Connecticut, Bridgeport Economic

  16     Development Corporation, Community Economic

  17     Development Fund, and three banks, including

  18     Citibank.

  19               I came here today to talk about the

  20     crucial role that Citibank has played in the

  21     formation of the Grow Bridgeport Fund and how

  22     the bank's continued involvement is critical to

  23     the fund's future development.

  24               GBF grew out of Bridgeport's

  25     empowerment zone application process, when the



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   2     entire community recognized that a key

   3     impediment to the city's economic growth was

   4     that credit from traditional lenders was not

   5     available for small businesses.  This sentiment

   6     was particularly acute in the wake of the New

   7     England banking crisis, which witnessed the

   8     demise of several local financial institutions

   9     and the removal of credit institutions from

  10     local to regional banking centers.

  11               The community as a whole suffered

  12     from this lack of access to credit because it

  13     stunned Bridgeport's ability to expand its tax

  14     base and create job opportunities for low- to

  15     moderate-income residents.

  16               In early 1995, the City of Bridgeport

  17     set out to request 18 banks operating in

  18     southwestern Connecticut to participate in the

  19     Grow Bridgeport Fund.  Citibank was only one of

  20     three banks that responded.  From the earliest

  21     planning sessions, it has actively participated

  22     in the fund through its representative Ellen

  23     Tower, and its counsel, Larry Brown.  They

  24     asked tough questions, but they were also

  25     willing to make the compromises necessary to



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   2     make this unusual coalition of the private and

   3     public sectors work.

   4               Further, once our operating agreement

   5     was put into place in late 1997, Citibank was

   6     the first bank to provide an equity

   7     contribution in the amount of $250,000.

   8               Since that time, the Grow Bridgeport

   9     Fund has gone on to make loan commitments

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

  11     requests.  Ellen Tower sits as a member of our

  12     board of managers and Michael LaBella serves on

  13     our investment committee, which reviews and

  14     approves all requests for credit.

  15               They continue to bring resources to

  16     the table, both human and financial, which

  17     contribute to the growth and stability of GBF.

  18     Citibank has made training available to develop

  19     and expand the capacity of our staff and

  20     classes, taught by the National Development

  21     Council on the Design and Administration of

  22     Rabb Funds.  It has helped to defray a portion

  23     of our marketing expenses, it has helped shape

  24     a risk rating system for our loan portfolio,

  25     and it has identified potential sources of



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   2     capital, which will allow GBF to expand its

   3     lending activities.

   4               I think Citibank's participation in

   5     the Grow Bridgeport Fund and other

   6     Bridgeport-based organizations is all the more

   7     praiseworthy because there are no Citibank

   8     branches or loan offices in our city.  What we

   9     are witnessing is not the infiltration of some

  10     marketing strategy, but, rather, the type of

  11     corporate citizenship that has recognized the

  12     genuine needs of an underserved community and

  13     has taken steps to serve those needs.

  14               Citibank's commitment to Bridgeport

  15     represents an act of leadership that is all too

  16     often absent in this era of consolidation

  17     within the financial services industry, which

  18     has been marred by rampant disinvestment of

  19     smaller and less wealthy communities.

  20               The collective expertise and wisdom

  21     of a Citibank is an invaluable resource and it

  22     is the most valuable asset to a fledgling

  23     organization such as the Grow Bridgeport Fund.

  24               As the financial services industry

  25     continues to contract, and creative alternative



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   2     lenders continue to emerge to serve the needs

   3     of those business borrowers at the low end of

   4     the spectrum, we don't need additional credit

   5     criteria.  Energetic participation by lenders

   6     is needed to support the efforts to manage and

   7     expand these portfolios.  It is the transfer of

   8     the larger institution's expertise that is

   9     almost as critical as capital in making these

  10     alternative lending institutions viable.

  11               Citibank's participation in Grow

  12     Bridgeport Fund has been a model of how those

  13     knowledge transfers can take place, and we hope

  14     this example of responsible and enlightened

  15     corporate support will continue in the future.

  16               Thank you.

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

  18               Any questions from the group?  If

  19     not, then I will thank the panel.

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

  21               (Recess)

  22               MR. LONEY:  We will begin with the

  23     panel that was scheduled for 2:35, Panel Ten.

  24               Everybody is here.

  25               Mr. Schallau, is that how you say



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   2     your name?

   3               MR. SCHALLAU:  Very well done.  Thank

   4     you.  My name is Doug Schallau.  I am president

   5     of Junior Achievement of New York City.  We are

   6     a franchise of Junior Achievement Inc., which

   7     has 163 domestic franchises in the United

   8     States and it has programming in over 100

   9     foreign countries.

  10               This year in New York City we will

  11     reach 150,000 students with our programs, all

  12     taught by volunteer role models from companies

  13     like we are here to talk about today.  And

  14     specifically I'd like to just spend a moment

  15     talking about our experience with Citibank,

  16     which has been absolutely tremendous and

  17     positive and, therefore, I am here to speak

  18     very much in favor of the consolidation.

  19               Over the past ten years, Citibank has

  20     contributed funds to Junior Achievement of New

  21     York in excess of half a million dollars, which

  22     has allowed us to bring our programs to young

  23     people that are very much in need of these.  In

  24     addition to that, they have provided their

  25     employees, approximately 350 of those over the



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   2     last ten years, to go into the classrooms with

   3     our programs to teach kids about free

   4     enterprise and economics.  In fact, our purpose

   5     is to educate and inspire young people to value

   6     free enterprise business and economics in order

   7     to improve the quality of their lives.

   8               I think this is where the similarity

   9     exists with, for example, Citibank, that we

  10     have a great experience with, and our

  11     organization.  We are both trying to improve

  12     the quality of lives for the kids we reach, and

  13     for Citibank the people in the locations where

  14     they exist.

  15               In addition to all that, they have

  16     been very generous.  Their employees have been

  17     very generous with their time in teaching in

  18     the classroom, as I mentioned, and also helping

  19     in our special event fund-raising.  They have

  20     raised probably another half a million dollars

  21     over the last ten years through our special

  22     events and, primarily, through our Bowl-A-Thon.

  23     That involves their employees helping raise

  24     money and then participating in the event.

  25               I'd also like to specifically talk



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   2     about the leadership role that Citibank has

   3     played with us and other organizations like

   4     ours, particularly our focus, which is the

   5     education system.  Without question, they have

   6     taken a leadership role in a number of areas,

   7     some of which -- as an example, in education

   8     technology Paul Ostergard, who heads the

   9     foundation, has been a pioneer and a driving

  10     force in involving technology in education.  He

  11     has also been very supportive with Junior

  12     Achievements International operations and is in

  13     Citibank involved in a number of foreign

  14     locations, has been very innovative in

  15     connecting the people that they are lending

  16     money to in their microlending program,

  17     involved in their Junior Achievement program,

  18     to help those people understand business and

  19     free enterprise and responsibilities that go

  20     with it.

  21               So I just would like to summarize by

  22     saying that I believe that this can only be an

  23     expansion of this leadership role to help

  24     improve the quality of lives in everyplace that

  25     this organization is located, and we certainly



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   1

   2     appreciate it not only here in New York City

   3     but all the locations where they are involved

   4     with us.  And they are truly a leader,

   5     enlightened philanthropy not only in the United

   6     States but globally, and we appreciate it very

   7     much.

   8               Thank you.

   9               MR. LONEY:  Thank you.

  10               Mr. Porter.

  11               MR. PORTER:  Good afternoon.  My name

  12     is Ralph Porter.  I represent Mid-Bronx

  13     Desperados Community Development Housing

  14     Corporation.  So on behalf of the board, staff

  15     and its residents, it a pleasure to come speak

  16     before you today.

  17               I am especially going to speak about

  18     our involvement with Citibank over the past ten

  19     or more years.  One, when we first started

  20     sponsoring a community development credit

  21     union, Citibank came to our aid in terms of

  22     giving us a grant for operations over a two- to

  23     three-year period.  As time went on, we also

  24     received grants for general operating.

  25               The last two specific grants that we



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   1

   2     received, which we were in dire need of, was

   3     one for our job resource center, which was a

   4     job training program basically geared to deal

   5     with welfare recipients and our residents to

   6     take them off of the welfare rolls.

   7               Another grant -- we were approved

   8     last year -- was the grant where we were

   9     dealing with economic development, and this

  10     grant went to maintaining a director of

  11     development, which presently we are in the

  12     process of developing a 136,000 square foot

  13     shopping center, which that money was given

  14     directed toward the salary for that particular

  15     person who had been on that project for some

  16     years, and also consulting fees.

  17               Citibank has also made it available

  18     for free training for some of our development

  19     staff to come to many courses and to increase

  20     their knowledge and talents so that they can

  21     come back into our community and be put to use

  22     in development in our community.

  23               I do have -- I asked myself the

  24     question that, what can this merger contribute

  25     to especially a not-for-profit organization,



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   2     and directly a community development

   3     cooperation such as Mid-Bronx Desperados and

   4     other community groups?

   5               I view community development groups

   6     as the glue for this society, to maintain what

   7     has been invested in these communities in

   8     affordable housing, economic development, etc.

   9     They become a living organism and a hub for

  10     being able to support the community in its

  11     efforts.

  12               It's important that private industry

  13     gets involved, and especially in the banking

  14     area I can say that I know you are in the

  15     business of making money, but there is also the

  16     business of social corporate responsibility.

  17     And as I look at this merger and I see this

  18     $115 billion over a ten-year period, I ask the

  19     question, in terms of community development,

  20     how much of those funds are going to be

  21     contributed in grants for operation support for

  22     buildings, for organizations, of

  23     not-for-profit.  It is extremely important that

  24     we look at those dollars figures that they have

  25     recommended, and they be increased in reference



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   1

   2     to insurance Travelers and what have you.

   3               I would ask you to take a very hard

   4     look at how can you reduce your rate for lower

   5     income communities.

   6               Thank you.

   7               MR. LONEY:  Thank you, Mr. Porter.

   8               Mr. Morrow.

   9               MR. MORROW:  I am Phillip Morrow,

  10     president of the South Bronx Overall Economic

  11     Development Corporation.  We are an economic

  12     development corporation that covers the Bronx

  13     south of Fordham Road, and I should say we were

  14     organized in 1972.  Citibank at that time was

  15     one of a group of people who gathered together

  16     with the Bronx borough president at the time,

  17     Bob Abrams, in terms of creating an economic

  18     development organization that would help

  19     reverse the decline and deterioration of the

  20     Bronx.  Citibank was there at the beginning.

  21     They are one of the founding banks, one of five

  22     founding banks, that started the organization,

  23     that financed it over the years.  They have

  24     provided us with continuous support over 26

  25     years of operation, both for project staff and



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   2     support of economic development projects.

   3               Lately, in our more recent activity

   4     there, Citibank has been involved in a project

   5     called Credits, providing early funding, a

   6     $100,000 revolving loan fund, and $10,000 a

   7     year for five years to provide financing for

   8     small businesses in the south Bronx.  The money

   9     they loan to us, which we loan to businesses

  10     that otherwise would not qualify for credit.

  11     Members of Citibank sit on the credit committee

  12     and review those loans and work with us in that

  13     fashion.

  14               In addition to that, Mr. Hector

  15     Ramirez is on our organization we call

  16     Employers for Education, because in addition to

  17     doing commercial revitalization and industrial

  18     development, SOBRO is a major actor in the

  19     world of training unemployed residents of that

  20     neighborhood for jobs.  So Hector is a founding

  21     member of SOBRO's advisory group called the

  22     Boarders of Education, with the specific

  23     purpose of identifying ways in which we can

  24     make end roads to find jobs for unemployed

  25     people, for people on welfare, for youth in the



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   1

   2     south Bronx.

   3               We are also a member of Citibank's

   4     Partners for Progress, which is working on

   5     commercial development and revitalization

   6     projects with both grants and loans, and we are

   7     looking forward to doing some financing of

   8     those projects in an area of the south Bronx,

   9     that up until now has been totally ignored by

  10     the south Bronx, and revitalization of that

  11     community.

  12               We are working quite hard on

  13     community development.  As Ralph Porter was

  14     talking, in commercial revitalization, economic

  15     development, industrial development, and job

  16     training, Citibank has been there as a partner.

  17     That is why we enthusiastically support the

  18     merger.

  19               I think when I look at this -- and

  20     there is also a branch on 149th Street in the

  21     hub, in the middle of the south Bronx, a

  22     Citibank-based branch, and we anticipate will

  23     remain there, and they will have a fight with

  24     us if they are going to move it since branch

  25     backing is pretty important to our neighborhood



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   1

   2     and community.  And we have been engaged by

   3     them -- they happen to have stolen one of my

   4     staff members, one of my best people, Paula

   5     Espinosa.  I had to say that because she's

   6     sitting out there.  And we have been engaged

   7     with them in planning on how some of this

   8     money, which is going to be available as a

   9     result of the commitment, the $115 billion

  10     commitment that's been made, would be

  11     reinvested in the south Bronx.

  12               I wanted to also mention that I have

  13     been in New York for 15 years, and before that

  14     I was in Hartford, and I was very familiar with

  15     Travelers Insurance Company as a partner and

  16     supporter and a founder of an organization that

  17     I used to run there.  So I can speak positively

  18     about my recollection of Travelers in the days

  19     20 years ago I left Hartford.  But at the time

  20     we were -- they were a good corporate citizen.

  21               To me, the key here is that you have

  22     two companies that have a demonstrated history

  23     of being a good citizen in their communities

  24     where they work, providing support for these

  25     efforts of making reinvestments and being in



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   1

   2     leadership, and none of that brings me pause

   3     about these two giants coming together and

   4     pooling the resources to try to make things

   5     better in communities like the south Bronx.

   6               Thank you.

   7               MR. LONEY:  Thank you, Mr. Morrow.

   8               Ms. Gerrol.

   9               MS. GERROL:  My name is Lisa Gerrol.

  10     I am the president of the Greater Connecticut

  11     Chapter of the National Multiple Sclerosis

  12     Society, and we are in the Hartford area, where

  13     Mr. Morrow is from, and I can talk a little bit

  14     about what has been happening in recent years

  15     with the Travelers.

  16               As in most communities, the

  17     Connecticut area has thousands and thousands of

  18     corporations and businesses.  Among those

  19     numbers, one local corporation, the Travelers

  20     Group, has distinguished itself as the

  21     corporation of the year of the National

  22     Multiple Sclerosis Society.  I would like to

  23     take a few minutes to tell you why we selected

  24     the Travelers Group as the corporation of the

  25     year and how they have changed the lives of



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   2     thousands of people with multiple sclerosis.

   3               Multiple sclerosis is a chronic,

   4     often disabling disease of the central nervous

   5     system.  Symptoms can be mild, like a tingling

   6     sensation in your limbs, or they can be severe

   7     and cause total disability, blindness, and

   8     increasing towards serious further disability.

   9               Most people with MS are diagnosed

  10     between the ages of 20 and 40 years old, yet

  11     the impact of MS lasts a lifetime.  The

  12     progress, severity, and specific symptoms of MS

  13     can't be predicted.  They are devastating, and

  14     with MS someone can wake up in the morning and

  15     not be able to see and not see for days on end

  16     or weeks on end and be totally blind.  They can

  17     wake up several weeks later, be able to see,

  18     but be in a wheelchair and completely unable to

  19     walk.

  20               The National Multiple Sclerosis

  21     Society provides local services and research.

  22     The services are to help end the devastating

  23     effects of multiple sclerosis, and the research

  24     is to find the cause, new treatments, and

  25     eventually a cure for multiple sclerosis.



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   2               Our history with the Travelers

   3     Foundation began about ten years ago when a

   4     small group of Travelers employees helped at

   5     one of our programs called MS Vacation Week.

   6     This is a program for people who are primarily

   7     severely disabled with MS, although they are

   8     young adults.

   9               People with MS at Vacation Week can

  10     enjoy an accessible environment where they are

  11     accepted, understood, and they are able to

  12     participate in programs that otherwise they are

  13     not able to do.  For example, they are able to

  14     go boating, they are able to go fishing, they

  15     are able to go swimming, they are entertained,

  16     and they have the opportunity to learn about

  17     treatment programs and ways of coping with

  18     their disease.

  19               The program also benefits caregivers,

  20     because people who are day in, day out, caring

  21     for someone who is severely disabled need a

  22     break, and this gives those caregivers an

  23     opportunity to have a break.

  24               The Travelers Foundation, in the

  25     early years when we first began Vacation Week,



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   1

   2     supported this program in a small way.  Their

   3     support increased during the last three years.

   4     They have been the major sponsor of MS Vacation

   5     Week allowing us to provide the program to far

   6     more adults than we have ever been able to.  In

   7     addition to that we have been able to improve

   8     and increase the quality of the programs that

   9     we offer.

  10               In addition, the Travelers

  11     Foundation, the Travelers Group, allows their

  12     employees to come help at Vacation Week, even

  13     though it is a program that is held during the

  14     week and they pay their employees to attend

  15     Vacation Week for the entire week, which is a

  16     wonderful benefit to our organization.

  17               Another example of how the Travelers

  18     has shown a commitment to giving back to our

  19     community and in helping the MS Society is

  20     through our walk.  Eight years ago a small

  21     group of Travelers employees participated in

  22     the walk, and that group has grown to this year

  23     250 employees participated in the MS walk on

  24     their own, raising about $23,000 in Connecticut

  25     alone.



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   2               In addition, the Travelers in their

   3     continuing efforts to support the MS Society

   4     and encourage their employees to do so, allowed

   5     them to publicize and promote the event

   6     throughout the country, so that there are

   7     hundreds of people in the communities

   8     throughout the United States that are

   9     participating in walks.

  10               Two years ago, the Travelers became

  11     the major sponsor of this particular event for

  12     the greater Connecticut chapter.  This is our

  13     largest fund-raising event, and it helped us

  14     raise about $400,000 this year with the MS

  15     walk.  This will help fund research to

  16     determine new treatments for MS, and one of

  17     those treatments has just been approved by the

  18     FDA in recent months, as well as two others

  19     that actually slow the progression of the

  20     disease by about a third.

  21               The Travelers has also been

  22     instrumental in helping more than 10,000 people

  23     in Connecticut and countless others throughout

  24     the country in providing local services that

  25     change the lives of people with multiple



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   2     sclerosis.

   3               The Travelers Group exemplifies how a

   4     corporation can significantly impact the

   5     welfare of our community and improve the lives

   6     of its residents.  The merger between Travelers

   7     Group and Citicorp can only make them stronger

   8     and more able to help all those we care so

   9     deeply about at organizations like the National

  10     Multiple Sclerosis Society.

  11               MR. LONEY:  Thank you.

  12               On a personal note, I am rooting for

  13     you, because a very good friend of ours in the

  14     Federal Reserve system has been battling that

  15     horrible disease for a number of years and a

  16     breakthrough would be most welcome.

  17               MS. GERROL:  We agree, definitely.

  18               MR. LONEY:  Mr. Buerger.

  19               MR. BUERGER:  Thank you.  I'm Ted

  20     Buerger.  I am external liaison for the

  21     Coalition for Welfare to Work.

  22               The Coalition was formed in 1997 by a

  23     group of business, religious and volunteer

  24     organizations who wished to bring the resources

  25     of the corporate and the private sector to help



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   2     people move from welfare to productive work.

   3     We do this in conjunction with all of the

   4     training programs and agencies in Westchester

   5     County, simply trying to add supplemental

   6     services and resources.

   7               Examples of things that we do,

   8     briefly, are that we provide

   9     interview-appropriate clothing, we provide

  10     practice interviews, and we provide mentors

  11     after people actually get jobs, to help them

  12     not only get jobs but then to keep jobs and

  13     move on to better jobs down the road.  We do

  14     this throughout Westchester County, from Mount

  15     Vernon and Yonkers to Peekskill, and everywhere

  16     in between.

  17               In doing this, we create a human

  18     bridge between the world of welfare and the

  19     world of work, which is important.  As we think

  20     of Citibank in a minute, because we are not

  21     just providing services, we are providing an

  22     open door that says to people we in the working

  23     world want you in the world of welfare to join

  24     us and work with us.

  25               In every area that we have made



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   2     efforts, Citibank has shared their professional

   3     workforce development skills in great depth and

   4     breath, as well as giving us numerous volunteer

   5     hours.

   6               One example, Citibank, in February of

   7     this year, did a clothing drive with large

   8     posters and racks in every Citibank in

   9     Westchester County and they kept those racks

  10     and posters up for months, and they put our

  11     brochures out in every Citibank soliciting

  12     volunteers for us.  They have also had their

  13     head of human resources provide professional

  14     interview training to our volunteers for

  15     interviewing.

  16               Citibank employees have volunteered

  17     to be mentors and to do practice interviews

  18     themselves, including offering to have

  19     candidates come into Citibank offices so they

  20     could do the interviews in a corporate setting;

  21     it would be realistic.  They have also trained

  22     our clients in personal budgeting and provided

  23     tours of their office facilities so people

  24     could experience or see the world of work.

  25               It doesn't stop there.  Citibank has



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   2     referred us to other organizations in community

   3     development and to potential sources of funds.

   4     They have always moved to deepen our contacts

   5     elsewhere in the Citicorp organization, and we

   6     would hope in the future into the Travelers

   7     Group organization.

   8               They have given us friendly and good

   9     advice about building and managing our young

  10     organization over the last year.  In all, the

  11     Citibank community development team, led by

  12     Peter Mosbacher, who I have to mention but

  13     would also acknowledge that his group includes

  14     six other people who meet with us every other

  15     month and then again connect us into their

  16     different branches to provide services, they

  17     have been professional, focused, creative and

  18     always helpful.

  19               We are proud of what the Coalition

  20     for Welfare to Work has accomplished in its

  21     first year, but I will tell you, we would not

  22     be where we are today without the many

  23     Citibankers who have gone the extra mile to

  24     help us.  There is no corporation who has

  25     helped us more and who has offered so many



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   2     services to benefit our clients.

   3               Thank you.

   4               MR. LONEY:  Thank you, Mr. Buerger.

   5               Mr. Torres.

   6               MR. TORRES:  My name is Edwin Torres,

   7     and thank you very much for the opportunity to

   8     present Bill Aguado's views on the proposal by

   9     the Travelers Group, Inc. to acquire Citicorp.

  10     Bill Aguado is the executive director of the

  11     Bronx Council on the Arts.

  12               Citicorp has been a long time

  13     supporter of the Bronx Council on the Arts and

  14     in recent years has had a significant impact on

  15     the Bronx Council on the Arts' community

  16     development initiatives as well as its basic

  17     operations.

  18               Because of its relationship with

  19     Citicorp, the Bronx Council on the Arts has

  20     been able to expand its focus of the cultural

  21     development of the Bronx to include a new

  22     corporation, the BCA Development Corporation.

  23     Citicorp, specifically their community

  24     development department, recognized the value of

  25     our efforts and those of other like-minded arts



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   2     organizations to begin exploring the role that

   3     we as arts organizations can play in the

   4     revitalization of our inner city communities.

   5               To that end, Citicorp designed and

   6     implemented a special initiative entitled

   7     "Cultural Builds Community."  The premise is a

   8     relatively simple one; that is, by creating

   9     partnerships between arts organizations and

  10     community development corporations a new and

  11     meaningful paradigm of service can be created.

  12               Culture Builds Community included a

  13     special training initiative for the proposed

  14     partnerships to enable them to effectively work

  15     together, to overcome and identify whatever

  16     management obstacles would emerge, and to

  17     assist the participants in program development.

  18               BCA and another technical assistance

  19     provider, Brooklyn In Touch, were contacted to

  20     conduct this important training.  The

  21     importance of this initiative cannot be

  22     stressed enough.  The recognition that the arts

  23     can enhance community development efforts is

  24     what distinguishes Citicorp from other

  25     financial institutions.



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   1

   2               Over 30 organizations were served by

   3     Culture Builds Community.  The concept and the

   4     experience was such a positive one that BCA

   5     created its own version, entitled Community

   6     Cultural Partnerships.  The concept has had

   7     also a positive impact on our Bronx

   8     organizations.

   9               To be sure, the arts are more than

  10     performances and exhibitions.  The arts reflect

  11     culture which in turn reaffirm the value system

  12     of the individuals comprised in that culture.

  13     Within the context of the community, the arts

  14     have the potential of bringing residents

  15     together in a proactive fashion.  The arts can

  16     and have effectively complemented the efforts

  17     of other traditional revitalization entities.

  18               Given the economic impact the arts

  19     have on the economy of New York City -- $9.3

  20     billion -- the arts is an area with tremendous

  21     potential for job and business development in

  22     our undeserved communities.

  23               Citicorp has indeed recognized that

  24     potential by being the first to support our new

  25     development corporation and one of its major



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   2     initiatives, our Arthandlers Job Training

   3     Program, of which I am assistant director and a

   4     case manager.

   5               Specifically, the Arthandlers Job

   6     Training component is a first of its kind

   7     program which is designed to prepare the

   8     unemployed for careers as arthandlers.

   9     Arthandlers are individuals who work behind the

  10     scenes at museums, galleries, auction houses

  11     and corporate collections and help to maintain

  12     art collections, install exhibitions, frame

  13     artworks, pack and crate, and provide risk

  14     management, to name a few tasks.

  15               The salaries at the entry level can

  16     range from $10 to $30 per hour.  Many with

  17     experience can have a very lucrative career and

  18     in turn support their families and contribute

  19     to their community's economies.

  20               We are now completing the training

  21     and the trainees will be placed in internships

  22     during July.  By the fall, we expect to place

  23     them in permanent positions.  Also, many

  24     opportunities are now presenting themselves in

  25     the form of new services and for profit



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   1

   2     business opportunities which would employ

   3     additional personnel from our communities.

   4               Lastly, Citicorp has allowed us to

   5     sustain our efforts during our difficult cash

   6     flow times by extending to us an important

   7     credit line.  Given the uncertainty of

   8     contracts for nonprofits, you can imagine the

   9     value of the credit line.  Moreover, there is a

  10     ripple effect one must consider; that is, the

  11     credit line allows us to sustain the integrity

  12     of our commitment while fulfilling our mandate

  13     of service during difficult times.

  14               Citicorp is owed a debt of gratitude

  15     for the forward thinking, and we have been

  16     assured that their commitment to our

  17     communities will continue after the acquisition

  18     of Citicorp by the Travelers Group.

  19               MR. LONEY:  Thank you, Mr. Torres.

  20               Do we have any questions for the

  21     group?  If not, I will thank you.  You are a

  22     very impressive group of folks doing some

  23     really nice things.  So thank you very much for

  24     coming to testify.

  25               Panel Eleven is Claudino Otenez,



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   1

   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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   1

   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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   1

   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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                                                                325
   1

   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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                                                                326
   1

   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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                                                                327
   1

   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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                                                                328
   1

   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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   1

   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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                                                                330
   1

   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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                                                                331
   1

   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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                                                                332
   1

   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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                                                                333
   1

   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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   1

   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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                                                                335
   1

   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



.
                                                                336
   1

   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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                                                                337
   1

   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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                                                                338
   1

   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



.
                                                                339
   1

   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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                                                                340
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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



.
                                                                341
   1

   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.

  22               Next panel will be panel 12, Patricia

  23     O'Neill Galin, Raymond C. Bowen, Amalia

  24     Betanzos, Sue Bastian and Peter Barnett.

  25               Ms. Galin, you're first on my list.



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   1

   2               MS. GALIN:  Ladies and gentlemen,

   3     thank you for the opportunity to speak to you

   4     regarding the acquisition of Citibank.  My name

   5     is Patricia O'Neil Galin, and I am the

   6     executive director of the These Our Treasures

   7     in the Bronx.  We are a not-for-profit agency

   8     serving youngsters and families for the past

   9     twenty-five years.

  10               Twenty-five years ago there were many

  11     banks to choose from regarding loans, credit

  12     lines, et cetera.  Citibank was the only

  13     banking institution who considered loans and

  14     the credit line for this Bronx organization.

  15               Citibank continues twenty-five years

  16     later to be a major influence in the Bronx

  17     community, and more particularly has helped

  18     These Our Treasures with our vision and mission

  19     to provide services to young disabled children

  20     and their families.

  21               As we have grown since 1973 with

  22     children and families and a budget of $288,000

  23     to a budget of over three and a half million

  24     dollars, Citibank has influenced our growth and

  25     has truly been a friend to TOTS.



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   1

   2               Thank you.

   3               MR. LONEY:  Mr. Bowen.

   4               MR. BOWEN:  Good afternoon, members

   5     of the Federal Reserve Board, ladies and

   6     gentlemen.  My name is Raymond C.  Bowen,

   7     president of the LaGuardia Community College of

   8     the City University Of New York.  I am here

   9     today to speak on behalf of LaGuardia and its

  10     long-standing relationship with Citibank.

  11               LaGuardia Community College, the

  12     youngest institution in the City University,

  13     enrolls about 33,000 students, 11,000 in the

  14     degree programs and 22,000 in noncredit

  15     programs.

  16               Our student body is comprised of

  17     individuals who are 37 percent Hispanic, 20

  18     percent black, 15 percent white, 13 percent

  19     Asian, 2 percent native American and 4 percent

  20     other, making us one of the most diverse higher

  21     educational institutions in America.

  22               Also noteworthy is the fact that 66

  23     percent of our students are women.  About 75

  24     percent of our new students reported family

  25     incomes under $20,000.  Most are on their own



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   1

   2     and in need of work in order to support

   3     themselves.  Many of our students work while

   4     they are enrolled at LaGuardia, 46 percent

   5     part-time and 54 percent full-time.

   6               We have the fifth largest foreign

   7     student enrollment of any Community College in

   8     the country.  Our students are drawn from over

   9     135 countries speak 85 languages other than

  10     English.  For several consecutive years

  11     LaGuardia Community College has ranked among

  12     the top community colleges in the country in

  13     graduating minority students.

  14               In 1977 LaGuardia ranked fifth among

  15     the nations two-year institutions in awarding

  16     degrees to minorities.  Priority initiatives

  17     for the college include cultural pluralism,

  18     economic development, and international

  19     education.

  20               LaGuardia has also been recognized by

  21     the US Department of Education as a model

  22     Community College both nationally and

  23     internationally.  As a collaborative

  24     partnership between the college and the New

  25     York City Board of Education LaGuardia hosts



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                                                                345
   1

   2     three model high schools on its campus; the

   3     Middle College High School creates a unique

   4     educational opportunity for students who are at

   5     risk of dropping out; the International High

   6     School serves recent immigrants from numerous

   7     countries by offering a comprehensive secondary

   8     curriculum while developing students oral and

   9     written English language competence, and the

  10     Robert F.  Wagner Institute for Arts and

  11     Technology, a New Visions school that takes the

  12     standard core curriculum and melds art and

  13     technology into every phase.

  14               From its inception LaGuardia

  15     Community College has been a cooperative

  16     education institution based on the premise that

  17     learning should take place in a variety of

  18     settings both inside and outside the classroom.

  19               The cooperative program is designed

  20     to help students determine their individual

  21     goals, explore various career options, apply

  22     classroom learning to real work situations, and

  23     strengthen interpersonal and technical skills.

  24               LaGuardia Community College has the

  25     largest cooperative education program of all



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                                                                346
   1

   2     two-year institutions.  This collaboration will

   3     have a dynamic impact on the lives of the

   4     students and families that LaGuardia serves and

   5     we look forward to many new positive ventures.

   6               Needless to say that we at the

   7     college are extremely excited to learn that

   8     Citicorp and the Travelers Group have made a

   9     ten year commitment of $115 billion to lending

  10     and investing in low and moderate income

  11     communities and small businesses.

  12               In addition to providing special

  13     pricing to low and moderate income consumers

  14     interested in commercial and homeowner

  15     insurance coverage, I was particularly

  16     interested in the financial and technological

  17     literacy program proposed in this merger.

  18               As an urban educator I also agree

  19     along with both Citicorp and Travelers Group,

  20     that consumers need financial and technical

  21     skills, as well as access to superior products

  22     and services, if they are to achieve financial

  23     well being.

  24               The opportunity for educators to join

  25     an advisory panel on financial literacy who



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   1

   2     will assist the bank in understanding the

   3     problems of this diverse population, and to

   4     ultimately develop effective solutions to meet

   5     their needs is critical and warranted endeavor.

   6               Citibank is no stranger to LaGuardia

   7     Community College.  Whether supporting programs

   8     for our older adults on wellness and consumer

   9     education, or providing funding for our college

  10     for childrens programs, over the years,

  11     Citibank grants have helped all segments of our

  12     population.

  13               In our high schools, Citibank has

  14     been a responsive partner in addressing the

  15     need for SAT test preparation, in preparing our

  16     students to enter the world of finance, and in

  17     understanding the responsibilities associated

  18     with savings, credit and money management.

  19     Citibank has provided our students with hands

  20     on exposure to financial curricula that the

  21     college was unable to offer.

  22               They have also supported many

  23     cultural events through our Academic Excellence

  24     Program.  Citibank has also been involved in

  25     our Talent Search Program which is a



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                                                                348
   1

   2     comprehensive support service program designed

   3     to facilitate access to post-secondary

   4     institutions for low income and first

   5     generation college students from Western

   6     Queens.

   7               I am proud to say that during this

   8     academic year nineteen LaGuardia students have

   9     been hired as interns at various Citibank

  10     locations, including Court Square, Wall Street

  11     and Citicorp Center, and five LaGuardia

  12     graduates have accepted permanent employment.

  13               Three students have been hired as

  14     interns in a partnership between Citibank and

  15     Cushman & Wakefield for this summer.  In

  16     addition, a permanent annual donation of $3,000

  17     has been given to LaGuardia's Partners in

  18     Cooperative Education for scholarships.

  19               Citibank administrators and staff

  20     have worked hand in hand with LaGuardia

  21     Community College over the past 25 years as a

  22     mentor, sponsor and a friend.

  23               On behalf of LaGuardia Community

  24     College, its faculty, staff and students and

  25     alumni, I am proud to support the merger of



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   1

   2     Citibank and Travelers Group and look forward

   3     to benefits of this merger which will bring to

   4     many of our students and various programs who

   5     depend upon us and Citibank to help them to

   6     fulfill their dreams.

   7               Thank you for this opportunity to

   8     speak on behalf of LaGuardia Community College

   9     for the proposed merger between Citibank and

  10     the Travelers Group.

  11               MR. LONEY:  Thank you, Mr. Bowen.

  12               Ms. Betanzos.

  13               MS. BETANZOS:  Thank you.  Good

  14     afternoon.  My name is Amalia Betanzos, and I

  15     offer this testimony in support of the proposed

  16     acquisition by Travelers Group with Citicorp.

  17     I am the president and CEO of the Wildcat

  18     Service Corporation, a not-for-profit human

  19     service agency which has provided training and

  20     employment opportunities to more than 70,000

  21     New Yorkers since 1972.

  22               Our agency assists the most

  23     disadvantaged and underserved populations in

  24     the city, including ex-offenders, ex-addicts,

  25     long-term welfare recipients and at-risk youth.



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   2               Travelers group's illustrious history

   3     has been punctuated by providing continuing and

   4     generous support to a growing number of diverse

   5     communities and their residents throughout the

   6     country.  Travelers' commitment to increasing

   7     the capacity and well being of the

   8     disadvantaged and its commitment to community

   9     is unsurpassed.

  10               This commitment permeates throughout

  11     the Travelers organization's staff and its

  12     subsidiaries.  Our own experience at Wildcat is

  13     demonstrative.  This year, Salomon Smith

  14     Barney's MIS staff contributed furniture and

  15     computer equipment and volunteered hundreds of

  16     hours of time to help Wildcat fill the computer

  17     training lab at a shelter for battered women on

  18     the lower east side of Manhattan.

  19               This one of a kind effort has become

  20     a model for enabling shelter-bound residents to

  21     receive much needed job skill training without

  22     the cost or the risk of traveling throughout

  23     the city to attend school, and serves as an

  24     example of what private industry can do to help

  25     those with multiple barriers to employment.



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   1

   2               In addition, three years ago, two

   3     years prior to the enactment of the historic

   4     new federal welfare reform legislation, Smith

   5     Barney, now Salomon Smith Barney a Travelers'

   6     subsidiary pioneered with Wildcat in an

   7     innovative training and employment program for

   8     single mothers receiving welfare.

   9               Approximately one year ago Travelers

  10     lent its full support to begin that program

  11     with two other subsidiaries, Commercial Credit

  12     Company in Baltimore and Primerica Financial

  13     Services in Atlanta, Georgia.  These welfare

  14     women after six months training, three months

  15     with Wildcat and three months of internship

  16     with Travelers Smith Barney, get jobs that

  17     average $24,000.  It really is wonderful to

  18     contemplate that these women who were on

  19     welfare and had no hope of getting off welfare

  20     after one year now own Travelers stock in

  21     addition.

  22               Despite these accomplishments,

  23     Travelers was not content to see the program

  24     nourish only with within its own corporate

  25     sphere, and so the senior management has



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                                                                352
   1

   2     recently reached out to sister companies and

   3     competitors in the financial services industry,

   4     and has brought five additional Wall Street

   5     giants together to develop similar programs

   6     with Wildcat.  This is as unique and unselfish

   7     and undertaking as I've seen in my thirty years

   8     in public office and private enterprise.

   9               Travelers has demonstrated time and

  10     time again as it expands, so do the benefits

  11     and opportunities that accrue to every member

  12     of the community in which it develops roots,

  13     and in particular to the most disadvantaged and

  14     marginalized youth and adult residents of these

  15     communities.

  16               I am confident that this merger with

  17     Citi will bring the strength of Travelers and

  18     the strength of Citicorp together.  Citicorp

  19     also has had a wonderful record of dealing with

  20     nonprofit organizations and helping to employ

  21     welfare recipients in their banks, and we are

  22     currently working on a program that started way

  23     before merger talk, to make sure that more

  24     Wildcatters who will be fully trained by

  25     Citibank and by Wildcat, will have the



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                                                                353
   1

   2     opportunity to really remake their lives.

   3               I'm certain that consistent with both

   4     their long history of expanding assistance to

   5     the needy as they expand their only commercial

   6     activities, the acquisition of Citicorp by

   7     Travelers will provide a new generation of

   8     support and an extended commitment to assist

   9     those most in need and, therefore, I urge the

  10     acquisition be approved.

  11               Thank you.

  12               MR. LONEY:  Thank you.  Ms. Bastian.

  13               MS. BASTIAN:  Yes.  Good afternoon

  14     Federal Reserve Board members, ladies and

  15     gentlemen.

  16               I am here as the president of

  17     Teaching Matters Inc. to describe our

  18     relationship with the Citicorp Foundation.

  19     Teaching Matters Inc., CMI is a New York City

  20     based nonprofit organization founded four years

  21     ago by Elizabeth Ruletin.

  22               Our mission is to help teachers in

  23     the New York City public schools learn to use

  24     the technology that is everywhere in a creative

  25     and effective way to strengthen student



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   1

   2     performance.

   3               To date we've served over 350 schools

   4     and this year we're working in 190 schools.  We

   5     send approximately 35 to 40 teacher trainers in

   6     technology into the five boroughs everyday.

   7               Our recent accomplishments were to

   8     work with the Board of Ed to write their

   9     strategic development plan for technology.

  10     We're funded, proud to say, by Annenberg and

  11     J.P. Morgan, and Seagram's, and we are

  12     partnership in the Department of Education

  13     challenge grant.

  14               We have at TMI a three year history

  15     of collaboration with Citibank which began in

  16     1995 with their support of $140,000 for the

  17     first CitiTech series gateway to technology

  18     planning for high school educators.  We felt

  19     that the principals of the schools were being

  20     left out of the education everyone needs about

  21     what to do with this puzzling phenomenon called

  22     technology, telecommunications and the

  23     computer.

  24               The series provided a leadership

  25     institute for staff and for leaders in the



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                                                                355
   1

   2     metropolitan area, including Westchester and

   3     Long Island.

   4               We followed that kind of initial

   5     exposure up with very regular visits to those

   6     schools.  Because of the attendees enthusiasm

   7     for the quality of training they received,

   8     Citibank funded us for a second year.  The

   9     second series reached 30 high schools, the

  10     first one I believe approximately 35.

  11               The bank's commitment again was

  12     approximately $140,000.  Last year we were

  13     pleased to receive a third grant from Citibank

  14     foundation for new thinking, new teaching,

  15     technology across the curriculum in order to

  16     bring the curriculum into subject matter area,

  17     and not have technology be an end in itself.

  18               We target the mayor's project smart

  19     principals this year and the teachers.  We're

  20     working with 110 teachers in two districts.

  21     Through their banking on education programs

  22     Citibank's contribution has been significant.

  23               The Foundation's ongoing commitment

  24     is evident time and time again to the public

  25     school.  Their contributions have been careful,



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                                                                356
   1

   2     informed and comprehensive.  They focused both

   3     on the principal and the classroom teacher many

   4     of whom are in underserved neighborhoods.  It

   5     is our belief that the Citicorp Foundation has

   6     helped establish the standard of what good

   7     corporate philanthropy is all about.

   8               Thank you.

   9               MR. LONEY:  Thank you, Ms. Bastian.

  10     Mr. Barnett.

  11               MR. BARNETT:  That was the cry of the

  12     poor.  A lot of people don't want to hear it.

  13     A lot of people can't hear it, and Glenn, Scott

  14     and James and Barbara, I want to tell you that

  15     Citibank is one of the few places that hears

  16     the cry of the poor and the needy and does

  17     something about it.

  18               I can remember a very poor community

  19     out on Long Island called Wyandanch and on that

  20     community there are many poor and homeless

  21     families.  On Long Island if you're a mother

  22     with three children you need to have about

  23     $30,000 a year to come in to survive on Long

  24     Island to have a decent house, food and a junk

  25     car to get around in.



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                                                                357
   1

   2               What Citibank does is care about

   3     other people.  I really don't know the

   4     corporation, but I know what Citibank has in

   5     one person.

   6               I've been working with a woman named

   7     Michelle Debenedetto who is an employee of

   8     Citibank and her main job is to look around at

   9     the communities of Long Island and say, what is

  10     needed?  What can the not-for-profit groups do

  11     to help the poor and needy of Long Island?  And

  12     she does it.

  13               She is a mother with a great heart

  14     and she represents what I feel is what's needed

  15     in America today with corporations, to help

  16     those who are in need, and Citibank is one of

  17     those groups that does that.

  18               (Continued on next page)

  19

  20

  21

  22

  23

  24

  25



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   2               MR. BARNETT:  Wynandach Homes &

   3     Properties is my nonprofit that builds and

   4     renovates houses for homeless women.  We take

   5     them out of the shelter, we take them out of

   6     their cars, we take them out of tents that they

   7     are living in and we give them a clean, decent

   8     place to live.  Then we help them get educated.

   9     We help them get into GED programs.  We help

  10     them get their AA degree at Suffolk Community

  11     College.  We help them get a decent job where

  12     they are on the road to making that $30,000.

  13               Citibank over ten years ago -- when I

  14     was just starting, just starting to get some

  15     money to do funding -- gave us the money to

  16     hire a summer intern, a woman that later we

  17     were able to hire full time; again, with help

  18     from Citibank, to work with these mothers to

  19     bring them from welfare to being

  20     self-sufficient women taking care of their

  21     families, with their degrees, getting a chance

  22     to make their AA degree.

  23               One of the things I find that with

  24     these mergers -- and we are not going to stop

  25     it; I was reading today another AT&T and



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                                                                359
   1

   2     Cablevision merging -- they are happening.  It

   3     is the way companies are stabilizing these

   4     days.  And what I am hoping to see with

   5     Citibank's merger is that they are going to

   6     create a very strong bank and they are going to

   7     create a very strong corporation that is going

   8     to have a heart, it is going to have the heart

   9     of Michelle DiBenedetto, because she's there

  10     and she's going to tell the banks and tell

  11     Travelers, you've got to stay committed to

  12     helping the poor and the needy.  I think that

  13     is what is going to happen.

  14               The Federal Reserve Bank two years

  15     ago started a program called LIHPPI.  It was

  16     called the Long Island Home Purchasing Process

  17     Initiative.  They helped bring together all

  18     sorts of banks and nonprofits on Long Island,

  19     saying how can we help people in minority

  20     communities, people who are just making that

  21     $30,000 buy a house on Long Island.  Citibank

  22     through its funding and its creative work with

  23     Michelle and other people that she brought in

  24     from Citibank created pamphlets, that we are

  25     getting into every library, every school on



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                                                                360
   1

   2     Long Island, "Breaking the Barriers to Home

   3     Ownership, Guides to Purchasing a Home."  These

   4     are things that are needed.  These were worked

   5     out with not-for-profit groups like myself to

   6     help them make a difference.

   7               One of the things I find is that many

   8     corporations need to hear the poor.  They need

   9     to hear the voice of the needy.  And one of the

  10     things that Citibank will do is help bring that

  11     about.  As they grow and develop, I have no

  12     doubt that they are going to help people hear

  13     that voice, people to care about the needy.

  14               There was a speech given by Carl

  15     Messenger to the United Nations in 1981 -- I

  16     will just end with this -- where he spoke to

  17     corporate America and said:  In corporate

  18     America, as you prosper, you can't just get up

  19     there all by yourself, but you have to help

  20     those rise with you, and we have to learn that

  21     we all have to rise together.  If one segment

  22     of our society gets up there all by itself, it

  23     will tackle.  It can't handle the attitude.

  24     You have to bring everybody else up with you.

  25               Carl Messenger said it this way, and



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   2     I believe that Citicorp believes in this:

   3     People are unreasonable, illogical,

   4     self-centered; love them anyway.  If you do

   5     good, people will accuse you of selfish

   6     ulterior motives; do good anyway.  If you are

   7     successful, you will win false friends and true

   8     enemies; try to be successful anyway.  The good

   9     you do today will be forgotten tomorrow; do it

  10     anyway.  Honesty and frankness make you

  11     vulnerable; be honest and frank anyway.  People

  12     favor underdogs, but I notice they follow the

  13     top dogs; fight for some underdogs anyway.

  14     What you spend years building may be destroyed

  15     overnight; build anyway.  People really need

  16     help, but they may attack you if you help them;

  17     try to help people anyway.  Give the world the

  18     best you have and you'll get kicked in the

  19     teeth; give the world the best you have anyway.

  20               Thank you.

  21               MR. LONEY:  Thank you.  I like that.

  22               Any questions from the panel?  If

  23     not, then I will thank you for coming and

  24     sharing your experiences with us.

  25               We are going to take a 15-minute



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                                                                362
   1

   2     break and be back at 4:25.

   3               (Recess)

   4               MR. LONEY:  Before we begin, we are

   5     trying to organize the open microphone

   6     testimony for this afternoon, and we have a

   7     list of people who have signed up, and I would

   8     like to find out if they are, in fact, here.

   9               If you hear your name called, would

  10     you go out to the registration desk and make

  11     sure that they know you are in fact here and

  12     still want to talk.

  13               Miguel Miranda, Hector Ramirez,

  14     Constantina Jones, Lionell Ouellette, Lloyd

  15     Bethune.  If you will go out and make yourself

  16     known to the folks at the registration desk, I

  17     would appreciate it.

  18               The next panel is Panel Thirteen.  I

  19     understand only one person is here representing

  20     the East Fulton Street Group, and that is James

  21     Daniel.  Mr. Daniel, if you would come forward.

  22               Are there two people?  I guess

  23     Reverend Dillon is here and James Daniel, who

  24     is the son of Reverend Daniel, who was

  25     originally scheduled to testify.



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                                                                363
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   2               Since you are on my list first,

   3     Reverend Dillon, maybe you should start first,

   4     if you are ready to go.

   5               One thing, if you will notice we have

   6     a timekeeper here.  We are giving everybody

   7     five minutes.  We give you a two-minute warning

   8     and then a final times-up notice.

   9               REVEREND DILLON:  I thank you very

  10     much, and I am certainly grateful for the time

  11     to share this testimony, this information.  I

  12     am Reverend Dennis Dillon, the publisher of the

  13     New York Christian Times.  We publish a

  14     newspaper that serves the black church

  15     community here in the City of New York.

  16               The reason for our participation in

  17     support of the 21st Century Partnership is our

  18     information that we have developed over the

  19     years relative to the treatment of the black

  20     community by Citibank.

  21               I would like to draw our attention to

  22     a report that came out in the New York Daily

  23     News the 20th of April, 1997.  The report

  24     states that despite the fact that Citibank made

  25     quite some loans to the community here in New



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                                                                364
   1

   2     York, that only one out of every three blacks

   3     were considered for those loans.

   4               There is a report also that I would

   5     like to bring to our attention, and that is a

   6     report by Congressman Charles Schumer, and the

   7     report states that for the first quarter of

   8     1997, Citibank received a total of 8,000

   9     applications from the white community compared

  10     with 2,000 applications from the Hispanic

  11     community and only 665 applications from the

  12     black community.

  13               It concerns us greatly that here we

  14     are in a city we call New York where the black

  15     population is a fair one-third of the city, the

  16     black population deposits $13 billion in

  17     Citibank every year, and Citibank is only able

  18     to walk away with 665 applicants for mortgages

  19     in our community.

  20               We've been pretty focused on looking

  21     at how this impacts upon the economics of our

  22     community, and we have discovered that the fact

  23     that, with the HMDA data, the fact that this

  24     information is made public, the numbers are so

  25     pitiful relative to mortgages we cannot begin



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                                                                365
   1

   2     to imagine what the numbers look like relative

   3     to Citibank making loans to black businesses

   4     that are looking to make progress in our

   5     community.

   6               The end result is that the United

   7     States Department of Commerce came up with a

   8     report and study that shows that in 1996,

   9     despite the fact that we have a total of almost

  10     40,000 black-owned businesses in the City of

  11     New York, the average black-owned business in

  12     this city does less than $43 million a year in

  13     gross business.

  14               I think we are at a critical point as

  15     we look to the 21st century, and banks that are

  16     so serious about investing in the global

  17     market, such as a Citibank, need to seriously

  18     look at where their deposit base is coming from

  19     and need to seriously deal with how we reinvest

  20     in our community in a real sense.

  21               In conclusion, it appears to me that

  22     there is a facade, Citibank is presenting a

  23     picture, as they have worked hard last year,

  24     knowing of the merger, to present a good

  25     picture, to present a positive picture to the



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   2     regulators.  But the end result, gentlemen,

   3     ladies, is that we have a bank that is showing

   4     a picture that is not true because they are not

   5     truly serving the black community, and I'm

   6     concerned that our deposits are ending up in

   7     Asia, across North America, and elsewhere, and

   8     it is not ending up in Harlem, Bedford

   9     Stuyvesant, and in our communities across this

  10     city.

  11               I thank you very much for your time,

  12     and we shall leave you some documents.

  13               MR. LONEY:  Thank you Reverend

  14     Dillon.

  15               Mr. Daniel.

  16               MR. DANIEL:  Unfortunately, because

  17     of a conference, my father is not able to make

  18     it, so I will be delivering his statement on

  19     behalf of him and the East Fulton Street Group

  20     21st Century Partnership.

  21               First let me state that the biggest

  22     merger in American history should be closely

  23     scrutinized before being passed.

  24               We of the 21st Century Partnership

  25     have had a relationship with Citibank for over



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   2     ten years and believe that they mean well in

   3     their efforts to meet the credit needs of their

   4     service area; however, meaning well and doing

   5     well are distinctly different.  The bank's CRA

   6     ratings need to improve.

   7               Because the merging financial

   8     institutions have not at this point given any

   9     indication of how this proposed merger will

  10     serve the public interest and, more

  11     particularly, low- to moderate-income

  12     communities, the investment alliance believes

  13     consideration for approving the merger should

  14     be considered only based upon a definitive

  15     community reinvestment plan with a definitive

  16     action plan and a time line created in

  17     consultation with community organizations and

  18     elected officials from the impacted

  19     communities.

  20               We call upon the government bank

  21     regulators, members of the United States

  22     Congress and Senate to look more closely at

  23     this merger.

  24               This merger at face value does very

  25     little to expand credit and other needed



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   2     financial services within inner city

   3     communities.  Right now it only increases the

   4     value of Citicorp and Travelers stock.

   5               It is important to note that Citicorp

   6     has a less than exemplary CRA record among the

   7     major banks.  Salomon Brothers and Smith Barney

   8     have never developed any community investment

   9     plans, and Travelers Insurance is a redliner

  10     with little presence in low-income communities.

  11               One can only hope that if this merger

  12     goes through that before it does there will

  13     have been a plan developed, in cooperation with

  14     the broader community, that succinctly details

  15     how the bank will do better than it presently

  16     does.

  17               Our concerns with these findings and

  18     Citibank's lack of substantiative involvement

  19     in support of community programs lead us to

  20     believe that if government regulators were to

  21     earnestly assess Citibank's reinvestment record

  22     they would rate them with a need to improve and

  23     stipulate such that before any merger is

  24     approved their rating must substantially

  25     increase.



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   2               I at this time would like to raise

   3     another point.  This country already has enough

   4     crime, and in a number of circles it is

   5     believed that this merger is illegal.  The

   6     illegality stems from a notion that Alan

   7     Greenspan, the Federal Reserve chairman, in a

   8     closed-door weekend meeting with Citicorp,

   9     tentatively agreed to give Citicorp an

  10     exemption from the law without approval from

  11     Congress.  One can only hope and trust that

  12     such allegations are just that, allegations.

  13               When we hear that the chairman of

  14     Travelers made over $208 million on the day the

  15     merger was announced, just from the

  16     announcement of the merger, and that this

  17     amount is more than his company contributed to

  18     minorities over its entire history, we hope

  19     that such enormous amounts of money can somehow

  20     find their way back into areas where poverty

  21     still reigns.

  22               These are the issues as we now see

  23     them.  Alan Greenspan and/or Secretary of the

  24     Treasury Robert Rubin can delay or stop this

  25     merger if they want, and they should if as is



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   1

   2     alleged under present law the merger is illegal

   3     and if we accept that as a fact that something

   4     that starts out illegally is more than likely

   5     to end up the same.

   6               Last, consider the following:  If the

   7     merger deal is successful, Merrill Lynch and

   8     Wells Fargo would most likely disappear as

   9     separate entities.  Chase Manhattan Bank could

  10     consider purchasing Merrill Lynch, and even

  11     Bank of America could become a thing of the

  12     past if this proposed merger is approved, and

  13     after that, why not Fleet Bank, American

  14     Express or Allstate?

  15               We have laws against monopolies and

  16     with this merger leading the way, can America

  17     afford a monopolized banking industry under the

  18     guise of more efficient and low-cost financial

  19     services?  If the answer is yes, what

  20     assurances will low-income communities have

  21     that they will be better served because of

  22     these mergers, and will any of the alleged cost

  23     savings reach undeserved communities through

  24     greater access to credit?

  25               While we would like to believe this



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   1

   2     will happen, without a definitive plan as to

   3     how, we believe that any approval of this

   4     merger should be associated with a definitive

   5     plan worked out in consultation with the

   6     effective communities and in advance of any

   7     approval of the applications.

   8               While the 21st Century Partnership

   9     has enjoyed the support of Citibank and it

  10     would welcome the expansion of our

  11     relationship, we call upon them to act in a

  12     more responsible and accountable manner than

  13     what is exhibited in their present efforts

  14     concerning this merger and, more particularly,

  15     to commit to getting an outstanding CRA rating.

  16               There must be a direct correlation

  17     between what Citibank and Travelers do and put

  18     on paper and what they invest in communities

  19     through lending and philanthropy.  Presently we

  20     don't see that happening with this merger.

  21               In closing, we choose to believe that

  22     Citibank and Travelers want to do the right

  23     thing and if the merger's approved as is or in

  24     a modified state, we will work with them, to

  25     the degree it becomes possible, to assure that



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   2     the delivery of quality financial products and

   3     financial services to the underbanked and all

   4     people in general is a reality.  We call upon

   5     the bank regulators and elected representatives

   6     to help them do just that.  For too much is at

   7     risk to do anything else.

   8               Thank you very much.  Signed, the

   9     21st Century Partnership.

  10               MR. LONEY:  Thank you very much,

  11     Mr. Daniel.

  12               Are there any questions?  If not, I

  13     will thank you very much for coming.

  14               We have worked Panel Fourteen just a

  15     bit to accommodate some people who were

  16     originally scheduled to speak tomorrow and for

  17     other purposes.

  18               As presently constituted, Panel

  19     Fourteen will be Jane Perkinson, David Wolin,

  20     Vicki Wacksman, Roslyn Goldmacher, Naomi Brown

  21     and Monique Spike.

  22               Thank you all.  Can we begin with

  23     Ms. Perkinson, please.

  24               MS. PERKINSON:  Good afternoon.  My

  25     name is Jane Perkinson.  I am chair of



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   2     Permanent Housing for SHORE, Inc., an interface

   3     nonprofit housing organization in the White

   4     Plains, Central Westchester area, with its

   5     membership based in more than 40 local churches

   6     and temples, as well as business in civic

   7     groups and individual members.  The purpose of

   8     our organization is to help people in the

   9     community with housing needs.

  10               SHORE started in 1985 as a

  11     spontaneous effort among several downtown White

  12     Plains churches and temples to provide

  13     short-term overnight shelter to homeless men.

  14     This has developed into a 24-hour-a-day

  15     fully-staffed men's shelter that provides

  16     counseling for substance abuse, mental health,

  17     assistance in finding housing, jobs, and job

  18     training, and has helped more than 500 men

  19     return to normal, productive life in the

  20     community.

  21               Since 1990, SHORE has turned its

  22     resources to developing apartment units as

  23     permanent affordable housing for families who

  24     need homes.  Using New York State grants and

  25     privately-raised funds and volunteer labor and



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                                                                374
   1

   2     furniture donations, we have acquired and

   3     renovated two vacant two-family houses creating

   4     rental apartments for deserving families who

   5     until that point had been homeless.

   6               These families, as paying tenants,

   7     have now stabilized their lives and those of

   8     their children, and the renovated housing has

   9     also enhanced two downtown neighborhoods of

  10     White Plains.

  11               We will shortly begin construction on

  12     fourteen units of affordable mixed home

  13     ownership and rental housing on two sites in

  14     White Plains; one of those sites currently

  15     owned by the city.

  16               Seven two-family townhomes will be

  17     marketed at affordable prices to qualified

  18     first-time homeowners of modest income.  Each

  19     of these homeowners will live in one of the

  20     units and rent the other to a selected family

  21     coming from emergency housing.  Buyers will be

  22     given mortgage counseling and assistance in

  23     obtaining favorable terms.  Income from the

  24     rental unit will help them meet the carrying

  25     costs of home ownership.



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   2               We believe the community will benefit

   3     through the improvement of two marginal

   4     neighborhoods, with a restored tax base on two

   5     presently very deteriorated properties and

   6     through an increase in the amount of badly

   7     needed affordable rental and home ownership

   8     housing available for its citizens.

   9               This development is supported by a

  10     composite of funding sources, including two New

  11     York State agencies, a HUD grant administered

  12     through Westchester County, the Federal Home

  13     Loan Bank, and also a package of low- or

  14     no-interest bridge loans from SHORE member

  15     houses of worship and other nonprofit lenders.

  16               Citibank, as a local bank in the

  17     community, has shown us its recognition that it

  18     has a critically important role to play in the

  19     success of this housing development.  The

  20     first-time home buyers will be in need of

  21     mortgages and Citibank will make end loans

  22     available to them so that they can take

  23     advantage of this rare opportunity to become

  24     property owners.

  25               A Citibank officer from one of the



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   1

   2     local branch banks serves on SHORE's board of

   3     directors.  She is rooted in the community

   4     herself and she works actively to be the

   5     all-important link between the needs SHORE

   6     seeks to fulfill and the resources that

   7     Citibank can provide.  Citibank has also made

   8     several grants to SHORE in the amount of $1,000

   9     to $2,000 which enable us to underwrite ongoing

  10     operations in our fund-raising and community

  11     outreach efforts.

  12               We are hopeful that all future

  13     developments of Citibank will enhance its

  14     ability to be present in the community, to know

  15     the community and be responsive to its needs,

  16     and we hope that it plays this important role

  17     not only with SHORE but with other partners,

  18     other organizations, in collaborative projects

  19     that can give all of us a stake in a better

  20     life for the community as a whole.

  21               I thank you.

  22               MR. LONEY:  Thank you.

  23               Mr. Wolin.

  24               MR. WOLIN:  Good afternoon, ladies

  25     and gentlemen.  My name is David Wolin.  I am a



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                                                                377
   1

   2     partner in the law firm of Willkie Farr &

   3     Gallagher.  I am testifying today on behalf of

   4     our client Habitat for Humanity International,

   5     which we represent on a pro bono basis.

   6               My purpose in testifying today is to

   7     describe Citibank's involvement in Habitat's

   8     innovative securitization program which raises

   9     millions of dollars to build low-income houses,

  10     and to describe the Travelers Group program for

  11     providing low-cost homeowner's income to

  12     Habitat families.

  13               I will give a very brief background

  14     of the program first and of Habitat.

  15               Habitat was founded in 1976 to build

  16     and sell simple, decent homes at no profit to

  17     low-income families who are not eligible for

  18     conventional financing.

  19               In the United States, Habitat is run

  20     by over 1,400 not-for-profit affiliates in

  21     local communities.  In 1997, Habitat affiliates

  22     built, repaired and renovated over 3,700

  23     houses.  Typically family income for a Habitat

  24     family of four ranges from just under $11,000

  25     to under $22,000.  Those families finance their



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   1

   2     homes with a no-interest mortgage to Habitat.

   3     The typical mortgage is for 20 years and the

   4     average combined monthly payment, including

   5     taxes and insurance, is $290.

   6               However, although the homes are

   7     generally built by volunteers, the affiliates

   8     are limited by a lack of funds in the number of

   9     homes they can build.

  10               Citicorp has invested in Habitat's

  11     securitization program in providing volunteers

  12     to work on houses.  Habitat's securitization

  13     program converts Habitat's portfolio of

  14     mortgages into cash to finance additional

  15     housing.  Its affiliates hold millions of

  16     dollars in zero interest mortgages which

  17     previously were illiquid assets.  With

  18     approximately 18,000 mortgages held in the

  19     United States, the total potential pool of

  20     Habitat mortgages is approximately $500

  21     million.

  22               Habitat's goal is to raise $100

  23     million for its affiliates through this program

  24     over the next five years.  To date, 25

  25     affiliates have raised approximately $5 million



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                                                                379
   1

   2     to build new homes.  Habitat is expecting to

   3     make its next offering of bonds in the fourth

   4     quarter of this year.  The bonds pay interest

   5     at a below market rate to its investors of

   6     between 1 and 5 percent.

   7               In the past year, Citibank has

   8     invested $400,000 in low-interest bonds that

   9     were secured by mortgages issued by the

  10     Rochester, New York and Washington, D.C.

  11     affiliates.  By providing the necessary

  12     liquidity for these affiliates, Citibank has

  13     allowed their programs to expand.

  14               For example, for years the Rochester

  15     affiliate had been trying to establish a

  16     program to rehabilitate homes in its

  17     communities, in addition to its program of

  18     building new homes.  However, it has been

  19     unable to raise funds for this rehabilitation

  20     program.  Using Citibank's investment in the

  21     Habitat bonds, the Rochester affiliate has been

  22     able to institute its long-awaited

  23     rehabilitation program.  In addition, Citibank

  24     has provided direct grants to the Rochester

  25     affiliate and also permits its employees to



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                                                                380
   1

   2     take time off from work to work on Habitat

   3     homes.

   4               Citibank has committed to Habitat

   5     that it will continue to invest in the bonds

   6     which are secured by mortgages held by

   7     affiliates in Citibank's service areas.

   8     Through Citibank's commitment to the

   9     securitization program, affiliates in Citibank

  10     service areas have the needed liquidity which

  11     allow them to build more homes with their

  12     low-income families.

  13               In addition, Habitat has worked with

  14     Travelers since 1993 to provide low-cost

  15     homeowner's insurance to its families.

  16     Travelers currently insures approximately

  17     one-third of all Habitat homeowner's in the

  18     United States.

  19               Travelers' program has helped to

  20     alleviate the difficult problem of Habitat

  21     families obtaining homeowner's insurance.

  22     Because Habitat homes are typically in

  23     low-income neighborhoods and have low dollar

  24     values, many insurance carriers will not insure

  25     them.  Some affiliates have in the past been



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                                                                381
   1

   2     unable to transfer ownership of homes because

   3     the family could not obtain insurance.  Even

   4     when coverage was available, the policies only

   5     provide limited coverage, and the family had to

   6     pay substantially higher premiums than would be

   7     paid by homeowner's in more affluent

   8     communities.

   9               Travelers' policies are issued to

  10     homeowner's without any credit checks or

  11     limitations on home value.  Travelers' coverage

  12     is even available to Habitat families in state

  13     where because of weather-related problems,

  14     insurance is difficult to obtain.  Under its

  15     program, Travelers charges Habitat homeowner's

  16     its lowest rate for homes situated in the

  17     community.

  18               The policy that Travelers provides is

  19     for full replacement costs for the home and

  20     property, and $100,000 in liability coverage.

  21     The typical homeowner pays between $150 and

  22     $250 per year for this coverage.  Because the

  23     average Habitat homeowner earns between 25

  24     percent and 50 percent of the area median

  25     income, the low premium can be the difference



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   1

   2     between being able to afford a home and not.

   3               In conclusion, I want to emphasize

   4     that Habitat has been fortunate to be working

   5     with Citibank and Travelers in the past and

   6     looks forward to working with them in the

   7     future.

   8               Thank you.

   9               MR. LONEY:  Thank you, Mr. Wolin.

  10               Ms. Goldmacher.

  11               MS. GOLDMACHER:  I am fine right now.

  12     I apologize for the interruption.

  13               Thank you and good afternoon, ladies

  14     and gentlemen, and thank you for the

  15     opportunity to testify before you today on the

  16     proposed acquisition of Citicorp by the

  17     Travelers Group, Inc.  I have prepared a more

  18     detailed written statement which I have

  19     submitted for your consideration.

  20               My name is Roslyn Goldmacher.  I am

  21     the executive director of the Long Island

  22     Development Corporation, which is a

  23     not-for-profit economic development membership

  24     organization which provides loans and technical

  25     assistance to small businesses in Nassau and



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                                                                383
   1

   2     Suffolk counties in New York.

   3               Long Island Development Corporation

   4     has made over 1,000 loans to small businesses

   5     totalling more than $300 million and has

   6     assisted over 1,800 very small Long Island

   7     companies to obtain $180 million in Department

   8     of Defense contracts.

   9               LIDC is the U.S. Small Business

  10     Administration's 504 Certified Development

  11     Company for Long Island.  It administers a

  12     variety of other government-related finance

  13     programs and it operates the Department of

  14     Defense Procurement Technical Assistance Center

  15     for Long Island.

  16               Long Island Development has worked

  17     extensively with Citibank.  Citibank is a

  18     member of our organization and is represented

  19     on our board and committees.  Citibank also

  20     participated in the SBA 504 program as a first

  21     mortgage lender.

  22               Citibank provides a small grant to

  23     Long Island Development Corporation to help

  24     conduct its procurement technical assistance

  25     program and it works with us in a local



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                                                                384
   1

   2     initiative which provides technical assistance

   3     to community groups to help them redevelop

   4     blighted areas.

   5               Citibank participates in a regional

   6     capital access loan fund operated by Long

   7     Island Development, and I am thrilled to say

   8     Citibank has recently committed to invest in

   9     two new small business investment companies

  10     providing debenture capital to small business

  11     for economic development in Long Island, New

  12     York, New Jersey, Puerto Rico and Nevada.

  13               Long Island Development Corporation

  14     supports the proposed acquisition.  It will

  15     increase the resources devoted by Citibank to

  16     economic and community development on Long

  17     Island.  It will result in increased small

  18     business lending under the SBA 504, SBA 7A and

  19     conventional loan programs.

  20               The acquisition will also bring

  21     additional and innovative finance products to

  22     the table for small business.  The resources of

  23     the Travelers Group will bring needed insurance

  24     products to the small business community,

  25     including bonding, which is much needed for our



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                                                                385
   1

   2     small businesses seeking government and other

   3     contracts.

   4               The investment banking and other

   5     finance divisions of Travelers will provide the

   6     knowledge to create innovative financing

   7     alternatives for small business such as

   8     securitization of small business loans.  The

   9     acquisition will provide increased

  10     accessibility for small business customers on

  11     Long Island because they will be able to access

  12     Citicorp services through their Travelers

  13     insurance agents.

  14               Finally, LIDC supports the proposal

  15     because Citicorp is committed to creating an

  16     Office of Financial Literacy as a result.  This

  17     office will increase small business awareness

  18     of financing programs and resources such as

  19     those offered by Long Island Development

  20     Corporation.

  21               For these reasons, Long Island

  22     Development Corporation supports the proposed

  23     acquisition of Citicorp by Travelers Group,

  24     Inc.

  25               Thank you for this opportunity.



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                                                                386
   1

   2               MR. LONEY:  Thank you.

   3               Ms. Wacksman.

   4               MS. WACKSMAN:  Thank you.  My name is

   5     M. Vicki Wacksman.  I am the president and CEO

   6     of the New York State Association of Black

   7     Women Owned Enterprises, Inc.  The Association

   8     is known publicly as BWE.  I will refer to our

   9     organization during this testimony as BWE.

  10               I am here this afternoon on behalf of

  11     the board of directors and our 625 members to

  12     share some of the experiences our organization

  13     has had with Citibank over the years.  It is

  14     our hope that these experiences will assist

  15     your deliberations related to the proposed

  16     Travelers Group, Inc. acquisition of Citicorp.

  17               Black Women Enterprises is a

  18     nonprofit, statewide, 501(c)3 organization,

  19     established in 1993 under the charity law of

  20     New York State.  We are based in Hempstead,

  21     Long Island.

  22               The 1991 Croson Report was the

  23     catalyst for the founding of the organization.

  24     The report studied the awarding of contracts to

  25     women and minorities by New York State



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                                                                387
   1

   2     agencies.  The report revealed that the

   3     greatest disparity fell upon black women-owned

   4     firms.  To reverse this trend, a group of

   5     progressive black women business owners

   6     established BWE.

   7               The mission of our organization is

   8     simply to remove barriers that impede the

   9     success of black women who desire to start or

  10     expand a business.  Our mission is achieved

  11     through the delivery of a comprehensive Monday

  12     to Friday, 10 to 6 p.m. counseling, technical

  13     assistance and training service to BWE members.

  14     The organization started in November 1993 with

  15     25 members.  Today, four-and-one-half years

  16     later, we have 625 members.

  17               We remain the only organization in

  18     New York State to specifically target the

  19     disparity issues affecting black women-owned

  20     firms and black minority women-owned firms; the

  21     state's largest group of minority women-owned

  22     enterprises.

  23               The chart below presents data

  24     provided by the 1998 report by the National

  25     Foundation of Women Business Owners.  It



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                                                                388
   1

   2     describes the enormous gap that exists between

   3     black women-owned enterprises and enterprises

   4     owned by Caucasian, Hispanic and Asian

   5     women-owned businesses.

   6               I would like to note that all women

   7     and minority enterprises fall at the bottom

   8     rung in overall sales in our great state.

   9     However, it is important to our mission to show

  10     that the targeting of black women-owned firms

  11     in economic development are not race-based but

  12     need driven.  Black women-owned firms average

  13     $63,000 annually in sales, while the Hispanic,

  14     Asian and Caucasian counterparts average from

  15     $155,000 to $439,000 annually per business.

  16               Since opening our doors for services

  17     in January 1994, BWE has sponsored 84 workshops

  18     in small business planning and management,

  19     provided over 2,000 hours of individualized

  20     technical assistance and business development

  21     coaching, and in 1997 piloted a Corporate

  22     Procurement and Technical Assistance Program.

  23               This program makes a frontal attack

  24     on the disparities we talked about earlier by

  25     helping our members win corporate contracts.



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   1

   2     Our goal for Phase I of the program was

   3     $700,000 in contract awards, and we achieved

   4     $1,619,000.

   5               We are finally getting a handle on

   6     how to help small microbusinesses compete

   7     effectively, and we hope to double and triple

   8     these achievements in the coming year.  The

   9     goal is 2 million for 1998.

  10               BWE's achievements would be far less

  11     without the help and support from Citibank.  In

  12     establishing the organization, we broadly

  13     reached out to government and the corporate

  14     community to assist the funding and

  15     implementation of our mission.

  16               Citibank was among the first to

  17     respond.  To assist our outreach and start up

  18     service delivery, Citibank donated $20,000.

  19               I would like to add that when BWE

  20     started this organization, New York State

  21     listed 67 black women-owned firms.  As far as

  22     agencies were concerned, they said that we

  23     could not be found.

  24               Citibank also invited us to attend

  25     some of the community development and



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   1

   2     revitalization training that Citibank offers

   3     which broaden our perception, skills and

   4     knowledge about economic development and

   5     revitalization issues.

   6               We needed to get our mission before

   7     legislators, especially those serving minority

   8     communities.  Citibank assisted this need by

   9     sponsoring our BWE Legislative Reception that

  10     is held in Albany each year during the black

  11     and Puerto Rican Caucus Weekend.

  12               We cannot achieve our mission without

  13     advice and guidance in identifying easy-to-use

  14     resources from the private sector.  We formed a

  15     corporate advisory board for this purpose.

  16     Citibank accepted our invitation to join and

  17     actively assists the planning and

  18     implementation now of all BWE programs,

  19     including the Corporate Procurement and

  20     Technical Assistance Program.  Citibank also

  21     provides $5,000 annually to assist the cash

  22     match requirement of the grant that we

  23     generally receive.

  24               We have attached a newsletter,

  25     brochure and a calendar of events to illustrate



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                                                                391
   1

   2     how we have leveraged this important help into

   3     a comprehensive service delivery.

   4               Thus, Citibank has truly been an

   5     excellent partner for BWE.  It provides us

   6     invaluable assistance.  From the very beginning

   7     of our relationship, Michelle DiBenedetto,

   8     Citibank's vice president for government and

   9     community relations provides advice on a

  10     regular basis.  She has encouraged us also to

  11     reach out to other lending institutions for

  12     support and assistance.  As illustrated in our

  13     newsletter, this outreach has fostered a

  14     variety of helping relationships with other

  15     banks.

  16               We feel certain that the

  17     Citibank/Travelers acquisition will result in

  18     greater opportunities for the entire community

  19     and especially for small minority and

  20     women-owned businesses.  Our members say that

  21     Citibank listens and provides real guidance in

  22     business finance.  We know firsthand that

  23     Citibank knows how to help people who need help

  24     the most and have the capacity to do so while

  25     maintaining the integrity of a helping



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                                                                392
   1

   2     relationship.

   3               I would also like to add that BWE

   4     works very closely with the Long Island

   5     Development Corporation, and those figures that

   6     Roslyn Goldmacher mentioned, you can count on

   7     lots and lots of BWE members in those figures.

   8               We certainly hope that this testimony

   9     will provide decision makers a clearer insight

  10     to the people behind the name Citibank and ask

  11     that the proposed acquisition request be

  12     granted.  We feel confident that the combined

  13     strength of Travelers and Citicorp will enhance

  14     their capacity to support and assist women and

  15     minorities in their quest to participate more

  16     fully in economic development.

  17               Thank you for the opportunity to

  18     share our views.  Respectively submitted, the

  19     BWE board of directors and founding officers,

  20     Phyllis Hill Slater, Chair; Vera Moore, Vice

  21     Chair; and Secretary/Treasurer, Viola Newton;

  22     and M. Vicki Wacksman, President and CEO.

  23               MR. LONEY:  Thank you.

  24               Ms. Spike.

  25               MS. SPIKE:  Good afternoon.  My name



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                                                                393
   1

   2     is Monique Spike, and I am 16 years old, and I

   3     attend Hartford Public High School in Hartford,

   4     Connecticut.

   5               I am here to talk about the Travelers

   6     support of a program called Postponing Sexual

   7     Involvement which I studied in Hartford to

   8     decrease the teen pregnancy rate, because

   9     Hartford has one of the highest numbers for

  10     teen pregnancy, one of the worst numbers for

  11     teen pregnancy in the country.  Travelers has

  12     provided current funding for 60 of Hartford's

  13     high school students, funds for the fifth grade

  14     classes of Hartford to be put into the

  15     curriculum.

  16               The curriculum consists of ways that

  17     the fifth graders can learn how to use sexual

  18     pressures and techniques -- to say no to sexual

  19     pressures, how to handle their curiosity about

  20     sex without having sex and how to deal with

  21     their peers.  Along with the benefits the

  22     program gives the fifth graders, such as the

  23     tools to resist peer pressure, and confidence,

  24     the program also benefits the teenagers

  25     themselves.



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   1

   2               As teen leaders, we are given tools,

   3     such as communication skills, that assist us in

   4     our everyday lives.  We also get extensive

   5     training in the PSI curriculum and have

   6     experience, improved grades and improved

   7     attendance at school.

   8               Teen leaders have shown a great

   9     responsibility to their community and to

  10     themselves and have served as role models to

  11     the fifth graders.  Teen leaders show great

  12     enthusiasm going to the fifth grade classrooms

  13     and I always look forward to the five weekly

  14     sessions that we do with the children.  As a

  15     teen leader myself, I believe that the program

  16     is very beneficial and I regret that is not

  17     offered to other cities in the country.

  18               Thank you.

  19               MR. LONEY:  Thank you, Ms. Spike.  I

  20     have to say you are a credit to teenagerhood.

  21               Ms. Brown.

  22               MS. BROWN:  Good afternoon, ladies

  23     and gentlemen.  My name is Naomi Brown, and I

  24     am also a 16-year-old teenager, and I am

  25     entering the 12th grade at Hartford Public High



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                                                                395
   1

   2     School in Hartford.  I was asked here to

   3     testify about the Postponing Sexual Involvement

   4     program and how it benefits the fifth graders.

   5               This past year was my first in PSI

   6     and I had the privilege of teaching at three

   7     schools and assisting at one.  When I go in

   8     there to teach the curriculum to the fifth

   9     graders, their faces light up.  They are

  10     absolutely willing and waiting to learn.  They

  11     are excited when we go in there, and the whole

  12     week before they ask their teacher when is PSI

  13     coming in, when are they coming in?  They love

  14     to see us.

  15               We teach them skills that will help

  16     them in today's rapidly changing world.  We

  17     teach them assertiveness techniques so they can

  18     resist different kinds of pressure.  The first

  19     technique we teach them is to say no in a

  20     clear, firm voice and keep repeating it.  The

  21     second technique we teach them is to ask the

  22     person why are you pressuring me or to tell the

  23     person how the pressure is making them feel.

  24     The third technique we teach them is to refuse

  25     to discuss the matter further or just walk



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                                                                396
   1

   2     away.

   3               With these techniques in mind, the

   4     students have the knowledge that they know how

   5     to say no and that they will mean it when they

   6     say no.  They also come away with the belief

   7     that they will be listened to and that they can

   8     make a difference not only in their own lives

   9     but in other people's lives.

  10               I believe that PSI helps students

  11     greatly because the relationship that the fifth

  12     graders form with the teen leaders helps them

  13     with their confidence and to help them come

  14     away with the belief that they mean something

  15     to someone and that someone wants them to

  16     succeed.

  17               I personally think that the students

  18     who go through PSI will be the future business

  19     leaders of today because they will have

  20     confidence and they will have respect, they

  21     will be able to do well in the workplace and

  22     they will be able to live a quality life

  23     themselves, a life through PSI that is

  24     hopefully drug free, that is

  25     sexually-transmitted disease free.  It will



.
                                                                397
   1

   2     also be free of unwanted early pregnancies.

   3     And I feel that this program is a great asset

   4     and I would like to thank the Travelers company

   5     for providing the funding to help us with this.

   6               Thank you.

   7               MR. LONEY:  Thank you.  You two young

   8     ladies did a fine job.

   9               MS. BROWN:  Thank you.

  10               MR. LONEY:  Do we have any questions

  11     of this group?  If not, I will thank you all

  12     very much for coming.

  13               We are going to do a little more

  14     agenda shifting.

  15               James Wyche and Lydia Tom from Panel

  16     Fourteen have arrived, and, also, Douglas

  17     Warens from the Sixteenth Panel is here, too,

  18     and we have room.  So if you would like to come

  19     up now, that would be good.

  20               (Continued on next page)

  21

  22

  23

  24

  25



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                                                                398
   1

   2               MR. LONEY:  Mr. Wyche, are you ready?

   3               MR. WYCHE:  Sure, I am.  Good

   4     afternoon.  I'm pleased to be present and to be

   5     part of the testimony and support of the merger

   6     for Citibank and Travelers Corp.

   7               I represent an organization called

   8     the Leadership Alliance.  As executive director

   9     I forged this alliance of 25 which are

  10     represented by the eight Ivy League

  11     institutions, the ten historic black colleges

  12     there are three Hispanic serving colleges as

  13     well as the seven tribal colleges in Montana

  14     associated with Montana State University.  This

  15     is an educational alliance that was formed back

  16     in 1992, and I'm pleased to tell you a part of

  17     the story, because Citibank was our first

  18     corporate sponsor.

  19               This organization was formed with the

  20     ideal of trying to reach toward under

  21     representation, specifically with

  22     African-American students, with Hispanic-Latino

  23     students, with Native American students, and to

  24     try to bring them through the process of our

  25     educational system, to get them into the



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                                                                399
   1

   2     terminal degree process, but, more importantly,

   3     to set up a monitorship program, to set up a

   4     networking system by which these students would

   5     then for ever be professionally enmeshed within

   6     our educational system.

   7               The sole purpose as we had started

   8     this endeavor was to change the classroom.  We

   9     had hoped that we would begin to change the

  10     demographics of the faculty situation in our

  11     institutions as well as nationally.

  12               As this organization has matured in

  13     the past seven years, we found it necessary to

  14     really stimulate all segments of our society,

  15     and indeed, as a national institution and

  16     organization we have now grown internationally

  17     where we have programs in 14 different

  18     countries in Asia, East-West Europe, Africa,

  19     Latin and South America.

  20               The important aspect of this program

  21     that I'd like to also stress is our ability to

  22     reach out worldwide, globally through our

  23     network and forge an alliance both for the

  24     students, for the faculty, the administrators

  25     as well as politicians.



.
                                                                400
   1

   2               I'm just returning from a trip to

   3     Africa visiting east, south and west African

   4     countries in which we're going to globalize the

   5     experience for over 240 faculty and students

   6     within this organization with support from

   7     organizations like Citibank.

   8               Now, let me tell you a little bit

   9     about what Citibank has meant to us

  10     specifically.  Over the course of the last six

  11     years in which Citibank again was our first

  12     corporate sponsor, it has enabled us to train

  13     over 700 students, 125 of which are now in

  14     terminal degree PhD. programs, all

  15     underrepresented minorities.

  16               These students are ushered through a

  17     system where we not only mentor them, where we

  18     network them, but we expose them to highest

  19     caliber educational environment that we can

  20     afford within our educational system.

  21               Within that system of 125 students

  22     we've provided them the opportunity to also go

  23     to foreign countries, to come back now wanting

  24     and desiring to discover things that many of

  25     them heretofore had not even thought of.



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                                                                401
   1

   2               I'll tell you a story also about our

   3     latest key note speaker in a national symposium

   4     and that is Fredrico Pe¤a, former secretary of

   5     energy and Mr. Pe¤a talked about a student from

   6     New York City of all places -- he obviously was

   7     based in Denver -- and he talked about a

   8     student who did not really know anything about

   9     higher education, a student who would look in

  10     the heavens and gaze and had no idea what he

  11     was looking at.

  12               This student came to him and talked

  13     to him about his vision of what he'd like to

  14     do, and as Mr. Pe¤a described this student.  He

  15     talked about what this student might do for

  16     America and what he might do for himself.  This

  17     student is currently enrolled in a PhD.

  18     program.

  19               It gives you some idea of the power

  20     of the interface with people that this

  21     difference can make for these individuals.  The

  22     second and last of the stories has to do with

  23     someone that I was interfaced with, a very

  24     important story for me because, again, it

  25     brings in the context of New York when I used



.
                                                                402
   1

   2     to be here as a professor in the City

   3     University Of New York.

   4               One Saturday I was in my laboratory

   5     and a student was draped across the door of my

   6     office, and I went to see him, and this student

   7     came to me and said:  I've been looking for

   8     you.  I've come from Beliz.  I said:  Well, how

   9     did you know me?  He talked about a program

  10     that I used to head here in New York City,

  11     which now has been expanded as part of the

  12     Leadership Alliance network and he said:  I was

  13     about to go back because I had just enough

  14     money to JFK and take a plane back home.

  15               Well, needless to say, I was

  16     enthralled by the student.  He enrolled, he

  17     finished his degree program, he went on, he got

  18     a PhD. at MIT.  He then went to Bell Labs.  He

  19     is now a professor at Princeton University in

  20     the mathematics department.

  21               These are stories again that are

  22     heart warming, that show that we have the

  23     opportunity to really expand the human talent

  24     pool, but we need corporate America.  We need

  25     the federal sector.  We need individuals to



.
                                                                403
   1

   2     participate, and, again, what I want to stress

   3     to you, but the first corporate partner, in

   4     fact, the first funder of this venture was

   5     Citibank.

   6               I can't tell you how important

   7     Citibank continues to be in our lives.  We have

   8     a member, a vice-president from Citibank who

   9     sits on our corporate board.

  10               The important issue I'd like to leave

  11     you with is simply this.  The expectation of

  12     the Leadership Alliance is that with this

  13     merger we are anticipating that Citibank

  14     Travelers will not only continue, but enhance

  15     the outreach of the Alliance, not only within

  16     the United States, but globally.  These are

  17     global organizations and these are global

  18     times.  We need young people who are going to

  19     be competitive and see their world globally.

  20               Finally, I'd like to simply say that

  21     I'm hopeful that through this merger that you

  22     will approve, and that it is your

  23     recommendation that we will go on and do better

  24     things for America.  Thank you.

  25               MR. LONEY:  Thank you Mr. Wyche



.
                                                                404
   1

   2     Ms. Tom.

   3               MS. TOM:  Good afternoon.  My name is

   4     Lydia Tom and I am director of housing and

   5     finance for the Enterprise Foundation's New

   6     York office.

   7               I would like to tell you briefly

   8     about Enterprise's involvement with Citibank,

   9     and how the bank has partnered with Enterprise

  10     in working to improve the quality of life in

  11     low income neighborhoods, through the

  12     development of housing and support services,

  13     both nationally and in New York.

  14               Citibank has been an invaluable

  15     partner in helping Enterprise to provide

  16     different financial resources to low-income

  17     communities.  Citibank has assisted us on many

  18     levels; as a funder, tax credit investor and

  19     loan source.

  20               Enterprise and Citibank have been

  21     working together since 1991.  Enterprise was

  22     established by Jim and Patty Rouse in 1982 to

  23     provide the opportunity for low-income

  24     Americans to secure decent affordable housing

  25     and move up and out of poverty.  Since that



.
                                                                405
   1

   2     time, Enterprise has helped create over 86,000

   3     affordable apartments nationally, including

   4     8,000 in New York.

   5               Citibank has worked with Enterprise

   6     in many cities around the country, including

   7     New York, Buffalo, Rochester, Syracuse,

   8     Delaware, Maryland, the District of Columbia,

   9     Florida, San Antonio, St. Louis, Nevada, and

  10     California.

  11               Since 1991, Citibank and the Citicorp

  12     foundation have provided $987,000 in grants to

  13     Enterprise and $1.75 million in below market

  14     rate loans.  Citibank has provided or committed

  15     to provide $74 million in equity through the

  16     low income housing tax credit.  This $74

  17     million includes $50 million invested in the

  18     New York Equity Fund, as well as nearly $20

  19     million in national funds that have supported

  20     special needs housing in New York.  This

  21     housing serves the formerly homeless, the

  22     elderly, those with a history of mental illness

  23     or substance abuse, and those with AIDS.

  24               These numbers have a real impact on

  25     communities.  The funds have been used to



.
                                                                406
   1

   2     extend to low-income families for home

   3     ownership, to develop affordable rental housing

   4     by placing equity from Citibank in tax credit

   5     eligible multifamily housing and to support

   6     special programs through grants, in such areas

   7     as job training and child care that improve the

   8     quality of life for residents.

   9               As an investor in tax credit and a

  10     source of predevelopment loans, Citibank has

  11     facilitated the creation of affordable housing

  12     for those who need it most.  You may have read

  13     a recent New York Times article that noted that

  14     the numbers of housing-needy families in the

  15     United States outnumber affordable apartments

  16     by 4.4 million.

  17               The low-income housing tax credit has

  18     been a valuable tool in filling this gap.

  19     Citibank's total commitment to the credit will

  20     help produce an estimated 1,750 safe, decent

  21     affordable homes nationally.

  22               Citibank is also participating in

  23     Enterprise's City Home Program, an effort with

  24     NYC and the Community Preservation Corporation

  25     to provide home ownership opportunities for low



.
                                                                407
   1

   2     and moderate income families.  Citibank will be

   3     providing mortgages for these first time

   4     buyers.  City Home targets smaller, abandoned

   5     city-owned buildings and helps bring stability

   6     to neighborhoods by transforming eye sores into

   7     community assets, and bringing back owners to

   8     deteriorated blocks.

   9               Predevelopment loans are another tool

  10     Citibank has provided for the development of

  11     affordable housing.  In New York, Citibank has

  12     provided $1.5 million in predevelopment funds

  13     over the past two years.  This includes some

  14     monies to upstate regions.  These funds help

  15     nonprofits pay for expenses such as

  16     architectural and legal fees, so that

  17     construction can close.

  18               Support services such as child care,

  19     job training and greening projects build on

  20     housing and uplift the quality of life in

  21     neighborhoods.  Citibank has been sensitive to

  22     these needs.

  23               Citibank was an early funder of a

  24     child care initiative Enterprise established.

  25     Through this project, two facilities have been



.
                                                                408
   1

   2     developed that provide quality child care for

   3     over 200 children from low-income families.

   4     Citibank also provided funds for a training

   5     program connected with one of these centers

   6     through which low-income women receive training

   7     in the Montessori Method of early childhood

   8     development while working as a teachers aid and

   9     classroom assistants.  This program, serving

  10     about 20 women, has made it possible for

  11     several participants to get off welfare and

  12     pursue a career in early childhood education.

  13               Citibank has also used its resources

  14     to fund employment initiatives, a major concern

  15     now that welfare reform has impacted

  16     communities.

  17               On a national level, Citibank funds

  18     made it possible for Enterprise to launch the

  19     Volunteer Institute in 1994.  The Volunteer

  20     Institute provides training for AmeriCorps

  21     volunteers solicited by selected nonprofit

  22     groups for community safety programs.  Thanks

  23     to Citibank's generosity, this program has had

  24     outstanding results for people at very low

  25     income levels, some of whom are having their



.
                                                                409
   1

   2     first experience in the work world.

   3               Citibank also funded a new job

   4     training effort in New York called the Tree

   5     Keeper Training program which will train

   6     residents in low-income neighborhood in tree

   7     maintenance and landscaping and link them with

   8     jobs with smaller landscaping contractors

   9     looking to create city-based work crews.

  10               On the community level, Citibank has

  11     used its resources to develop creative

  12     partnerships to meet local needs.  Through its

  13     Culture Builds Community program, Citibank

  14     funded a program implemented by Enterprise and

  15     Trees New York in 1995, to plant street trees

  16     along West 159th Street in Washington Heights.

  17     The Community League of West 159th Street was

  18     the local sponsor.

  19               Residents helped plant and have since

  20     cared for and maintained the trees.  Not only

  21     has the program helped bring greenery to the

  22     block, but the care of the trees has served as

  23     an organizing tool for tenant associations.

  24               Finally, the leadership of Citibank

  25     senior executives has been a great asset to



.
                                                                410
   1

   2     Enterprise.  Janet Thompson and Emilio

   3     Fernandez serve on Enterprise advisory boards

   4     in New York and Miami, respectively.

   5               In New York, Janet has been

   6     instrumental in examining ways in which

   7     Enterprise and Citibank can contribute to a

   8     more comprehensive approach to community

   9     development.  Other Citibank executives have

  10     been very active in Enterprise New York's

  11     Junior Board, a group of young professionals

  12     who participate in hands-on activities in

  13     neighborhoods, such as planting community

  14     gardens and furnishing community rooms.

  15               Citibank has been very helpful with

  16     Enterprise's annual network conference, which

  17     now involves over 1,300 housing professionals

  18     from around the country.  Citibank executives

  19     have addressed the conference and participated

  20     in workshops.

  21               Enterprise supports the application

  22     for Citibank and Travelers to merge.  We hope

  23     that this is an opportunity to expand services

  24     to low-income communities, through the

  25     combination of Citibank's existing initiatives



.
                                                                411
   1

   2     with the resources that Travelers brings,

   3     including $100 million in tax credit

   4     investments made by Salomon Brothers.

   5               MR. LONEY:  Thank you, Ms. Tom.

   6               Mr. Warns.

   7               MR. WARNS:  Thank you for the

   8     opportunity to speak in support of Citibank and

   9     their work with us.

  10               I am president of the United Way of

  11     Tri-State which is a regional organization

  12     serving New York, Connecticut and New Jersey

  13     here in the New York metropolitan area.  The

  14     past year we raised about $103 million from

  15     about 140 regional companies of which Citibank

  16     is one.

  17               We distribute this money to 30

  18     participating United Ways in the three-state

  19     region.  These United Ways provide funding to

  20     1800 health and human service agencies in

  21     almost every community.

  22               Citibank has a major supporter of the

  23     United Way for many years.  Their support in

  24     fact helped found our organization in 1977 and

  25     prior to our founding, there was the Greater



.
                                                                412
   1

   2     New York Fund and several other United Ways in

   3     this area that they supported.  We were the

   4     first regional United Way to be formed here,

   5     thanks to their help.

   6               In 1997 Citibank donated $750,000 for

   7     the United Way campaign and their generous

   8     employees contributed another $1,850,000  for

   9     the campaign.  Since 1992 Citibank and it's

  10     employees have contributed over ten million

  11     dollars to the United Way in this region, that

  12     doesn't count the thousands of dollars they

  13     contribute elsewhere in the country.  These

  14     donations in conjunction with the donations of

  15     all other participating companies and their

  16     employees helps an estimated 6.5 million people

  17     in this region, or roughly about one in every

  18     three people over the past ten years.

  19               In addition, Citibank encourages

  20     their employees to volunteer, as you've heard

  21     here, with organizations in communities to help

  22     improve these communities in which they live,

  23     work and receive services themselves.  This

  24     help, as you've heard here, also has helped

  25     other nonprofits do well, as well as improve



.
                                                                413
   1

   2     the communities and the neighborhoods, at least

   3     in this region.

   4               The United Way is grateful for

   5     Citibank's support and believe the future

   6     combined entity with Travelers will also be a

   7     strong corporate supporter of health and human

   8     services throughout the tri-state region

   9     helping to meet critical human needs in this

  10     area.  Thank you very much.

  11               MR. LONEY:  Thank you, Mr. Warns.

  12               We are going to have to do a little

  13     adjusting on the schedule so if you can bear

  14     with us.  Do we have any questions?

  15               We thank you very much for coming.

  16               As I understand it the panel that was

  17     scheduled to be here at 5:15, an ACORN panel,

  18     has decided not to appear.  We have a couple of

  19     folks from -- Mr. Warns was actually scheduled

  20     on the 16 panel -- we have a couple of other

  21     folks Maria Rosado and Donna Panton, who are

  22     here from the panel 16, so using the

  23     prerogative of the chair I guess I will ask

  24     that those two come forward.

  25               We can hear from them now, and then



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   2     maybe there is only one other person from that

   3     panel, and we can see if he arrived later.

   4     Ms. Rosado and Panton, if you would come

   5     forward.

   6               MR. LONEY:  Ms. Rosado are you ready?

   7               MS. ROSADO:  Yes. My name is Maria

   8     Rosado and I am the president of MHR

   9     Management, a real estate management company

  10     based in Williamsburg, Brooklyn.  I'm here to

  11     speak on behalf of the proposed merger of

  12     Citicorp and Travelers Group.

  13               My testimony is based on my

  14     experience with Citibank's community

  15     development and their commitment to the

  16     neighborhoods where we manage low and moderate

  17     income properties.

  18               Through the NEP program we were able

  19     to borrow $10 million from Citibank to renovate

  20     12 buildings in Bedford-Stuyvesant.  We have

  21     already completed seven buildings, and are

  22     preparing to initiate phase two of this

  23     restoration work.

  24               Although the venture is modest, it is

  25     one of many projects that are necessary to



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   2     revitalize the well being of an important

   3     community.

   4               Many families for the first time see

   5     the reality of investment in the metamorphosis

   6     of their apartments, their homes and their

   7     neighborhood.

   8               It is tangible evidence of the

   9     commitment already made, and suggests a

  10     grander, more stable future for communities

  11     already following this dynamic duo.

  12               Everyone benefits from an enlightened

  13     acquaintance.  Investment, loans, insurance,

  14     and financial reeducation will follow a natural

  15     progression from those already persuaded.  And,

  16     just as surely, as a new home engenders real

  17     hope, conservation, and commitment, an educated

  18     partner will see the need for savings,

  19     insurance, and reinvestment in and beyond their

  20     self interests.

  21               This merger I believe will put all

  22     the needed tools for financial establishment

  23     within the reach of communities previously

  24     undernourished in this area.  It is only right

  25     that we have an opportunity to learn from the



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   1

   2     biggest and the best.  Thank you.

   3               MR. LONEY:  Thank you, Ms. Rosado.

   4   Ms. Panton.

   5               MS. PANTON:  I am Donna Panton,

   6     executive director of the Nonprofit Connection.

   7     The Nonprofit Connection provides management

   8     assistance to nonprofit, community based

   9     organizations throughout New York.

  10               For the past 21 years we have worked

  11     with these nonprofits to improve their

  12     administration and operations in order to

  13     enhance the effectiveness of their services.

  14     Citibank has supported our work since 1997 with

  15     grants totalling $125,000.

  16               Since our clients are the human

  17     service, arts and communities development

  18     organizations that build and strengthen the

  19     communities and neighborhoods of New York City,

  20     the goal of my statement today is to present

  21     three partnership initiatives that the

  22     Nonprofit Connection has undertaken with

  23     Citibank's support, and to urge that these

  24     programs be strengthened should the merger be

  25     approved.



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   2               First:  Citibank has helped the

   3     Nonprofit Connection to expand the services we

   4     provide in the boroughs of Queens and Staten

   5     Island, boroughs that historically have been

   6     underserved by foundations and corporate

   7     funders.

   8               Citibank funded us directly to

   9     provide workshops and technical assistance and

  10     also gave grants to the organizations

  11     themselves to pay for technical assistance, and

  12     gave grants to the organizations themselves to

  13     pay for technical assistance services to

  14     improve fund raising, board development,

  15     financial management, strategic planning,

  16     programs and other area of operation.

  17               Second:  In 1993 and 1995, Citibank

  18     funded two series of planning workshops for

  19     senior managers of community-based

  20     organizations funded by the bank.

  21               Many of these groups had never

  22     planned their programs and operations and these

  23     workshops helped them to understand the process

  24     and to apply strategy to increase effectiveness

  25     of their programs and strengthen their



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   1

   2     positions vis-a-vis the funding community.

   3               Third:  Since 1996, the Nonprofit

   4     Connection has received funding to conduct the

   5     Citibank Community Development Institute, a

   6     five-month course aimed at helping community

   7     development corporations strengthening their

   8     sustainability by developing their internal

   9     capacity and putting together economic

  10     development projects.

  11               As you know CDCs play a crucial role

  12     in community revitalization and in the creation

  13     of opportunity for businesses and low income

  14     residents.

  15               Specifically, the institute helped

  16     these CDCs to review needs of their

  17     constituents, strengthen staffing and

  18     administrative procedures to refocus programs,

  19     utilize market analysis and create market and

  20     planning to maximize the potential of the

  21     success of new initiatives and to prepare and

  22     submit economic development projects for

  23     financing.

  24               Twenty-five CDCs have participated in

  25     three separate Institutes conducted for



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                                                                419
   1

   2     organizations from Brooklyn, from Queens and

   3     Staten Island, and from the Bronx and upper

   4     Manhattan which is currently under way.

   5               As a direct result of this

   6     participation, eight CDCs have raised over 1.5

   7     million dollars from private and public sources

   8     to support new administrative and program

   9     initiatives.  We are discussing with Citibank

  10     the possibility of extending the program to

  11     Westchester County in the fall.

  12               Specific economic development

  13     projects created or refined through the

  14     Institute include merchant organizing,

  15     commercial and retail strip development, advice

  16     and incubator services for small businesses;

  17     increased access to credit and capital for

  18     local businesses and home buyers, and the

  19     development of for-profit ventures including, a

  20     funeral parlor, a book store, a residential

  21     weatherization business, thrift shops, home

  22     health care services and food service delivery.

  23               In addition, the CDCs were able to

  24     strengthen relationships with Citibank.  Four

  25     of the Brooklyn groups were awarded first round



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                                                                420
   1

   2     grants in Citibank's Partners in Partners in

   3     Progress program which provide substantial

   4     funding for economic development projects.

   5               A number of other groups developed

   6     new relationships with community relations

   7     officers that helped them to access Citibank

   8     funding for the first time.  Benefits also

   9     accrued to Citibank itself.

  10               Staff from the foundation and the

  11     community development and loan departments

  12     served as speakers and advisers.  Branch

  13     managers, loan officers and mortgage analysts

  14     had an opportunity to meet with people involved

  15     in community building and learn about the work

  16     of the CDCs.

  17               In closing, let me say that Citibank

  18     has had considerable impact on community

  19     development initiatives in New York City

  20     through its support of CDCs, community

  21     development financial institutions; arts,

  22     educational and human service organizations;

  23     and of technical assistance providers like the

  24     Nonprofit Connection.

  25               We hope that the new corporate



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                                                                421
   1

   2     entity, if it is realized, will expand this

   3     commitment to community building, particularly

   4     here in New York.  Thank you.

   5               MR. LONEY:  Thank you, Ms. Panton.

   6     Is there any question?

   7               Folks, if not, we will thank you very

   8     much for your participation today.

   9               Let me ask is Mr. Kiernan here?

  10               Mr. Kiernan is scheduled for 6 p.m.

  11     and he's the last person that I understand is

  12     to testify.  He is on his way.  We will wait

  13     for him to hear from Mr. Kiernan, and we'll be

  14     in recess until he arrives.

  15               (Recess)

  16

  17               MR. LONEY:  Mr. Kiernan.

  18               MR. KIERNAN:  Good evening and thank

  19     you for waiting.

  20               My name is Peter Kiernan and I'm

  21     chairman of the Brooklyn Sports Foundation.

  22     That's the capacity I have testified here

  23     tonight, and I'm very grateful for this

  24     opportunity.

  25               My testimony is about Citicorp and



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   2     the very positive and significant and generous

   3     contributions Citicorp has made in respect of

   4     the Brooklyn Sports Foundation.

   5               The foundation is duly organized

   6     501(c)(3) not-for-profit foundation.  It's

   7     fundamental purposes are to address and solve,

   8     the lamentable dearth of amateur sports

   9     facilities in Brooklyn.

  10               As you know, Brooklyn has more than

  11     2.3 million residents, a school-age population

  12     of nearly 500,00 kids, but its sports

  13     facilities are completely inadequate.

  14               For example, there are more than one

  15     hundred thousand kids per outdoor track in

  16     Brooklyn, and there is only one indoor track,

  17     and you have about 500,000 kids for that track.

  18     That doesn't leave a lot of room to run.

  19               I mean some of the other data is even

  20     more discouraging.  25,000 kids per ball field,

  21     nine thousand kids per gymnasium.

  22               Organized sports in our belief plays

  23     a key role in nurturing, in socialization, in

  24     education and in building healthy bodies and a

  25     healthy society.  Learning how to play by the



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   1

   2     rules, learning how to set goals and how to

   3     measure progress against those goals and

   4     learning how to win, and learning how to lose

   5     are among life's most important lessons.

   6     Society has the obligation and the need to

   7     provide the opportunities for such lessons to

   8     be taught and experienced.

   9               The Foundation, predicated on the

  10     belief that sports can be an antidote to racism

  11     and crime began a sustained effort about 1987

  12     to maximize the opportunity for Brooklyn's

  13     youth and really the city's youths to

  14     participate in organized sports and I am

  15     pleased to report today that the final design

  16     is under way for a sport complex known as

  17     Sportsplex.

  18               It will be located in Coney Island.

  19     It will have several buildings, but it will

  20     feature an arena that will seat 12,500 and

  21     currently the largest public assembly space in

  22     Brooklyn is 2,500.  The Foundation will be the

  23     developer and operator of that and it is fully

  24     funded.

  25               In this effort to achieve what has



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                                                                424
   1

   2     been achieved the Foundation has enjoyed the

   3     support and the participation of Brooklyn's

   4     business, academics, religious, athletic

   5     communities, but none of the foundation's

   6     support has exceeded that of the support

   7     provided by Citicorp, both in terms of

   8     financial contributions, personnel, time and

   9     talent, and its reputational stake.

  10               Sportsplex will be located in Coney

  11     Island, and there is a variety of reasons for

  12     that, not the least of which is that was once

  13     was a world famous location synonymous with New

  14     York City, and symbolizing an era of

  15     recreation, fun and harmony has become a dreary

  16     example of abandonment and decay and urban

  17     segregation.

  18               Citicorp in its role as providing

  19     members of our board and guidance and

  20     participating in all of our activities,

  21     Citicorp recognized that while Brooklyn

  22     desperately needs sports facilities, it also

  23     needs economic development.

  24               It was Citicorp that recognized that

  25     Coney Island is not simply a vestige of a



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                                                                425
   1

   2     forgone economic era, an era made obsolete by

   3     air conditioning and interstate highways;

   4     rather, Coney Island is the choice repository

   5     of economic opportunity, because Coney Island

   6     has land, it has transportation, it has human

   7     resources and it has a tradition of

   8     entrepreneurship, and Citicorp prominently

   9     associated itself with the determined effort to

  10     demonstrate that public capital funding of a

  11     sports complex on public land in Coney Island

  12     will generate private economic development on

  13     ancillary private land.

  14               Citicorp prominently committed itself

  15     to the notion that development of what will be

  16     an adjunct to New York City's education

  17     infrastructure, because the primary users will

  18     be the Board of Education, board of higher

  19     education, that the development of an adjunct

  20     to the city's education infrastructure can be

  21     good economics and conversely that good

  22     economic development can be very wise education

  23     policy.

  24               Since 1997 the state and City of New

  25     York have pledged more than $70 million in cash



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                                                                426
   1

   2     and land to Sportsplex.  Ancillary private

   3     commercial development of one hundred million

   4     dollars has been announced, and an additional

   5     $20 million for a minor league baseball stadium

   6     in what is now to be a revitalized Coney Island

   7     was just approved by the City Council.  It's

   8     part of the mayor's budget.

   9               More than 25 million dollars in

  10     direct tax revenue has been forecast to result

  11     from this economic activity, and that's not to

  12     mention the good that will be done for those

  13     who have the opportunity to participate.

  14     Hundreds of permanent jobs are going to be

  15     created.  A major expansion of the subway in

  16     Coney Island has now entered the final planning

  17     stage and you all this has been given impetus

  18     by Sportsplex.

  19               To Coney Island what this infusion of

  20     new activity will be, it will be to the early

  21     21st century what the amusement parks in Coney

  22     Island were to the early 20th century.  It's

  23     going to bring life and excitement back to a

  24     world famous place.

  25               Citicorp continues to assist this



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                                                                427
   1

   2     effort broadly, and in so doing, in my view, it

   3     gives definition to the phrase corporate

   4     citizen.  The Citicorp gave and gives far more

   5     than just money, and a gave a lot of that,

   6     facilities, the use of its offices and

   7     equipment, it gives more than that.  It gave

   8     more than just the talent that it provided and

   9     the talent it provided in terms of individuals

  10     on our board and in our committees has been

  11     very considerable, but in addition it gave the

  12     weight of its credibility and its commitment to

  13     a proactive public policy.  And Citicorp has

  14     never asked for anything in return.

  15               If I could just add one last anecdote

  16     that I didn't write -- it's not in the written

  17     statement.  We were seeking for several years

  18     state legislation for the funding or the public

  19     funding of the capital cost of Sportsplex in

  20     1995, legislation permitting that passed both

  21     the Assembly and the Senate, but it didn't

  22     become a law because there was a single

  23     difference in the two versions.

  24               The difference was that in the Senate

  25     the sponsor in the Senate had deleted the



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                                                                428
   1

   2     affirmative action requirement.  Now we decided

   3     that, it was deliberately done to create a

   4     controversy and to call into question

   5     affirmative action, which was beginning to be

   6     the subject of a national debate, particularly

   7     with the Supreme Court decision that made

   8     headlines in every newspaper in the country,

   9     but affirmative action policy was the law of

  10     New York State, and we didn't think that it was

  11     right to try to change it in Brooklyn, on a

  12     single example of Brooklyn, probably the most

  13     diverse county in the United States, a county

  14     where 93 languages are spoken.

  15               So we decided to fight that, and

  16     every major corporation on our board to their

  17     credit stuck with us on that fight.  But I

  18     think I should salute Citicorp in this regard,

  19     because they never strayed from that fight,

  20     were very prominent in it, and it was simply a

  21     matter of social justice.

  22               But, like a lot of the other

  23     corporations, they had a legislative agenda.

  24     Banks are regulated and banks have laws they

  25     want to get passed all the time by the state



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                                                                429
   1

   2     legislature.  And they stood up in this case in

   3     the State Senate for what they believed was

   4     right and it had a happy ending and I think for

   5     that they should be saluted as well and I thank

   6     for your attention.

   7               MR. LONEY:  I'd like to ask you one

   8     thing, again, showing my ignorance.  Where is

   9     Coney Island exactly, and what is there now?

  10               (Laughter)

  11               MR. KIERNAN:  Coney Island is in

  12     Brooklyn.  It's on the eastern shore of

  13     Brooklyn obviously on the Atlantic Ocean.  It's

  14     on sort of a peninsula.  As you may know what

  15     used to be there were thriving amusement parks.

  16               MR. LONEY:  Right, I've heard of

  17     that.

  18               MR. KIERNAN:  Those amusement parks

  19     are still there, but most of them are closed.

  20     It has public housing and some very

  21     deteriorated housing stock.  It has a lot of

  22     vacant land.  It has fields that are growing

  23     weeds.  It has maybe in the summertime it still

  24     can have a taste of its past glory when maybe

  25     300,000 people will come to the beaches, but in



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                                                                430
   1

   2     the wintertime it's a very dark and dreary

   3     place.

   4               MR. LONEY:  You're thinking there is

   5     a market here for minor league baseball?

   6               MR. KIERNAN:  Well, the Brooklyn

   7     Sports Foundation which I'm representing is not

   8     advocating professional sports.  It's

   9     advocating amateur sports, but because the

  10     commitment was made by both the state and the

  11     city, the city is putting 37 million dollars

  12     and the state is putting up 30 million dollars

  13     and the land and services worth much more than

  14     that, because they made the commitment to build

  15     the sports complex for amateur sports.

  16               The Mets in conjunction with the

  17     Mayor decided they would put a minor league

  18     baseball stadium there that they believe there

  19     is a market there and the point I was trying to

  20     make is the Sportsplex has given impetus to

  21     other economic development, and that includes a

  22     hundred million dollars of private development

  23     which is primarily going to feature

  24     entertainment, 21st century kind of

  25     entertainment, movie theater, virtually reality



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                                                                431
   1

   2     centers and high tech feature entertainment and

   3     entertainment retail and the developers and the

   4     tenants of those developers that are putting

   5     up, making that commitment obviously were in

   6     the market and, again, that was given impetus

   7     by the fact that they were able to generate a

   8     public investment of more than $70 million and

   9     we had always looked at Sportsplex as an

  10     education project with economic development

  11     dimension, and Citibank in their participations

  12     with us urged us to look at it as an economic

  13     development project with very good education

  14     benefits and dimension and that's what turned

  15     the trick.

  16               That's what really got the public

  17     support.  And it was their leadership, in part

  18     with some other major corporations, their

  19     leadership that attracted the real business

  20     support of the Brooklyn business community

  21     which is considerable.

  22               MR. LONEY:  Are there any other

  23     questions?  If not, I will thank you for

  24     coming.

  25               MR. KIERNAN:  Thank you.



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                                                                432
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   2               MR. LONEY:  I believe we are finished

   3     with the prepared agenda.  The only question is

   4     whether there is anybody going to make use of

   5     the open mic.

   6               So we go into recess until somebody

   7     comes and asks for the open mic or a decent

   8     interval passes without anybody asking for the

   9     mic.

  10               (Recess)

  11               MR. LONEY:  We are hereby adjourned

  12     for the evening.  We'll see you here at 8

  13     o'clock tomorrow.

  14               (Adjourned)

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Last update: December 3, 2010