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Public Meeting Regarding Citicorp and Travelers Group
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1 1 2 3 4 5 6 7 8 9 PUBLIC MEETING REGARDING CITICORP AND TRAVELERS 10 GROUP 11 THURSDAY, JUNE 25, 1998 12 NEW YORK CITY 13 14 15 16 17 18 19 20 21 22 23 24 25 . 2 1 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 . 3 1 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 . 4 1 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. . 5 1 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 . 6 1 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 . 7 1 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 . 8 1 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 . 9 1 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 . 10 1 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 . 11 1 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 . 12 1 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 . 13 1 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 . 14 1 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 . 15 1 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 . 16 1 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 . 17 1 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. . 18 1 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 . 19 1 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 . 20 1 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 . 21 1 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 . 22 1 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 . 23 1 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 . 24 1 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 . 25 1 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 . 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 . 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. . 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 . 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 . 55 1 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, . 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 . 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 . 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 . 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 . 62 1 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 . 63 1 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. . 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 . 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 . 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 . 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 . 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 . 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 . 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 . 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 . 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 . 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 . 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 . 99 1 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 . 100 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 . 101 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 . 102 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 . 103 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. . 104 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 . 105 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. . 106 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. . 107 1 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 . 108 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 . 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 . 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 . 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 . 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 . 113 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 . 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 . 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 . 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. . 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. . 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 . 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 . 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 . 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 . 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) . 123 1 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, . 124 1 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 . 125 1 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 . 126 1 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 . 127 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 . 128 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. . 129 1 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 . 130 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 . 131 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 . 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 . 133 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 . 134 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 . 135 1 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 . 136 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 . 137 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 . 138 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 . 139 1 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 . 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 . 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 . 142 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 . 143 1 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) 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 . 144 1 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 . 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 . 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 . 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 . 148 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 . 149 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. . 150 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, . 151 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 . 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 . 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 . 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 . 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 . 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 . 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 . 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 . 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 . 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 . 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 . 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 . 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. . 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 . 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. . 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 . 172 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 . 173 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 . 174 1 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 . 175 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 . 176 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' . 177 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. . 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 . 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. . 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 . 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. . 182 1 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 . 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 . 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 . 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 . 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, . 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. . 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 . 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 . 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. . 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 . 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 . 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 . 196 1 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, . 197 1 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. . 198 1 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 . 199 1 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 . 200 1 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 . 201 1 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 . 202 1 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 . 203 1 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 . 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 . 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 . 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 . 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 . 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 . 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 . 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 . 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 . 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 . 213 1 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 . 214 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 . 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 . 216 1 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 . 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 . 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 . 219 1 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 . 220 1 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 . 221 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 . 222 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 . 223 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, . 224 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 . 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 . 226 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. . 227 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 . 228 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 . 229 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. . 230 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 . 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 . 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 . 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 . 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 . 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 . 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 . 237 1 2 Tol, Phyllis Salowe-Kaye, Rashnmi Rangan, Ruhi 3 Maker, Gail Burks, and Alan Fisher from 4 California Reinvestment Committee has asked 5 that the letter that he propose be read into 6 the record as has Mr. Van Tol of the Wisconsin 7 Rural Development Center. 8 Mr. Ortiz, are you going to read both 9 of those letters? 10 MR. ORTIZ: No. I'm going to read Mr. 11 Fisher's letter. 12 Dear Mr. Loney: The California 13 Reinvestment Committee regrets it cannot be 14 present for this testimony in person. We 15 authorize the Inner City Press/On the Move to 16 enter our testimony into the record and request 17 it consent on the matter. 18 We would like to extend our 19 appreciation to the Federal Reserve for 20 inviting public comment on the Citicorp 21 Travelers proposed merger. 22 I am Ernesto Ortiz representing the 23 California Reinvestment Committee from San 24 Francisco, California. 25 We regret that we cannot attend in . 238 1 2 person and with our coalition members, who 3 represent two hundred community-based 4 organizations around California. 5 For a number of critical reasons 6 described below, we urgently request that the 7 Federal Reserve deny Travelers' application to 8 acquire Citicorp. The crux of our argument 9 rests on the record Travelers and Citicorp has 10 established in communities of color and how 11 this merger will adversely affect low-income 12 communities. 13 As you have heard or may hear in 14 testimony from other groups both Travelers and 15 Citicorp have programs supporting community 16 investment and charitable giving. Yet both 17 groups have poor histories of serving people of 18 color and of underserving low-income 19 communities. 20 In addition, the announced $115 21 billion CRA lacks scope, size and detail for an 22 institution the size and scope of the proposed 23 Citigroup. 24 Citibank has one of the worst 25 reinvestment programs for a major California . 239 1 2 financial institution. The bank has a record 3 of severely underserving Hispanics in the 4 State. California is at least 30 percent 5 Hispanic, yet only 12 percent of the 6 applications taken by Citibank in California in 7 1995 were from Hispanics. 8 In 1996 that number plummeted to only 9 4 percent of mortgage applications. Over that 10 same period of time, the number of applications 11 accepted from white applicants increased nearly 12 10 percent. 13 For many years the bank received 14 below satisfactory ratings on it's CRA 15 performance evaluation. Oddly enough, the CRA 16 rating for Citibank improved in 1996 as their 17 lending record to Hispanics was decimated. 18 Just when their rating began to 19 improve, the bank also dropped its commitment 20 to low-income people and began to pander to 21 moderate and high income people. The bank has 22 systematically eliminated low-cost products 23 such as those Citibank competitors offered 24 specifically designed to meet the needs of 25 low-income consumers. . 240 1 2 According to Citibank literature, the 3 Basic Banking Account has a monthly service 4 charge of $6.50 and is only free if you do 5 $10,000 in business with them. 6 The new EZ Checking program is a 7 no-fee account only if you keep a balance of 8 $1500. Clearly, low-income account holders 9 were not in mind when these programs were 10 develop. The Citibank developed the small 11 business loan product which has a minimum loan 12 requirement of $100,000. 13 The minimum requirement prevents most 14 small businesses owned by people of color or 15 businesses that reside in low-income 16 communities from qualifying. 17 Instead, these communities need loans 18 in the amounts of ten to forty thousand. The 19 California Reinvestment Committee has tried 20 unsuccessfully to work with Citibank. Since 21 1992 Citibank has refused to adopt Community 22 Reinvestment recommendations provided by the 23 California Reinvestment Committee. If one 24 looks at Travelers record of serving people of 25 color, the picture is equally harrowing to that . 241 1 2 of Citibank. 3 As you may already know there is 4 outstanding housing discrimination complaint 5 against Travelers Group. The suit alleges that 6 Travelers discriminates in the provision 7 underwriting, and terms and conditions of 8 homeowners insurance to homeowners and homes in 9 African American or Latino neighborhoods. 10 Travelers maintains a minimum policy 11 value of $250,000 in metropolitan Washington, 12 D.C. This excludes more than 90 percent of 13 homes in predominantly African American and 14 Latino neighborhoods from qualifying for 15 Travelers homeowners insurance. 16 In what may be an effort to right the 17 wrong, Travelers and Citicorp has delivered a 18 $115 billion commitment to communities. 19 Unfortunately, this pledge is minuscule for an 20 institution the size of the proposed Citigroup. 21 The California Reinvestment Committee 22 has been working with banks for eleven years to 23 develop community investment goals and in all 24 our times we have not had one bank measure its 25 goals based on the bank's deposit business. . 242 1 2 Banks such as Bank of America, Washington 3 Mutual, Wells Fargo, as well as others, have 4 measured their CRA goals based on a percentage 5 of the bank's assets. 6 Currently, the industry standards is 7 8 percent of assets. If a proposed Citigroup 8 were to revise its goal amount to reflect its 9 assets, as it should, the pledge will need to 10 be increased from 115 billion to 560 billion 11 dollars, nearly a 500 percent increase. 12 But more important than the size of 13 the commitment, is how it would impact the 14 communities. This commitment provides zero 15 assurance that it will benefit low-income 16 people because the commitment lacks details on 17 how the program will be delivered. For 18 example, the proposed Citigroup pledges to 19 quote expand the availability of commercial and 20 homeowners insure coverage and low and moderate 21 income customers, yet does not describe any 22 details on how this program will be developed 23 and delivered. 24 Considering Citibank and Travelers 25 histories of underserving communities of color, . 243 1 2 we are not convinced that this pledge is backed 3 up by a clear understanding of the needs of low 4 in come areas and communities of color, nor a 5 concrete commitment that the proposed Citigroup 6 would indeed serve the chronically underserved 7 communities. 8 MR. LONEY: Thank you, Mr. Ortiz. 9 MR. LEE: We will put it in the 10 record. 11 MR. LONEY: Please do. Mr. Lee. 12 MR. LEE: I don't know if you want to 13 alternate. I'll do it. To whom it may concern 14 at the Federal Reserve: I authorize Matthrew 15 Lee of Inner City Press, or whomever he 16 designates, to read the following comments 17 during my scheduled appearance at the Citicorp 18 Travelers merger hearing on Thursday, June 19 25th, in New York City as a representative of 20 the Wisconsin Rural Development Center. 21 Mr. Lee is also authorized to answer 22 any questions that you may have. We'll see. 23 Don't count on it. 24 I would have preferred to make these 25 comments myself, but unfortunately the Federal . 244 1 2 Reserve has not agreed to use readily available 3 technologies to allow testimony from people who 4 cannot afford to travel to New York. 5 The same goes for Woodstock and I 6 also raise that for the record. Here it is. 7 Wisconsin Rural Development Center testimony to 8 the Federal Reserve on the Citicorp Travelers 9 merger. 10 June 25, New York City. 11 My name is Matthew Lee. Hubert Van 12 Tol of Sparta, Wisconsin has asked me to 13 present these comments today on behalf of the 14 Wisconsin Rural Development Center. 15 Mr. Van Tol also served as a board 16 member of the National Community Reinvestment 17 Coalition and is co-chair of NCRC's Legislative 18 Regulatory Committee. 19 Thank you for the opportunity to 20 testify today. We would have preferred the 21 opportunity to testify in a location more 22 convenient to our membership, but we 23 nevertheless bring this message to you from our 24 members. 25 Don't allow this illegal merger to . 245 1 2 take place. Wisconsin Rural Development Center 3 has been assessing the credit needs of our 4 community and working with banks in Wisconsin 5 for the past five years. WRDC is a member of 6 the National Community Reinvestment Coalition 7 and we endorse NCRC's position on this merger. 8 Our members know that the 9 consolidation in the banking industry has not 10 provided them with benefits that are worth the 11 increased fees. They doubt that further 12 consolidation across the whole range of 13 financial services will bring them any more 14 benefits than banking consolidation has. 15 Our members are primarily from rural 16 and small-town Wisconsin. They are people who 17 work hard, play by the rules and often find the 18 deck stacked against them. Even if they could 19 do so, our members would never dream of making 20 an application to the Federal Reserve for the 21 privilege of breaking the law. They don't 22 think that way, and even if they did, they 23 would have no hope of succeeding. 24 When they hear the details of what 25 Citicorp and Travelers are proposing to do with . 246 1 2 merger they just shake their heads. They know 3 why government regulators are so willing to 4 bend and break the law on behalf of powerful 5 corporations, but they wonder if our democracy 6 really has to be that way. 7 The Bank Holding Company Act makes 8 clear that any bank holding company aquiring 9 another company which is engaged in activities 10 which are impermissible for a bank, has two 11 years to divest themselves of those 12 impermissible activities. 13 The Federal Reserve has ruled very 14 explicitly in previous cases that during the 15 two year waiver period the acquiring 16 institution may not engage in cross-marketing 17 and cross-selling between the bank and the 18 business in question. The two year waiver 19 period is granted in the law solely for the 20 purpose of providing a reasonable length of 21 time for the bank holding company to divest 22 itself of impermissible businesses without 23 having a fire sale. 24 The three additional one year waivers 25 were only intended for use in cases in which . 247 1 2 the bank holding company had made a good faith 3 effort to divest itself during the two year 4 period but was unable to do so. 5 With this application Citicorp and 6 Travelers are throwing the law, Federal Reserve 7 precedent and common sense out the window. 8 They seek what they believe should be an 9 automatic two year waiver, not so they will 10 have time to divest their insurance 11 underwriting business, but so they will have 12 time to integrate the different businesses. 13 They present their application with 14 the assumption that they are automatically 15 entitled to the two year waiver, and it seems 16 the additional three one year waivers as well, 17 even though they have no intention of divesting 18 their insurance underwriting business. 19 They have made it very clear they 20 intend to use the two year period to build and 21 develop their insurance business by 22 cross-marketing and cross-selling between the 23 banking and insurance sides of the business. 24 They are rubbing our faces in their blatant 25 disregard for current banking laws. . 248 1 2 It is clear the Citicorp and 3 Travelers want the Congress to pass a financial 4 modernization bill; it is also clear that the 5 Federal Reserve wants Congress to pass a 6 financial modernization bill, but such a bill 7 has not passed and in fact may not pass in the 8 next two years. The responsibility of the 9 Federal Reserve is to enforce the laws and 10 regulations as they written, not as particular 11 Federal Reserve or arrogant corporate leaders 12 may wish they were written. 13 While we agree that the Citicorp 14 Travelers CRA pledge with nearly half the 15 dollars in credit card lending is a bogus 16 pledge, we are not raising community 17 reinvestment issues or convenience and needs 18 questions at this hearing. 19 Any question of the adequacy of the 20 of Citicorp's CRA record and the future CRA 21 commitments of the merged entities is 22 overshadowed by the legal questions raised by 23 the proposed merger. 24 If corporations like Citicorp and 25 Travelers are allowed to ride roughshod over . 249 1 2 the law in this way it will mean that virtually 3 everything about our democracy is up for sale. 4 We ask the Federal Reserve to do the 5 right thing, deny this application and tell 6 Citicorp and Travelers that if they wish to 7 change the law, they are entitled to do so in 8 the same way that everyone else is in this 9 country by petitioning Congress to change the 10 law. 11 Thank you very much. 12 MR. LONEY: Phyllis Salowe-Kaye. 13 MS. SALOWE-KAYE: You had asked 14 before another speaker to give you the 15 information that they had requested from 16 Travelers that they didn't receive, and I have 17 a letter and I had marked the things that we 18 didn't receive that we requested, so I'll leave 19 it here. 20 Secondly, we received no money from 21 Travelers or Citibank, although Citibank does 22 take a table at our recent annual dinner, but 23 we haven't gotten the check. 24 (Laughter) 25 And I don't know if we'll get the . 250 1 2 check after today. 3 My name is Phyllis Salowe-Kaye and 4 I'm executive director of New Jersey Citizen 5 Action. 6 The testimony I'm going to give today 7 is on our behalf. We are the state's largest, 8 New Jersey's largest consumer watch dog 9 organization with over one hundred affiliated 10 organizations and more than sixty thousand 11 families which pay dues to us. The second 12 group is the New Jersey Affordable Nonprofit 13 Housing Network, and they are the state's trade 14 association representing over one hundred 15 nonprofit organizations. 16 We oppose this merger for the 17 following reason. 18 Number one, the merger is illegal. 19 Two, it's not safe or sound. 20 Three, Citibank comes into this state 21 into New Jersey with a less than impressive 22 record of service to low and moderate income 23 communities. 24 And, four, Travelers activities are 25 not regulated under the Community Reinvestment . 251 1 2 Act, a situation which we believe is a threat 3 to all low and moderate income residents in New 4 Jersey. 5 Speaking to the first point, it 6 almost seems silly to be addressing the 7 illegality of this merger under the current law 8 when we all know that changing the law is what 9 this is all about. Both entities have been 10 lobbying Congress to pass the Financial 11 Services Act of 1998 that would presto-changeo 12 make all of this legal. But until that happens 13 this merger is premature and dangerous. 14 Afterwards, if it happens, this merger will be 15 dangerous. 16 While Citigroup claims that the 17 merger is legal so long as the new entities 18 divest itself of Travelers underwriting 19 business within two years, there is no mention 20 of such divesture and no good faith attempt to 21 share a plan for how this might happen. We 22 don't believe that they've given it a single 23 thought. 24 Clearly, they expect to have one foot 25 out of the gate when the legislation that they . 252 1 2 have lobbied for so heavily is finally passed. 3 Why should you, the Federal Reserve Board, give 4 them the advantage? 5 On the second point, the merger 6 brings up the issue of safety and soundness. 7 No one seems to know what this new 8 sewing-together and it's entity will look like 9 or how it will behave once it has been created. 10 We believe it will be a monster. Now 11 we know that Godzilla is fake, but this new 12 Citigroup will be real, and once it is set in 13 motion with no rules to govern half of its 14 limbs and a part of its brain, it will too 15 late. 16 This merger has the potential for 17 exposing taxpayers to another situation like 18 the S&L bailout. As a result, Citigroup could 19 become dangerously exposed to sudden crises 20 either of their own making, or due to events 21 beyond their own control, that could wipe out 22 assets. 23 Citicorp remember received constant 24 oversight by both your board and the OCC when 25 it overextended itself in developing countries . 253 1 2 in the 1980s. 3 This merger could recreate a company 4 that is too big to be allowed to fail when in 5 times of trouble it would mean costly 6 government bailouts in order to prevent 7 economic catastrophe. We do remember the S&L 8 bailout and will never forget who paid for it. 9 The third issue, which is the poor 10 quality of the Citibank service to low and 11 moderate income people in New Jersey, is a 12 matter of record. 13 While they claim some improvement 14 over the last year, their 1996 record is 15 abysmal. Loans by Citicorp to African 16 Americans were denied 2.4 times more than 17 whites, the number being far higher than the 18 national denial rate. 19 The record shows that the bank is 20 clearly underserving a significant portion of 21 minority and low and moderate income people in 22 New Jersey. They trail their peers in all 23 categories with the exception of having the 24 same denial rate to Hispanics as all lenders. 25 Now Travelers. Citizens Action and . 254 1 2 the Affordable Housing Network have held some 3 promises meetings with Citibank over the last 4 few months about how they could better meet the 5 needs of New Jersey, but nothing has been 6 finalized. 7 Our recent discussions have only 8 emphasized the lack of clarity regarding the 9 intentions of their bride-to-be, Travelers 10 insurance company. Travelers has been a real 11 Neanderthal when it comes to recognizing and 12 understanding their responsibility to low, 13 moderate and minority communities in New 14 Jersey. 15 Here is an example. When questioned 16 about -- and we met with the general counsel of 17 the P and C for the whole country -- when 18 questioned about their Fair Housing complaint 19 filed against Travelers last year which accused 20 them of not insuring homes valued at less than 21 $250,000, the answer was that the property 22 casualty insurers in New Jersey actually has 23 been doing much better, because they market the 24 houses of a lower value, somewhere between two 25 hundred thousand and $225,000. That should . 255 1 2 really make the aspiring homeowners in Newark, 3 Trenton and Camden breathe easier. 4 That's not the worst of it. On a 5 Tuesday we were told that New Jersey was one of 6 the top ten markets for P and C insurance and 7 that they write lots of homeowners insurance in 8 New Jersey. 9 The following Monday we get a call 10 from them telling us that almost all the 11 wonderful things that were announced in the 12 Citigroup press release won't be done in New 13 Jersey because they hardly write any homeowners 14 policies in New Jersey. 15 Two days later they call us and tell 16 us they have 4.9 percent of the market and 17 yesterday we find out from the Department of 18 Banking that they're number 6 out of 77 19 companies in New Jersey that write homeowners 20 insurance. 21 We don't know who they are. We've 22 asked for information from them. This points 23 to why they must be forced to disclose all of 24 the information just like the bank has to. 25 Finally, in their press release, Citigroup . 256 1 2 makes the following pledge and I'm going to 3 quote. They say: They promise to be fair and 4 transparent in dealing with our customers and 5 their communities, so we can earn their trust 6 and support. 7 In light of their lack of clarity and 8 candor regarding the nature of Travelers 9 current business in New Jersey, or its future 10 commitment, or its plan to divest of 11 underwriting business under the current law, I 12 would say that transparent is light years away. 13 In fact, they haven't made it out of opaque 14 into translucent, and the only thing that's 15 transparent here is their clumsiness in trying 16 to avoid making a clear commitment to the 17 people of New Jersey. This merger must be 18 stopped. 19 MR. LONEY: Thank you, ma'am. 20 Ms. Rangan. 21 MS. RANGAN: Good afternoon. My name 22 is Rashmi Rangan. I am the executive director 23 of Delaware Community Reinvestment Action 24 Council. I am also board member of National 25 Community Reinvestment Coalition, a trade . 257 1 2 association of more than six hundred fifty 3 organizations nationwide. 4 I am also a member of Inner City 5 Press/Community On the Move. I'm also a tax 6 paying citizen, and I'm very concerned about 7 this merger. 8 I am testifying today under protest. 9 These proceedings are already tainted because 10 of the illegality of this merger, and the fact 11 that apparently it has already been 12 preapproved. 13 Without taking away the important 14 role that groups who have testified and will 15 testify in favor of this merger, and the 16 support that the banking community rendered 17 Citicorp offered these communities, we still 18 say that we are the community reinvestment 19 experts. We assess a bank's performance 20 exclusive of its subsidiaries and affiliates 21 and other entities locally, nationally and now 22 globally, and what the impact will be on our 23 community. 24 We are a ten-year old nonprofit 25 advocacy organization. We are opposed to the . 258 1 2 merger, proposed merger of Travelers to 3 Citicorp, and there are a number of adverse 4 issues. 5 The announced merger is an illegal 6 proposal. Under the federal Bank Holding 7 Company Act and even under the Federal Reserve 8 Board's own precedents and regulations, the 9 BHCA prohibits a bank holding company from 10 owning insurance underwriter or agency 11 operations. 12 The Act was enacted precisely to 13 prohibit combinations like Travelers and 14 Citicorp. Even Travelers say that under 15 current law it would have to divest its 16 insurance underwriting operation. The 17 announced merger is and unethical proposal. 18 Back in 1956 when the Bank Holding 19 Company Act was enacted the two year waiver 20 made sense to the newly created bank holding 21 company to buy time to come into compliance 22 with the law. 42 years later to ask for it 23 this time does not make sense, particularly 24 when the intent is absolutely clear that 25 lobbying efforts will be stepped up. . 259 1 2 Of much concern to us is the fact 3 that the discussion between applicants and the 4 Federal Reserve System prior to the merger 5 announcement which make a mockery of today's 6 proceedings and tomorrow's proceedings. 7 I also would like to, actually, I 8 have too little time, so I'll skip some. But I 9 have a big packet out there already presented 10 with transcripts from the Delaware Department 11 of Insurance public hearing and I want to 12 request that you get the transcript of the New 13 Jersey Insurance Department hearing, the 14 Delaware Banking Department public hearing, and 15 we testified at all those places. 16 The proposed merger is an expensive 17 bet. We have been led to believe in the 18 doctrine of too big to fail. If the big giants 19 have to be bailed out, we, the taxpayers, will 20 be stuck with that cost. 21 The savings banks will end up paying 22 hefty premiums. Maybe some of you don't 23 remember the S&L crisis. We do. Most megabank 24 mergers today tout the advantage of electronic 25 banking and technology. . 260 1 2 Can you imagine within this 3 environment the impact on safety and soundness 4 when with one stroke on the keyboard you can 5 move your deposit, particularly when the entity 6 which is a large insurer of property in a 7 geographic area struck by a national 8 catastrophe also happens to be your bank? 9 What about the implied subsidies? 10 We're talking about the FDIC insurance. This 11 proposal also raises concerns with the 12 community convenience and need. Travelers 13 Group to our community symbolizes antitrust. 14 We do not trust PrimeAmerica 15 Financial Service in our community. We do not 16 trust Commercial Credit loan officers in our 17 community. We do not trust property casualty 18 insurance insuring our community. We do not 19 trust Travelers Group, period. 20 Relative to that, we remain 21 unimpressed. This application should be 22 dismissed or otherwise denied. 23 Thank you. 24 MR. LONEY: Thank you, Ms. Rangan. 25 Ms. Maker. . 261 1 2 MS. MAKER: Good afternoon. My name 3 is Ruhi Maker, and I am co-convenor of the 4 Greater Community Reinvestment Coalition in 5 Rochester, New York, and I present this 6 testimony on their behalf. 7 We have been in existence since 1993 8 and approximately serving not-for-profit 9 organizations which is actually quite a large 10 number in Rochester, and I would say about a 11 million, and I'm show you some of our 12 demographics later. 13 I also work as a Senior Attorney at 14 the Public Interest Law office of Rochester. 15 Many of our colleagues have spoken 16 about some of the technical legalities and I 17 won't belabor those specific points. I'm here 18 to speak against the proposed merger today. In 19 the name of modernizing the laws governing the 20 financial institutions of this country the CEOs 21 of the largest of those institutions have been 22 lobbying for a number of years to repeal the 23 Act. Despite pouring of millions of dollars 24 into the contributions into the campaigns of 25 the House and Senate Banking Committee, they . 262 1 2 have failed to achieve their goal, and there is 3 still no consent on what financial 4 modernization should look like, despite the 5 version of HR we have before the Senate today. 6 In the face of their failure, the 7 CEOs of Citicorp and Travelers, two of the 8 largest financial institutions in the country, 9 have now decided to simply forge ahead with the 10 merger that takes advantage of a loophole in 11 the existing law trusting that their political 12 and financial clout will insure that there fait 13 accompli is legalized. 14 This is not modernization. It is a 15 reversion to the oligarchies of the past. As 16 someone who grew up in Pakistan, I emigrated to 17 this country about 13 years ago, I know what it 18 is like to live in an oligarchy, where a 19 handful of families control the economy and are 20 free to act as if they were above the law. 21 For the Federal Reserve to approve 22 this merger under these conditions would send a 23 clear signal to the financial elite that their 24 privileged status carries no corresponding 25 obligations to the community. . 263 1 2 True financial modernization would 3 require the systematic revision of the laws 4 governing the financial industry. It cannot be 5 done by granting piece meal exceptions to 6 existing regulations of time there is a new 7 merger application. 8 True financial modernization would 9 require the systemic extension of existing 10 community investment obligation from the 11 banking industry to the securities and 12 insurance industry in line with their recently 13 acquired rights to provide services formerly 14 restricted to banks. 15 True financial modernization would 16 require an increase in the responsiveness of 17 financial institutions to the needs of their 18 host communities. 19 Here I can speak from my own 20 experience as a member of the RC, the 21 coalition. We have had ongoing discussions 22 with four area banks about the credit needs in 23 Rochester. The three banks with the regional 24 or local-decision making authority have been 25 far more responsive than has the megabanks in . 264 1 2 our region. We have had virtually no dialogue 3 with Citibank. 4 When Rochester represents a 5 significant portion of a banks market share the 6 regional presence returns our phone call, and 7 makes sure the deal gets done, even if someone 8 has to work on it over the weekend. 9 When Rochester represents 1 percent 10 of an essentially global bank's market which is 11 probably what we will be if this merger goes 12 through, the needs of a local community are 13 very low priority. 14 As the trend of globalization of the 15 economy proceeds apace, we must ensure that the 16 democratic accountability of those who control 17 the commanding heights of the economy keeps 18 pace, otherwise false modernization is liable 19 to lead us back in the era of robber barons. 20 One of the things that we said when 21 the merger was first announced was that the 22 pledge, the CRA records for me, it's 23 irrelevant. Even if the CRA record was 24 perfect, this for policy reasons that I've just 25 outlined, I would have problems with this . 265 1 2 merger. 3 However, we have analyzed some of the 4 data. We have been analyzing it since 1993. 5 We released reports. You always rank all major 6 nine banks doing business in the Rochester. 7 '93, '94, '95, Citibank has had the worst 8 record of lending in low-income neighborhoods 9 and always the last of all nine banks. 10 I would like to, maybe you can wake 11 us up a little bit, Matt. Matt has agreed to 12 work with me on this in showing the three 13 little maps. 14 I'll first show you the racial 15 composition map which will show what the 16 demographics of Rochester looks like. 17 Turn that on. Essentially the red is 18 poorer, redlining. The yellow is median income 19 indications over there, and the green are the 20 more moderate income neighborhoods and then the 21 little black pie charts show you the rates. 22 The ones that are predominant black are 23 predominantly minority neighborhoods. The ones 24 that are predominantly. 25 So you understand what the racial . 266 1 2 composition looks like, I will then quickly 3 show you two maps of 1996 small business and 4 home mortgage lending. 5 Here is home mortgage, and I don't 6 know how familiar you are with Rochester but 7 basically the red with the black pies and 8 that's black and tends to be poor and you can 9 very quickly see there were no loans in the red 10 center, and if you look at the red, many of 11 them are predominantly minority census tracts. 12 That is clear with the numbers that I could 13 speak to if I have more time. 14 Matt, look at the small business. 15 This is, again, you know very recent data. The 16 red represents the no loans and, again, very 17 graphically the lack of lending occurs in many 18 of the minority low-income neighborhoods and 19 I've submitted copies of the maps along with 20 written testimony. 21 Very quickly, if I may proceed, you 22 know, if you look at 1996 loans to blacks and 23 Hispanics in the entire MSA, Citibank had 11. 24 The person who is number 8, and all of this is 25 again in charts that are submitted in terms of . 267 1 2 market share, had twice, two times as many 3 loans, the nearest competitor. The one who is 4 right at the top, the bank that was right at 5 the top, had eight times as many loans to 6 blacks and Hispanics. Again, looking at low 7 numbers, 21 loans home mortgage loans in the 8 MSA to low census tracts. Bank number 8 had 9 four times as many loans. 10 The bank that was number one had 13 11 times as many loans, and in terms of deposits, 12 they are the second largest deposit in 13 Rochester, so it's not that they are small 14 presence. They have a lot of our money. I 15 don't know what they do with it. So I will 16 conclude at this point. 17 Thank you. 18 MR. LONEY: Thank you. 19 Ms. Salowe-Kaye, I wasn't quite clear 20 what you were saying about the issue of 21 Travelers' present involvement activities in 22 New Jersey. 23 MS. SALOWE-KAY: Sure. 24 MR. LONEY: Is it a mystery to 25 people? I mean it sounded like were getting . 268 1 2 different answers. 3 MS. SALOWE-KAY: When Travelers came 4 down from Connecticut and met with us they told 5 us that they did a whole lot of, they wrote a 6 whole lot of policy for homeowners insurance in 7 the state. They told us they were one of the 8 top ten, they had a great amount of market 9 share. 10 A week later, when we asked that we 11 be included as one of the states that was 12 announced in their press release to receive a 13 bunch of special programs, like their diversity 14 training for ages -- they had a whole bunch of 15 things to increase their policy sales. They 16 had a program where they would decrease the 17 cost of policies for people of lower income. 18 They said, no, now we can't do that 19 in New Jersey because we really write virtually 20 no homeowners insurance in New Jersey. Then 21 we, they called two days later they said, well, 22 our market share is 4.9. By that time, the 23 Department of Banking in New Jersey had gotten 24 back to us with the statistics -- insurance -- 25 and we discovered that in fact they are number . 269 1 2 6 out of 77 in terms of who writes the most 3 homeowners policy in New Jersey. 4 What I'm saying is we asked them for 5 some very specific information about the 6 income, the race, the census tracts as to where 7 they write their policies. They refused to 8 give us that information, plus a whole lot of 9 other information that we requested, and what 10 I'm saying is it seemed that they were less 11 than truthful with us when they met with us 12 about what kind of business they actually were 13 doing in New Jersey, and when we actually found 14 out they in fact were doing a fair amount of 15 market share. 16 MR. LONEY: Okay. 17 MS. SALOWE-KAY: The letter shows you 18 who we met with, also. 19 MR. ALVAREZ: I have a question for 20 Ms. Maker on the charts. 21 Did you do your analysis based on the 22 controlling for income or taking into account 23 income levels? You showed us charts that were 24 based primarily on race. 25 MS. MAKER: The first chart actually . 270 1 2 had race and income on it. It's the red was 3 the low income and the yellow was the median. 4 MR. ALVAREZ: I'm asking a slightly 5 different question. 6 Did you control for the income of the 7 borrower in the area where there were loans? 8 You showed us some areas where there are no 9 loans, and some areas where there are loans and 10 then you break the chart out into various 11 racial groups. 12 Did your analysis go another step to 13 include also an analysis of income levels of 14 the various people who did receive loans to 15 show disparities among income levels? 16 MS. MAKER: Yes, I think I need to 17 refer to -- you're talking about HMDA at this 18 point as opposed to small business? 19 MR. ALVAREZ: I'm just asking if it's 20 in the study you're going to be providing. 21 MS. MAKER: We looked at both. 22 (Continued on next page) 23 24 25 . 271 1 2 MS. MAKER: Low-moderate houses, 3 low-moderate census tracts, I have the previous 4 year's numbers; all of that is provided in 5 there. 6 I can see, for example, in 1996 there 7 were 78 loans in low-mod households in the MSA 8 and, again, that was the last low-mod household 9 that received the least number of loans in the 10 MSA. And the next bank up was, actually, First 11 National Bank, which was a tiny bank in 12 Rochester, which was 130. Again, that persists 13 across income. Yes. That is all in the -- the 14 little charts are attached to stuff that was 15 handed out, and handed out, again, as with the 16 maps. 17 MR. HODGETTS: You say it appears to 18 form better -- I can't hear you. You said the 19 peers perform better than City. Do they 20 perform better in those inner city census 21 tracts? 22 MS. MAKER: In all of the categories, 23 the peers perform. If you look at 1996, for 24 HMDA, Citibank is, I think, last, apart from 25 that bank which now doesn't exist anymore; it . 272 1 2 has merged with a tiny bank. Citibank is last 3 for the MSA. It is last for the City of 4 Rochester. It is last in black Hispanic 5 households in the MSA. It is last in terms of 6 low-mod households in the MSA. It is last in 7 terms of low-mod income census tracts as well. 8 So it is consistently -- I think when we did -- 9 the '96 data hasn't been put into that ranking. 10 But '93, '94, '95, we look at loan to 11 deposit, we have 13 different 12 characteristics -- and, again, that study is 13 also included in the comments. We looked at 13 14 different characteristics, and however you spun 15 the numbers, because I know statistics can say 16 a lot and this is why I have done it, I have 17 spun the numbers every single way and they 18 always came at the bottom. 19 The middle ranks -- sometimes the 20 banks would move depending on how you cut the 21 numbers. Citibank, maybe they could figure out 22 a way to make themselves come out ahead. But I 23 cut the numbers many, many different ways when 24 I did this and they all came ranked ninth. 25 Again, the point is they are the . 273 1 2 second largest depository bank in Rochester. 3 They are not a nonexistent presence. It is 4 Citibank New York State which is, in fact, a 5 subsidiary of the entity you have here. 6 MR. HODGETTS: Thank you. 7 MR. LONEY: Any other questions? If 8 not, I will thank the group, and don't forget 9 your slides. 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. . 274 1 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 . 275 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 . 276 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 . 277 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 . 278 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 . 279 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 . 280 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 . 281 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 . 282 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 . 283 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 . 284 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 . 285 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 . 286 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 . 287 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 . 288 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 . 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 1 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 . 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 . 293 1 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 . 294 1 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 . 295 1 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 . 296 1 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 . 297 1 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 . 298 1 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 . 299 1 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 . 300 1 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 . 301 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 . 302 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, . 303 1 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 . 304 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 . 305 1 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 . 306 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 . 307 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 . 308 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 . 309 1 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. . 310 1 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, . 311 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. . 312 1 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 . 313 1 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 . 314 1 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 . 315 1 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 . 316 1 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 . 317 1 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 . 318 1 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. . 319 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 . 320 1 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 . 321 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, . 322 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, . 323 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. . 324 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 . 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. . 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 . 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. . 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 . 329 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 . 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 . 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 . 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. . 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. . 334 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 . 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. . 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. . 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. . 340 1 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. . 342 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. . 343 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 . 344 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 . 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 . 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 . 347 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 . 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 . 349 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. . 350 1 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. . 351 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 . 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 . 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 . 354 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 . 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, . 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. . 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 . 358 1 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 . 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 . 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 . 361 1 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 . 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. . 363 1 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 . 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 . 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 . 366 1 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 . 367 1 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 . 368 1 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. . 369 1 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 . 370 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 . 371 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 . 372 1 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 . 373 1 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 . 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. . 375 1 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 . 376 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 . 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 . 378 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 . 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 . 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 . 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 . 382 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 . 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 . 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 . 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. . 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 . 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 . 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. . 389 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 . 390 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 . 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 . 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 . 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. . 394 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 . 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 . 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 . 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 . 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. . 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 . 414 1 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 . 415 1 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 . 416 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. . 417 1 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 . 418 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 . 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 . 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 . 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 . 422 1 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 . 423 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 . 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 . 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 . 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 . 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 . 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 . 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 . 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 . 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. . 432 1 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) 15 16 17 18 19 20 21 22 23 24 25
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