Public Meeting Regarding Citicorp and Travelers Group Thursday, June 25, 1998 Transcript of Opening Remarks

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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.frb.

  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.