Mr. Ralph Nader
P.O. Box 19312
Washington, D.C. 20036

Dear Mr. Nader:

This is in response to your letter dated April 7, 1998, to Chairman Greenspan noting press reports of talks between the Chairman and the Chairmen of the Travelers Group and Citicorp prior to the public announcement of the acquisition of Citicorp by Travelers. Your letter raises concerns about the potential for insider trading based on those discussions.

About ten days prior to the public announcement of the Travelers/ Citicorp transaction, Chairman Greenspan met with representatives of the two companies, who advised him that an acquisition transaction was under active consideration, but that no agreement had yet been reached. Chairman Greenspan told the representatives that the Board would judge any possible transaction under the applicable statutory criteria. Chairman Greenspan expressed no views on the merits of the proposal, nor did he indicate his views as to how the Board as a whole might act on such a proposal.

Representatives of Travelers and Citicorp also had discussions with, and provided two letters to, the Board's General Counsel, which outlined several specific legal issues that might be raised by a possible acquisition transaction. In these communications, the representatives outlined possible approaches to these legal issues and staff identified relevant principles. No statement was made as to how the Board would act on an application for approval of any transaction that might be worked out between the parties. In addition, the representatives met with the staff of the Board's Division of Banking Supervision and Regulation to make a presentation on the general financial condition of Travelers and its subsidiaries, their risk management systems, and efforts to address the Year 2000 problem. The staff provided no guidance to the representatives on any of these issues.

We have been advised that representatives of Travelers and Citicorp had similar communications with the Federal Reserve Bank of New York and that Reserve Bank personnel likewise gave no indication with respect to how the Board would act on any acquisition proposal.

While the ex parte rules of federal law do not apply to applications unless a formal hearing is ordered, the Board has adopted a policy that restricts ex parte communications between outside parties interested in any application and Board personnel. These restrictions, however, do not apply until a formal application has been filed and a protest to the proposal has been received. It is not uncommon, and is fully consistent with federal law and the Board's rules, for companies considering acquisitions to provide advance notice to the Federal Reserve and to discuss potential issues raised by the proposal. Although in these preliminary discussions the staff may help identify particular issues relevant to the proposal and provide guidance to these companies on relevant Board precedent and principles governing these issues, our practice is not to provide these companies with any views as to ultimate Board action. Staff also provides information regarding the issues raised by proposals, including by this proposal, to various other interested members of the public, including community groups, law firms, banking organizations, and members of Congress and their staff. The Board's practice in this regard represents sound public policy.

Under the Board's procedures, once an application for approval of the Travelers/Citicorp transaction is received by the Board, public notice of the application will be published, setting a period of time for the submission of comments on the proposal from the public. Any comments received will be carefully considered by the Board. The Board will then make its decision on the transaction based on the record developed in the application process and the Board's views of the relevant statutory factors.

Finally, the trading activity referred to in your letter occurred after the public announcement of the Travelers/Citicorp agreement. You should also be aware that the federal securities laws would prohibit trading by a corporate insider who has nonpublic information concerning a potential acquisition in the stock of the companies involved based on that information. Board members and employees are also prohibited from buying the stock of a banking organization, such as Citicorp, or the stock of an organization, such as Travelers, that has a securities firm as a predominant part of the company. Federal ethics rules also prohibit federal officials and employees from making use of nonpublic information for personal financial gain.

Very truly yours,

(Signed) William W. Wiles

William W. Wiles