Home > Banking Information & Regulation > Public Meeting Transcripts > PMT - Agendas June 25-26, 1998
Public Meeting Transcripts
Public Meeting Regarding Citicorp and Travelers Group
Friday, June 26, 1998
Transcript of Panel Twenty-Three
550 1 2 MR. LONEY: I'd like to call panel 3 23, Carlisle Towery, Anne C. Robinson, Rhonda 4 Kotelchuck, Samuel C. Hamilton, Steven 5 Alexander, Audi Abernathy and Rev. Floyd Flake. 6 Rev. Flake, you were scheduled 7 earlier today so we will begin with you, and I 8 can claim the prerogative of the chair, I will 9 tell you that the one time I had the, shall we 10 say, pleasure of testifying in Congress, you 11 were on this side of the gavel and I was on 12 that side of the gavel. 13 REV. FLAKE: I hope I treated you 14 fairly. 15 (Laughter) 16 MR. LONEY: It was more bloody in the 17 contemplation than in the doing, I will tell 18 you. 19 REV. FLAKE: I thank you very much. 20 MR. LONEY: I appreciate you coming 21 and if you will begin the panel, I appreciate 22 it. 23 REV. FLAKE: Thank you very much, and 24 thank you for allowing this privilege to speak 25 first. Obviously, my schedule has gotten . 551 1 2 backed up, since I'm doing a group of seminars 3 up at Harvard for ministers from around the 4 country and I flew in to do this hearing, 5 because I think it is so critical. 6 In 1986 I was elected to the US House 7 of Representatives and assigned to the House 8 Banking Committee. During the first few years 9 of my tenure there I was assigned to a task 10 force headed by Doug Maynard from Georgia with 11 the responsibility of trying to determine how 12 we might best inform the financial service 13 industry. 14 One of the discoveries we made was 15 that America at that time did not have a single 16 bank in the top 25 in the world, and, 17 therefore, part of our challenge was trying to 18 repeal Glass-Stegall in a way that would allow 19 for modernization process that would open doors 20 for banks and other industries like them to be 21 able to work together in trying to give the 22 best service to the American citizenry, and to 23 the citizenry of the world, realizing that the 24 world now has become much smaller, particularly 25 in relationship to how we do our financial . 552 1 2 business. 3 Today as we come, having served as 4 Chairman of the Committee on Oversight 5 Investigation for one term, and recently 6 retired in December as the ranking member of 7 the Committee on Domestic and International 8 Monetary Policy, I realize that we are still 9 facing a major crisis as it relates to the 10 place of the American banking community in the 11 world at large. 12 Other systems have seen fit to open 13 doors of possibility so that other industries 14 could function in ways that would allow for the 15 best means of delivering services to the 16 majority of people. 17 As we have it currently in America, 18 one has to make decisions about where to invest 19 their money, to another place to decide where 20 to buy their insurance, another place to be 21 able to make other decisions relative to their 22 financial well being. It is my contention 23 after years of looking at this problem that it 24 is in the best interests of this nation to 25 create the best mechanism possible for these . 553 1 2 entities to be able to work together. 3 I realize that the Congress has been 4 slow in making a decision in relationship to 5 bank modernization, but I don't think we can 6 afford to wait for the Congress. 7 As you know, the Congress moves based 8 on political will. The political will has not 9 been there to make the decision that I think is 10 appropriate for the banking industry. 11 Therefore, Citi and Travelers have made the 12 decision that I think must be honored. It must 13 be honored because it represents to us a major 14 step in trying to move forward at a process 15 that has for years lied dormant. 16 The reality is our practices relative 17 particularly to the Glass-Stegal Act have been 18 those that were put in place over 50 years ago. 19 They are not the most modern as it relates to 20 our ability to function in a competitive 21 environment and therefore are critical to the 22 survival of the industry. 23 Someone argued that the problem is 24 that bigger is not always better. I would 25 suggest that that may well be true, but the . 554 1 2 alternative is even worse. Those banks that 3 could not compete in this environment would 4 generally not be able to provide the level of 5 services that we can anticipate from banks that 6 have the capability of delivering a wide range 7 of services that constituents feel a necessity 8 of going to. 9 Our challenge becomes to understand 10 not only the industry, but to understand the 11 fullness of this responsibility, and a part of 12 that responsibility is obviously to ensure that 13 there are fair practices on the part of the 14 bank. 15 HMDA data clearly indicates and has 16 indicated over the last twenty or thirty years 17 that the Boston Study, particularly since the 18 Boston Study of 1987 negates that there have 19 been some practices on the part of the banking 20 community in general in relationship to 21 redlining and other practices that have 22 mitigated against the possibility of the 23 development of many communities in this nation, 24 particularly urban communities where there is a 25 need for access to capital for the rebuilding . 555 1 2 of commercial strips that have deteriorated, 3 the building of homes so that people can begin 4 the process of building the necessary equity to 5 become a full participant in American society; 6 beyond that to share in the American dream, 7 which is everyone's desire. 8 It is my hope that as this merger 9 moves forward there will be some prophecy by 10 which Citi will evaluate it's overall role in 11 community development, it's role in allowing 12 institutions in those communities that have 13 been underserved and overlooked to become full 14 partners in the process of development. 15 Clearly, the weak link has been 16 capital. I must say Citibank in participating 17 in a 15 million dollar loan to my church 18 recently in the recent development of our 19 church with another seven banks joining with 20 them, show the model that could be emulated 21 throughout this nation, a model whereby banks 22 who do not want to take the major risk of 23 putting their capital on the line for an 24 institution, may do so through participation 25 with other banks. . 556 1 2 Citi has also demonstrated some 3 capability in its funding of many of the 4 financial institutions in urban communities 5 that would have otherwise gone out of business 6 by now. I would urge them to continue in that 7 participation. 8 I would ask the Fed that you be 9 vigilant in your pursuit of insuring that the 10 mandates are fully met, but I do believe that 11 you have the capability to do it. I know you 12 have the capability of doing it. Mr. Greenspan 13 has testified numerous times before committees 14 that I have sat on, and I believe that it is 15 the will of the Fed to participate in the 16 process of building a great and stronger 17 nation. 18 Indeed, I've worked with many of the 19 members of the Governors, traveled with the 20 Governors several years ago when we were 21 looking at how the Fed might become more 22 involved in our community development 23 processes, and believe that at the heart of the 24 Fed there are those that have an interest in 25 trying to assure this development take place . 557 1 2 because they realize it is in the long term 3 interests of America. 4 So I conclude by merely suggesting 5 that this body would move forward in voting in 6 support of the merger of Travelers and 7 Citicorp. 8 I believe that these two entities 9 together represents for us a very strong 10 financial institution. Its reach will not only 11 be limited to the borders of this nation, but 12 indeed, place this bank and this insurance 13 group in a category where they will be able to 14 participate with the largest banks in the 15 world. 16 We cannot do any less if we expect to 17 remain competitive. We must do this in order 18 to assure that not only does Citi continue to 19 grow in its ability and it's reach, but also to 20 assure that this merger demonstrates to the 21 Congress that it is time for them to not 22 continue to allow politics to dictate the 23 direction of this nation as it relates to 24 financial policy, but, indeed, to move forward 25 with bank modernization, which I think is . 558 1 2 critical for our overall and long-term 3 survival. 4 To that end, I yield the balance of 5 my time. Oh, I'm not in the House any more. 6 (Laughter) 7 I yield my time, which the young lady 8 says has expired anyway. 9 (Laughter) 10 MR. LONEY: Thank you very much. 11 Mr. Towery. 12 MR. TOWERY: Thank you. I'm from 13 Greater Jamaica Development Corporation which 14 is a private not-for-profit local development 15 organization whose mission is to encourage and 16 facilitate the economic recovery and 17 revitalization of downtown Jamaica and it's 18 environs. 19 We're formed in 1967 by business, 20 civic and community leaders, including 21 commercial banks, and have worked since that 22 time in close partnership with all sectors to 23 carry out the plan to transfer Jamaica's older 24 downtown into a modern center of business, 25 commercial and industrial employment, higher . 559 1 2 education, the arts, transportation and housing 3 improvement. 4 This plan was prepared by Regional 5 Plan associates, city government and local 6 leaders to service to some half million 7 residents who live in twenty-one neighborhoods 8 around this downtown. 9 We appreciate this opportunity. We 10 are after all end-users of financial 11 institution products and our communities are 12 the beneficiaries when those products are 13 shaped and tailored and prioritized to enable 14 community development and to capacitate its 15 practitioners. 16 My comments are emphasizing the 17 involvement and support we have received from 18 Citibank over the thirty-one years of our 19 economic development and community reinvestment 20 work in Jamaica. 21 This community, working to recover 22 from a ten-year period, 1975 to 1985 of severe 23 economic trauma, uncertainty and a general loss 24 of public confidence, has benefited 25 significantly from Citibank good works. It's . 560 1 2 not an overstatement to characterize the good 3 works of this good corporate citizen as 4 exemplary. 5 Jamaica has progressed from a 6 characterization at least as a low and moderate 7 income community to what is now clearly a 8 moderate to middle income emerging area. 9 Citibank aggressive proactive lending 10 programs in that area account I believe for 11 increased home ownership, business growth, and 12 other economic activities. 13 They have a very active branch in 14 Jamaica center, and their headquarter units and 15 the community development units are very 16 responsive to us. They have provided strong 17 and ongoing leadership for Greater Jamaica 18 Development Corporation's efforts, serving 19 consistently on our board with able senior 20 representation which has been exceptionally 21 active and involved. 22 Citibank's contributions to our 23 board's activities have included a high level 24 of intelligence and interest in our general 25 governance, sponsorship of retreats, meetings . 561 1 2 and special events, chairs of committees, 3 provision of in-kind services, including a 4 loaned executive for two years who helped us 5 establish a special revolving loan fund, 6 advocacy with government, and financial 7 contributions at leadership levels toward our 8 general operations and for special projects. 9 Citibank has participated in the 10 provision of local small business loans through 11 our revolving loan plan which is capitalized by 12 the US Economic Development Administration, New 13 York State Empire State Development and the 14 City of New York Department of Business 15 Services using CDBG funds, federal community 16 block grants funds. 17 Citibank provided us with a mortgage 18 loan for improving and refinancing our 19 headquarter office building, provided operating 20 support along with board and other leadership 21 for three of our associated and affiliated 22 organizations, Jamaica Arts Center, King Manor 23 Museum and Jamaica Business Resource Center, 24 that we helped establish back in the '70s, 25 which Congressman Flake helped us with the SBA . 562 1 2 loan and now is an independent and wonderful 3 entity. 4 Through Citibank pioneering Culture 5 Builds Community Program and participation in 6 something called the Arts Forward Fund, 7 Citibank helped launch an arts initiative in 8 Jamaica called Culture Collaboration Jamaica 9 and continues to support it. Their leadership 10 and support for York College, another key 11 project in Jamaica for which we were somewhat 12 instrumental. 13 Working with Citibank people is 14 inevitably a productive process for us. They 15 are thorough and eager to facilitate results to 16 get things done. 17 Their corporate and personal 18 involvement in Jamaica I believe has been 19 material in the success of this community 20 revitalization. 21 As a long-term practitioner of local 22 economic development working in the trenches 23 and on the front line, if you will, let me 24 respectfully raise some matters for the new 25 Citigroup's consideration. . 563 1 2 In our three decades of work in 3 Jamaica very challenging endeavors which are 4 high in public purpose, only modest involvement 5 have come from insurance companies and the 6 investment banking community to date. We 7 enjoyed the services of a loan executive from 8 Met Life for a key project. Equitable has 9 provided us with two mortgages that were key 10 projects. Merrill Lynch Foundation has enabled 11 the startup and investor retention effort over 12 that thirty years, but our experience suggests 13 that the interest of the investment banking and 14 insurance communities typically appear to be 15 elsewhere, only slightly related to urban 16 economic or community development. 17 Thus, we're keen to know whether this 18 acquisition will unleash the skills, the no how 19 and the resources of Travelers and Salomon and 20 Smith Barney in community development, and, if 21 so, how? 22 One, will any of the products of the 23 Travelers Group be tailored and focused on 24 community development objectives? For example, 25 we'd welcome a long view of insurers in . 564 1 2 financing small real estate projects that are 3 admittedly small for them, and it would be very 4 helpful for Jamaica's local economy if our 5 community small contractors were enabled to 6 participate in the major construction projects 7 under way in Jamaica through a prequalification 8 and special bonding method so that they can 9 compete. 10 Two. Will Salomon Smith Barney 11 devote its entrepreneurial know-how to places 12 like Jamaica bringing its professional skills 13 to bear on the community development? 14 Many of our companies, perhaps most 15 of our companies are simply outside corporate 16 America's mainstream, often small and not well 17 capitalized minority and women-owned, but they 18 are often energetic and with significant 19 potential. 20 We welcome a partnership with an 21 investment bank to identify and nurture the 22 special opportunities in Jamaica, and 23 opportunities are being missed, we believe, to 24 create markets there, literally creates markets 25 there and the products to serve them. . 565 1 2 There should be ways and means to 3 make these companies eligible for the capital 4 markets. 5 For us, these are intriguing and 6 proper questions for the new Citigroup given 7 the special capacities it will have from 8 combined commercial banking, insurance and 9 investment banking and we support this 10 acquisition with some enthusiasm. 11 Thank you. 12 MR. LONEY: Thank you Mr. Towery. 13 Ms. Robinson. 14 MS. ROBINSON: Good morning. I am 15 executive director of both Bridgeport 16 Neighborhood Fund and Bridgeport Neighborhood 17 Trust, which are located in Bridgeport, 18 Connecticut. For those of you not familiar 19 with Bridgeport, it's located in Fairfield 20 county in Connecticut, one of the nation's most 21 affluent counties. Bridgeport unfortunately 22 hasn't shared in that affluence very much. It 23 not only is Fairfield County's poorest city, 24 it's one of the two poorest cities in 25 Connecticut, and would be a poor city I think . 566 1 2 in any state. 3 That said, Bridgeport Neighborhood 4 Fund's mission is as a community developing 5 bank to make loans to rehabilitate substandard 6 rental housing. We get funds from six 7 participating banks, Citibank being one of 8 those banks, which lends funds to us, so that 9 we can relend them for our rehab activities. 10 My other organization, Bridgeport 11 Neighborhood Trust, is a community organization 12 which tries to support the efforts of residents 13 to improve the quality of their lives. We have 14 a number of programs, and Citibank has been a 15 long-time supporter of those, both financial 16 contributions and also people sitting on both 17 my boards, both the fund and the trust boards. 18 Interestingly, I can honestly say 19 that Citibank CRA officer Ellen Power is the 20 only CRA officer who ever calls me up and asked 21 me what Citibank can do for us. Usually I'm 22 knocking on other people's doors asking them to 23 do things for me. Also Citibank is the only 24 bank which has asked if they can lend us more 25 money and, again, it's usually the reverse. . 567 1 2 All of this has been done by Citibank 3 despite the fact that they do not have a branch 4 in Bridgeport. The nearest branch is in the 5 adjacent town of Fairfield, so I do believe 6 that their commitment to our organizations and 7 to Bridgeport is truly to improve the community 8 as opposed to being really driven only by CRA 9 concern, not taking deposits in Bridgeport. 10 I am hopeful that the merger will be 11 beneficial and I am here to support it. 12 Travelers in the past has been 13 contributor to another neighborhood 14 organization in Bridgeport, Neighborhood 15 Housing Services. Right now it's actually 16 easier in Bridgeport to get a loan than it is 17 insurance, so, I can say that Travelers is a 18 company which writes a fair amount of insurance 19 in Bridgeport, but I'm hoping that the merger 20 will result in more business being done in 21 Bridgeport, certainly if they pick up 22 Citibank's philanthropic bent I think that will 23 be the case. 24 Salomon Smith Barney obviously 25 doesn't have much of a presence in the city but . 568 1 2 I'm encouraged by seeing the types of programs 3 that they are starting to enact in other area 4 of the country, and I'm hopeful that that, too, 5 will have a beneficial effect in Bridgeport. 6 So on the whole I'm hopeful about the 7 merger, and I think that it should have good 8 impact on the city life of Bridgeport because 9 it should bring more resources into the 10 community such as ours. Thank you. 11 MR. LONEY: Thank you. Ms. 12 Kotelchuck. 13 MS. KOTELCHUCK: Thank you. My name 14 is Rhonda Kotelchuck. I'm the executive 15 director of the Primary Care Development 16 Corporation. 17 Thank you for this opportunity to 18 testify with regard to the work that we have 19 done over the last several years with the 20 community development group at Citibank. 21 The Primary Care Development 22 Corporation is a not-for-profit corporation 23 created to assure access to quality primary 24 health care in medically underserved 25 communities of New York City. We do this by . 569 1 2 providing financing and technical assistance to 3 nonprofit community health centers, hospitals 4 and primary care providers to build new or 5 expanded facilities in these communities. 6 Among our most important tools is a 7 24 million dollar loan fund created for the 8 financing of smaller facilities. Citibank has 9 not only been instrumental to the structuring 10 of the loan fund, but has also committed five 11 million dollars to the loan fund. Citibank has 12 also made it clear that it's interested in 13 expanding its relationship with Primary Care 14 Development Corporation and has offered 15 financing as well as its time and best thinking 16 to help us further our mission. 17 In the course of the coming year we 18 will work with Citibank in exploring several 19 new arenas, including different sources of 20 credit enhancement, the potential for creating 21 a similar loan vehicle in underserved areas 22 upstate and the expansion of our technical 23 assistance programs for project sponsors in 24 financial operations. 25 To date we have financed 15 . 570 1 2 facilities that collectively will provide basic 3 preventive and primary health care to some 4 220,000 New Yorkers living in all five boroughs 5 of New York City. Ten of these facilities are 6 now operating. We also have an active pipeline 7 of some dozen additional facilities in earlier 8 stages of development. 9 This record of achievement clearly 10 would have been impossible without the active 11 and creative involvement of the Citibank 12 community development group. We look forward 13 to a continued partnership in meeting the 14 health care needs of New York City's 15 underserved community. 16 Thank you. 17 MR. LONEY: Thank you, Ms. 18 Kotelchuck. 19 Mr. Hamilton. 20 MR. HAMILTON: Good morning. I'm 21 executive director of the Hartford Economic 22 Development Corporation and the Greater 23 Hartford Business Development Center of 24 Hartford, Connecticut. 25 These companies provide technical . 571 1 2 assistance, loan packaging and subordinate debt 3 financing for small and medium-sized businesses 4 in Hartford and the surrounding region. 5 Both organizations have provided loan 6 assistance for business startup and expansion 7 projects located in low and moderate-income 8 neighborhoods. Since 1983, we provided more 9 than 19 and a half million dollars in loan 10 assistance resulting in the retention of almost 11 1700 jobs and the creation of another nine 12 hundred new jobs in those areas. 13 Since we are often considered a 14 lender of last resort, these much-needed funds 15 help to create jobs in companies and in 16 communities that can provide goods and services 17 that ordinarily would not be accessible to the 18 residents of these communities. 19 Of the four hundred fifty clients 20 that we serve annually, more than 60 percent of 21 our loans are given to minority and women-owned 22 businesses. The ability of the Economic 23 Development Corporation in the business 24 development center to provide services at no 25 charge for more than twenty years is directly . 572 1 2 related to the support of outstanding corporate 3 citizens like the Travelers. 4 In our early years Travelers donated 5 management and technical resources to our firm. 6 Travelers also provides a million dollars in 7 funds and loan pool targeted for women and 8 minority-owned businesses, certainly a group 9 which has and continues to have in many cases 10 access to capital. 11 Travelers has consistently been 12 represented on our board of directors and has 13 helped share our growth in contributions to the 14 community. On January 1 of 1997, Travelers 15 converted its original low interest loan of one 16 million dollars to a grant. This generosity 17 will enable our organization to continue to 18 resolve this loan pool for a considerable 19 period of time. 20 As you might expect, Travelers' 21 involvement in our community has not been 22 limited just to the companies I represent. A 23 $100,000 grant in 1986 to the Connecticut Small 24 Business Development Center, and funding for 25 the Womens Business Enterprise Specialist . 573 1 2 Program have enabled these organizations to 3 flourish and become the entrepreneurial center 4 at the Hartford College for Women. 5 This program has become a national 6 model for helping women entrepreneurs gain 7 self-sufficiency. The center continues to be a 8 collaborative effort between corporate, public 9 and private entities. 10 In 1997 the Travelers Foundation gave 11 the Entrepreneurial Center a $75,000 grant to 12 help provide small business loans for women. 13 Lastly, as chairman of the board of 14 the United Way of the Capital Area, I have seen 15 firsthand Travelers' commitment to assuring 16 that those with the greatest needs and the 17 least resources are served by the United Way 18 agencies in our community. 19 In the last four years alone, 20 Travelers' employees have contributed more than 21 three million dollars to the community 22 campaign. As to the Travelers' corporate gift, 23 that total ballooned to more than 4.2 million 24 dollars. 25 Travelers corporate concerns is . 574 1 2 consistently positive in most, if not all, 3 areas of concern in Hartford and the region. 4 It is for these reasons and others too numerous 5 to mention in the time allotted that I speak in 6 favor of combining Citicorp and the Travelers. 7 I am certain that the new entity will do even 8 greater good than is being done in the 9 communities they currently serve. 10 Thank you. 11 MR. LONEY: Thank you, Mr. Hamilton. 12 Ms. Abernathy. 13 MS. ABERNATHY: Good morning. Thank 14 you for this opportunity to speak on behalf of 15 Elaine Edmond, executive director of the Harlem 16 YMCA. 17 I'd like to say that there is a new 18 Citibank branch opening on 134th Street and 19 Eighth Avenue in Harlem. 20 Citibank has been and active 21 supporter of the Harlem YMCA since the 1971 22 inception of our National Salute to Black 23 Achievers in Industry Awards Dinner. They have 24 been our leading sponsor, generally donating 25 annually towards our various youth programs. . 575 1 2 Recently as a corporate sponsor they 3 contributed considerably in support of the 4 Jackie Robinson Youth Center. They stay in 5 constant contact with us, seeking additional 6 ways to collaborate with the Harlem YMCA, to 7 continue to support our youth programs and the 8 community. 9 Citicorp Citibank and the Harlem YMCA 10 have had and continue to have one of the most 11 positive relationships in the Harlem community. 12 Citibank is one of the very few large 13 institutions that has remained consistent in 14 their support of our community needs. 15 Their financial support has enabled 16 the Harlem YMCA to offer, in addition to our 17 youth programs, a wide variety of innovative 18 programs for the YMCA families we assist. We 19 have been able to increase and expand our 20 outreach services to a larger portion of our 21 community. 22 In recent years the population of 23 Harlem has changed to a multicultural, 24 multiracial diverse population with different 25 challenges. With Citibank as a staunch . 576 1 2 supporter we are able to meet some of these 3 challenges. We provide full-day services to 4 preschool children ranging in ages from 2.9 to 5 5 years old. Our after-school activities also 6 assist parents who need child care until 7 p.m. 7 for students ages 16 to 17 who require a safe, 8 secure structured environment. 9 Citibank recognized our increased 10 need of services when welfare reform required 11 custodial parents to join the work force. 12 Citibank approached us with ideas and financial 13 assistance to fulfill this new demand from our 14 community. 15 I came today to give testimony so 16 people can be made aware of the vital 17 assistance the Harlem YMCA receives from 18 Citicorp Citibank. The needs of the Harlem 19 community continue to increase, and so does the 20 need for financial support. 21 It is comforting for us at the Harlem 22 YMCA to know our collaboration with Citibank is 23 still a supporting one. 24 Thank you. 25 MR. LONEY: Thank you, Ms. Abernathy. . 577 1 2 I have a couple of questions. First 3 of all, Mr. Towery, I'm not sure if I am clear 4 totally. I understand that you were testifying 5 that there are a number of things that Citicorp 6 has done for you, loan access programs and such 7 as that, but either I missed it, or you didn't 8 say whether they have actually made loans to 9 your organization or through your organization. 10 MR. TOWERY: Yes, they have. The 11 mortgage on our building, our headquarter 12 building is with Citibank, one million six I 13 think it is. They've made several small 14 business loans through our revolving loan fund 15 that we participate and usually fill gaps, the 16 banks help the banks and with blended rates and 17 participated in several of those, and then I 18 think I mentioned that their expertise helped 19 us actually start that revolving loan fund. 20 MR. LONEY: Okay, thank you. Anybody 21 have any questions of the panel? 22 MS. KENT: I have. Ms. Abernathy, is 23 that a full-service bank? 24 MS. ABERNATHY: Yes, the new one 25 that's opening. As a matter of fact, . 578 1 2 ironically the vice-president and two of the 3 managers came to visit me yesterday. They came 4 to look at the branch, the Harlem YMCA offices 5 and their services there, because being that 6 they were new in the community they wanted to 7 familiarize themselves with us, and I had the 8 opportunity of meeting them then. They will be 9 on the corner of 134th and Seventh Avenue in 10 Harlem. I didn't bring my notes from the 11 meeting, but I believe they are opening in 12 August. 13 MS. KENT: That's what I'm trying to 14 ask, are they opening a full-service branch, 15 not just a -- 16 MS. ABERNATHY: No, it's a 17 full-service bank in Harlem. 18 MR. LONEY: I have a question of 19 Mr. Flake. 20 Don't you miss Washington? 21 (Laughter) 22 That's not really my question, but I 23 thought I'd ask it anyway. 24 REV. FLAKE: Actually, there is 25 something wrong with me, I haven't even had . 579 1 2 withdrawal from that. 3 MR. LONEY: One of the things that is 4 interesting from your perspective, given your 5 distinguished career in Congress, a number of 6 folks have come in and argued the illegality of 7 this transaction saying that the law as it 8 presently stands is against this transaction 9 being approved. 10 One might anticipate that one with 11 your perspective of having spent sometime in 12 Congress might share that, and it's interesting 13 to me that you don't seem to, and I wonder if 14 you could talk to me about that a bit. 15 REV. FLAKE: Well, one of the things 16 I learned in my 11 years in Congress is that 17 the wheels of progress there generally turn 18 relatively slow. 19 Most progressive moves in this nation 20 have been made outside of the political 21 process, with the political process ultimately 22 catching up and then jumping in front, and 23 doing what is necessary to clear the way. 24 I would argue that to wait, I'd 25 rather see us move forward, and if there are . 580 1 2 going to be legal challenges, allow those 3 challenges to move through the Court process, 4 even if it goes all the way to the Supreme 5 Court, to make some determinations that I think 6 are in the best long term interests, not only 7 of the industry in general, but in the 8 long-term interests of America. 9 I don't think we can afford to 10 continue in what I call the substandard state 11 relative to other countries of the world 12 waiting for Congress to act. I think it is 13 imperative that there can be a process that 14 people can at least have an opportunity to 15 evaluate, gather some data from, and I think 16 this may wind up being the model for future 17 mergers and will serve as a major impetus to 18 put forward the process that I think is very 19 archaic and outdated. 20 So I think history of our nation has 21 always been, regardless of what the law is in 22 the pure sense of the word, there are other 23 interpretations of the spirit of that law, as 24 has been evidenced by other changes that have 25 taken place in the financial services industry . 581 1 2 and those changes have taken place in spite of 3 the limitations of the Congress. 4 MR. ALVAREZ: We've been privileged 5 with this panel and other panels in the last 6 day and a half to hear from community groups, 7 organizations that are doing real work in the 8 trenches and helping a variety, a diverse 9 variety of needs and one of the points that you 10 made today, and others have made is that banks' 11 support of your program is very important and 12 allows you to do what you are doing. 13 Others have suggested that there is 14 room for banks to do, to support these groups 15 and to direct activities themselves and perhaps 16 banks are relying too much on organizations 17 such as yours and funding organizations such as 18 yours and retreating from doing direct 19 activity, direct lending, direct investment 20 which really competes with your organization, 21 but would be other means to the community. 22 My question is, do you have that 23 sense? Do you have the sense that banks are 24 relying too much on other intermediaries or 25 organizations that are in the trenches of the . 582 1 2 community and are withdrawing their own direct 3 involvement in the community? 4 MS. ABERNATHY: I would -- 5 MS. ROBINSON: I'd like to address 6 that, because Bridgeport Neighborhood Fund is a 7 community development bank, and so we are 8 making loans. 9 What I find with the type of lending 10 that we do, it's such a very peculiar niche and 11 you have to have a great deal of knowledge, not 12 only about the community, but also typically 13 about the borrower. Lots of times you're not 14 just looking at financial information about 15 that borrower, but you really need to know 16 something about either the individual or the 17 not-for-profit background and you're making a 18 loan as much on that as you are on any 19 financial information that you're getting. 20 I think it would be very difficult 21 for a conventional bank to have the type of 22 knowledge that we have and that we need to make 23 the kind of loans that we're making, and I 24 think that's one of the reasons that the six 25 banks support us because they recognize that we . 583 1 2 are better capable of making those loans. 3 Also, we make small loans. Our 4 typical loans are between $200,000, the 5 transaction cost for any banks to try to handle 6 a loan of that size would just be prohibitive, 7 so either the borrower would be getting charged 8 more fees or we'd really be costing the bank a 9 lot of money to do those types of loans, and, 10 actually, we'll do loans down to thirty 11 thousand dollars, so I just don't think it 12 would be make sense that a bank would put in 13 resources and try to make the type of loans 14 that we do. 15 MR. LONEY: Ms. Abernathy? 16 MS. ABERNATHY: Yes. I think the 17 fact that the familiarity of the population of 18 our communities with us is easier for them to 19 approach us than it would be directly going to 20 the large institution. I think being 21 intermediaries your supportive of the community 22 needs in that respect. 23 MR. HAMILTON: I would just like to 24 add one point to that. One of the things that 25 we're seeing in our community, perhaps the . 584 1 2 intermediaries, that the bank have used us 3 somewhat as a research or laboratory in a sense 4 and we're now seeing a tremendous amount of 5 activity in marketing, if you will, to the 6 small business segment by a number of the banks 7 in our community. 8 So I do believe that they have made 9 an amazing discovery that you can lend in these 10 markets to this type of business, and have it 11 be profitable. I think there will always be 12 the niche that is spoken of here that you need 13 some specialized type of expertise and time and 14 effort with, but you do see more, at least in 15 our marketplace, more involvement of the area 16 banks as they get more into small business 17 centers, small business lending, and marketing, 18 specifically, the small minority-women-owned 19 businesses as they continue to emerge as a 20 major force in the economy. 21 MR. TOWERY: You may I say that I 22 understand the appeal of wholesaling products 23 and services that larger banks have, but my 24 caveat would be that there is a risk of getting 25 out of the retailing of their products if those . 585 1 2 intermediaries are really large in terms of 3 geographic interest. Community intermediaries, 4 our little resolving loan fund a big loan for 5 us $150,000, but I do think community-scale 6 intermediaries, national regional 7 intermediaries, I'm sure there is a wonderful 8 function for them and requirement there, but I 9 think relying on just large scale 10 intermediaries at the experience of retailing 11 their products and dealing directly with local 12 communities is not a very good idea. 13 I haven't seen that huge trend in any 14 way, but I do think it's a risk worth watching. 15 REV. FLAKE: As a community developer 16 is what I do more so than what I was doing in 17 politics, I think it is critical for us to 18 understand that the actual loan of the bank 19 requires that they have a system by which they 20 can measure some standards and some 21 accountability. 22 I think the worst thing would be to 23 listen to some of those who basically would 24 draw us back into a process that would be 25 nothing but a replication of what happened with . 586 1 2 Model Cities and some of the other programs, 3 and that is that there would be dumping of 4 monies into communities through other kinds of 5 intermediaries and those monies would not be 6 accountable, and I don't think you would get a 7 product. 8 I think the way that the system works 9 now is in the best interests of most 10 communities in that the banks have identified 11 the most accountable, most capable 12 organizations for the delivery of their 13 product, and I think it has worked extremely 14 well, and to spread that out to interests that 15 are not necessarily concerned about that kind 16 of development, but are concerned about the 17 ongoing survival of the organization, or 18 concerned about having a voice, the reality is 19 that is not the bank's function, and, 20 therefore, we have to be very careful in making 21 sure that we do not demand of a bank that which 22 jeopardize its ability to be able to do what it 23 is in fact certified and organized to do, and I 24 would just urge that to have that caution as we 25 move forward. . 587 1 2 3 MS. KOTELCHUCK: Speaking from our 4 perspective, this is the first time that we're 5 aware of banks such as Citibank embracing 6 primary care as and integral part of community 7 development, which we believe it to be, and as 8 such, primary care is really a developing area. 9 It's a direction that the health system is 10 moving in. 11 It is a new area for lending and for 12 development, and it's been our experience that 13 an enormous amount of work is needed and an 14 enormous amount of expertise is needed in terms 15 of what will work in a particular community, 16 what a group needs to be successful in this 17 area, and Citibank has been quite supportive in 18 terms of the development of that expertise on 19 the part of our group, and I hope that this is 20 useful to others in terms of breaking into the 21 area of primary care from lending and other 22 communities. 23 MR. LONEY: Thank you. Any other 24 questions of this panel? If not, I thank you 25 all very much.
Last update: December 3, 2010