Public Meeting Regarding Citicorp and Travelers Group
Thursday, June 25, 1998
Transcript of Panel Eight
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25 The next panel is panel 8 Hubert Van
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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
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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
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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.
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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
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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.
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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,
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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
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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
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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
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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
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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.
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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.
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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.
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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.
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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
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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.
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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.