Public Meeting Regarding Citicorp and Travelers Group
Thursday, June 25, 1998
Transcript of Panel Two
66
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.