Public Meeting Regarding Citicorp and Travelers Group
Friday, June 26, 1998
Transcript of Panel Twenty-Three
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2 MR. LONEY: I'd like to call panel
3 23, Carlisle Towery, Anne C. Robinson, Rhonda
4 Kotelchuck, Samuel C. Hamilton, Steven
5 Alexander, Audi Abernathy and Rev. Floyd Flake.
6 Rev. Flake, you were scheduled
7 earlier today so we will begin with you, and I
8 can claim the prerogative of the chair, I will
9 tell you that the one time I had the, shall we
10 say, pleasure of testifying in Congress, you
11 were on this side of the gavel and I was on
12 that side of the gavel.
13 REV. FLAKE: I hope I treated you
14 fairly.
15 (Laughter)
16 MR. LONEY: It was more bloody in the
17 contemplation than in the doing, I will tell
18 you.
19 REV. FLAKE: I thank you very much.
20 MR. LONEY: I appreciate you coming
21 and if you will begin the panel, I appreciate
22 it.
23 REV. FLAKE: Thank you very much, and
24 thank you for allowing this privilege to speak
25 first. Obviously, my schedule has gotten
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2 backed up, since I'm doing a group of seminars
3 up at Harvard for ministers from around the
4 country and I flew in to do this hearing,
5 because I think it is so critical.
6 In 1986 I was elected to the US House
7 of Representatives and assigned to the House
8 Banking Committee. During the first few years
9 of my tenure there I was assigned to a task
10 force headed by Doug Maynard from Georgia with
11 the responsibility of trying to determine how
12 we might best inform the financial service
13 industry.
14 One of the discoveries we made was
15 that America at that time did not have a single
16 bank in the top 25 in the world, and,
17 therefore, part of our challenge was trying to
18 repeal Glass-Stegall in a way that would allow
19 for modernization process that would open doors
20 for banks and other industries like them to be
21 able to work together in trying to give the
22 best service to the American citizenry, and to
23 the citizenry of the world, realizing that the
24 world now has become much smaller, particularly
25 in relationship to how we do our financial
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2 business.
3 Today as we come, having served as
4 Chairman of the Committee on Oversight
5 Investigation for one term, and recently
6 retired in December as the ranking member of
7 the Committee on Domestic and International
8 Monetary Policy, I realize that we are still
9 facing a major crisis as it relates to the
10 place of the American banking community in the
11 world at large.
12 Other systems have seen fit to open
13 doors of possibility so that other industries
14 could function in ways that would allow for the
15 best means of delivering services to the
16 majority of people.
17 As we have it currently in America,
18 one has to make decisions about where to invest
19 their money, to another place to decide where
20 to buy their insurance, another place to be
21 able to make other decisions relative to their
22 financial well being. It is my contention
23 after years of looking at this problem that it
24 is in the best interests of this nation to
25 create the best mechanism possible for these
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2 entities to be able to work together.
3 I realize that the Congress has been
4 slow in making a decision in relationship to
5 bank modernization, but I don't think we can
6 afford to wait for the Congress.
7 As you know, the Congress moves based
8 on political will. The political will has not
9 been there to make the decision that I think is
10 appropriate for the banking industry.
11 Therefore, Citi and Travelers have made the
12 decision that I think must be honored. It must
13 be honored because it represents to us a major
14 step in trying to move forward at a process
15 that has for years lied dormant.
16 The reality is our practices relative
17 particularly to the Glass-Stegal Act have been
18 those that were put in place over 50 years ago.
19 They are not the most modern as it relates to
20 our ability to function in a competitive
21 environment and therefore are critical to the
22 survival of the industry.
23 Someone argued that the problem is
24 that bigger is not always better. I would
25 suggest that that may well be true, but the
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2 alternative is even worse. Those banks that
3 could not compete in this environment would
4 generally not be able to provide the level of
5 services that we can anticipate from banks that
6 have the capability of delivering a wide range
7 of services that constituents feel a necessity
8 of going to.
9 Our challenge becomes to understand
10 not only the industry, but to understand the
11 fullness of this responsibility, and a part of
12 that responsibility is obviously to ensure that
13 there are fair practices on the part of the
14 bank.
15 HMDA data clearly indicates and has
16 indicated over the last twenty or thirty years
17 that the Boston Study, particularly since the
18 Boston Study of 1987 negates that there have
19 been some practices on the part of the banking
20 community in general in relationship to
21 redlining and other practices that have
22 mitigated against the possibility of the
23 development of many communities in this nation,
24 particularly urban communities where there is a
25 need for access to capital for the rebuilding
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2 of commercial strips that have deteriorated,
3 the building of homes so that people can begin
4 the process of building the necessary equity to
5 become a full participant in American society;
6 beyond that to share in the American dream,
7 which is everyone's desire.
8 It is my hope that as this merger
9 moves forward there will be some prophecy by
10 which Citi will evaluate it's overall role in
11 community development, it's role in allowing
12 institutions in those communities that have
13 been underserved and overlooked to become full
14 partners in the process of development.
15 Clearly, the weak link has been
16 capital. I must say Citibank in participating
17 in a 15 million dollar loan to my church
18 recently in the recent development of our
19 church with another seven banks joining with
20 them, show the model that could be emulated
21 throughout this nation, a model whereby banks
22 who do not want to take the major risk of
23 putting their capital on the line for an
24 institution, may do so through participation
25 with other banks.
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2 Citi has also demonstrated some
3 capability in its funding of many of the
4 financial institutions in urban communities
5 that would have otherwise gone out of business
6 by now. I would urge them to continue in that
7 participation.
8 I would ask the Fed that you be
9 vigilant in your pursuit of insuring that the
10 mandates are fully met, but I do believe that
11 you have the capability to do it. I know you
12 have the capability of doing it. Mr. Greenspan
13 has testified numerous times before committees
14 that I have sat on, and I believe that it is
15 the will of the Fed to participate in the
16 process of building a great and stronger
17 nation.
18 Indeed, I've worked with many of the
19 members of the Governors, traveled with the
20 Governors several years ago when we were
21 looking at how the Fed might become more
22 involved in our community development
23 processes, and believe that at the heart of the
24 Fed there are those that have an interest in
25 trying to assure this development take place
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2 because they realize it is in the long term
3 interests of America.
4 So I conclude by merely suggesting
5 that this body would move forward in voting in
6 support of the merger of Travelers and
7 Citicorp.
8 I believe that these two entities
9 together represents for us a very strong
10 financial institution. Its reach will not only
11 be limited to the borders of this nation, but
12 indeed, place this bank and this insurance
13 group in a category where they will be able to
14 participate with the largest banks in the
15 world.
16 We cannot do any less if we expect to
17 remain competitive. We must do this in order
18 to assure that not only does Citi continue to
19 grow in its ability and it's reach, but also to
20 assure that this merger demonstrates to the
21 Congress that it is time for them to not
22 continue to allow politics to dictate the
23 direction of this nation as it relates to
24 financial policy, but, indeed, to move forward
25 with bank modernization, which I think is
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2 critical for our overall and long-term
3 survival.
4 To that end, I yield the balance of
5 my time. Oh, I'm not in the House any more.
6 (Laughter)
7 I yield my time, which the young lady
8 says has expired anyway.
9 (Laughter)
10 MR. LONEY: Thank you very much.
11 Mr. Towery.
12 MR. TOWERY: Thank you. I'm from
13 Greater Jamaica Development Corporation which
14 is a private not-for-profit local development
15 organization whose mission is to encourage and
16 facilitate the economic recovery and
17 revitalization of downtown Jamaica and it's
18 environs.
19 We're formed in 1967 by business,
20 civic and community leaders, including
21 commercial banks, and have worked since that
22 time in close partnership with all sectors to
23 carry out the plan to transfer Jamaica's older
24 downtown into a modern center of business,
25 commercial and industrial employment, higher
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2 education, the arts, transportation and housing
3 improvement.
4 This plan was prepared by Regional
5 Plan associates, city government and local
6 leaders to service to some half million
7 residents who live in twenty-one neighborhoods
8 around this downtown.
9 We appreciate this opportunity. We
10 are after all end-users of financial
11 institution products and our communities are
12 the beneficiaries when those products are
13 shaped and tailored and prioritized to enable
14 community development and to capacitate its
15 practitioners.
16 My comments are emphasizing the
17 involvement and support we have received from
18 Citibank over the thirty-one years of our
19 economic development and community reinvestment
20 work in Jamaica.
21 This community, working to recover
22 from a ten-year period, 1975 to 1985 of severe
23 economic trauma, uncertainty and a general loss
24 of public confidence, has benefited
25 significantly from Citibank good works. It's
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2 not an overstatement to characterize the good
3 works of this good corporate citizen as
4 exemplary.
5 Jamaica has progressed from a
6 characterization at least as a low and moderate
7 income community to what is now clearly a
8 moderate to middle income emerging area.
9 Citibank aggressive proactive lending
10 programs in that area account I believe for
11 increased home ownership, business growth, and
12 other economic activities.
13 They have a very active branch in
14 Jamaica center, and their headquarter units and
15 the community development units are very
16 responsive to us. They have provided strong
17 and ongoing leadership for Greater Jamaica
18 Development Corporation's efforts, serving
19 consistently on our board with able senior
20 representation which has been exceptionally
21 active and involved.
22 Citibank's contributions to our
23 board's activities have included a high level
24 of intelligence and interest in our general
25 governance, sponsorship of retreats, meetings
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2 and special events, chairs of committees,
3 provision of in-kind services, including a
4 loaned executive for two years who helped us
5 establish a special revolving loan fund,
6 advocacy with government, and financial
7 contributions at leadership levels toward our
8 general operations and for special projects.
9 Citibank has participated in the
10 provision of local small business loans through
11 our revolving loan plan which is capitalized by
12 the US Economic Development Administration, New
13 York State Empire State Development and the
14 City of New York Department of Business
15 Services using CDBG funds, federal community
16 block grants funds.
17 Citibank provided us with a mortgage
18 loan for improving and refinancing our
19 headquarter office building, provided operating
20 support along with board and other leadership
21 for three of our associated and affiliated
22 organizations, Jamaica Arts Center, King Manor
23 Museum and Jamaica Business Resource Center,
24 that we helped establish back in the '70s,
25 which Congressman Flake helped us with the SBA
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2 loan and now is an independent and wonderful
3 entity.
4 Through Citibank pioneering Culture
5 Builds Community Program and participation in
6 something called the Arts Forward Fund,
7 Citibank helped launch an arts initiative in
8 Jamaica called Culture Collaboration Jamaica
9 and continues to support it. Their leadership
10 and support for York College, another key
11 project in Jamaica for which we were somewhat
12 instrumental.
13 Working with Citibank people is
14 inevitably a productive process for us. They
15 are thorough and eager to facilitate results to
16 get things done.
17 Their corporate and personal
18 involvement in Jamaica I believe has been
19 material in the success of this community
20 revitalization.
21 As a long-term practitioner of local
22 economic development working in the trenches
23 and on the front line, if you will, let me
24 respectfully raise some matters for the new
25 Citigroup's consideration.
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2 In our three decades of work in
3 Jamaica very challenging endeavors which are
4 high in public purpose, only modest involvement
5 have come from insurance companies and the
6 investment banking community to date. We
7 enjoyed the services of a loan executive from
8 Met Life for a key project. Equitable has
9 provided us with two mortgages that were key
10 projects. Merrill Lynch Foundation has enabled
11 the startup and investor retention effort over
12 that thirty years, but our experience suggests
13 that the interest of the investment banking and
14 insurance communities typically appear to be
15 elsewhere, only slightly related to urban
16 economic or community development.
17 Thus, we're keen to know whether this
18 acquisition will unleash the skills, the no how
19 and the resources of Travelers and Salomon and
20 Smith Barney in community development, and, if
21 so, how?
22 One, will any of the products of the
23 Travelers Group be tailored and focused on
24 community development objectives? For example,
25 we'd welcome a long view of insurers in
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2 financing small real estate projects that are
3 admittedly small for them, and it would be very
4 helpful for Jamaica's local economy if our
5 community small contractors were enabled to
6 participate in the major construction projects
7 under way in Jamaica through a prequalification
8 and special bonding method so that they can
9 compete.
10 Two. Will Salomon Smith Barney
11 devote its entrepreneurial know-how to places
12 like Jamaica bringing its professional skills
13 to bear on the community development?
14 Many of our companies, perhaps most
15 of our companies are simply outside corporate
16 America's mainstream, often small and not well
17 capitalized minority and women-owned, but they
18 are often energetic and with significant
19 potential.
20 We welcome a partnership with an
21 investment bank to identify and nurture the
22 special opportunities in Jamaica, and
23 opportunities are being missed, we believe, to
24 create markets there, literally creates markets
25 there and the products to serve them.
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2 There should be ways and means to
3 make these companies eligible for the capital
4 markets.
5 For us, these are intriguing and
6 proper questions for the new Citigroup given
7 the special capacities it will have from
8 combined commercial banking, insurance and
9 investment banking and we support this
10 acquisition with some enthusiasm.
11 Thank you.
12 MR. LONEY: Thank you Mr. Towery.
13 Ms. Robinson.
14 MS. ROBINSON: Good morning. I am
15 executive director of both Bridgeport
16 Neighborhood Fund and Bridgeport Neighborhood
17 Trust, which are located in Bridgeport,
18 Connecticut. For those of you not familiar
19 with Bridgeport, it's located in Fairfield
20 county in Connecticut, one of the nation's most
21 affluent counties. Bridgeport unfortunately
22 hasn't shared in that affluence very much. It
23 not only is Fairfield County's poorest city,
24 it's one of the two poorest cities in
25 Connecticut, and would be a poor city I think
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2 in any state.
3 That said, Bridgeport Neighborhood
4 Fund's mission is as a community developing
5 bank to make loans to rehabilitate substandard
6 rental housing. We get funds from six
7 participating banks, Citibank being one of
8 those banks, which lends funds to us, so that
9 we can relend them for our rehab activities.
10 My other organization, Bridgeport
11 Neighborhood Trust, is a community organization
12 which tries to support the efforts of residents
13 to improve the quality of their lives. We have
14 a number of programs, and Citibank has been a
15 long-time supporter of those, both financial
16 contributions and also people sitting on both
17 my boards, both the fund and the trust boards.
18 Interestingly, I can honestly say
19 that Citibank CRA officer Ellen Power is the
20 only CRA officer who ever calls me up and asked
21 me what Citibank can do for us. Usually I'm
22 knocking on other people's doors asking them to
23 do things for me. Also Citibank is the only
24 bank which has asked if they can lend us more
25 money and, again, it's usually the reverse.
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2 All of this has been done by Citibank
3 despite the fact that they do not have a branch
4 in Bridgeport. The nearest branch is in the
5 adjacent town of Fairfield, so I do believe
6 that their commitment to our organizations and
7 to Bridgeport is truly to improve the community
8 as opposed to being really driven only by CRA
9 concern, not taking deposits in Bridgeport.
10 I am hopeful that the merger will be
11 beneficial and I am here to support it.
12 Travelers in the past has been
13 contributor to another neighborhood
14 organization in Bridgeport, Neighborhood
15 Housing Services. Right now it's actually
16 easier in Bridgeport to get a loan than it is
17 insurance, so, I can say that Travelers is a
18 company which writes a fair amount of insurance
19 in Bridgeport, but I'm hoping that the merger
20 will result in more business being done in
21 Bridgeport, certainly if they pick up
22 Citibank's philanthropic bent I think that will
23 be the case.
24 Salomon Smith Barney obviously
25 doesn't have much of a presence in the city but
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2 I'm encouraged by seeing the types of programs
3 that they are starting to enact in other area
4 of the country, and I'm hopeful that that, too,
5 will have a beneficial effect in Bridgeport.
6 So on the whole I'm hopeful about the
7 merger, and I think that it should have good
8 impact on the city life of Bridgeport because
9 it should bring more resources into the
10 community such as ours. Thank you.
11 MR. LONEY: Thank you. Ms.
12 Kotelchuck.
13 MS. KOTELCHUCK: Thank you. My name
14 is Rhonda Kotelchuck. I'm the executive
15 director of the Primary Care Development
16 Corporation.
17 Thank you for this opportunity to
18 testify with regard to the work that we have
19 done over the last several years with the
20 community development group at Citibank.
21 The Primary Care Development
22 Corporation is a not-for-profit corporation
23 created to assure access to quality primary
24 health care in medically underserved
25 communities of New York City. We do this by
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2 providing financing and technical assistance to
3 nonprofit community health centers, hospitals
4 and primary care providers to build new or
5 expanded facilities in these communities.
6 Among our most important tools is a
7 24 million dollar loan fund created for the
8 financing of smaller facilities. Citibank has
9 not only been instrumental to the structuring
10 of the loan fund, but has also committed five
11 million dollars to the loan fund. Citibank has
12 also made it clear that it's interested in
13 expanding its relationship with Primary Care
14 Development Corporation and has offered
15 financing as well as its time and best thinking
16 to help us further our mission.
17 In the course of the coming year we
18 will work with Citibank in exploring several
19 new arenas, including different sources of
20 credit enhancement, the potential for creating
21 a similar loan vehicle in underserved areas
22 upstate and the expansion of our technical
23 assistance programs for project sponsors in
24 financial operations.
25 To date we have financed 15
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2 facilities that collectively will provide basic
3 preventive and primary health care to some
4 220,000 New Yorkers living in all five boroughs
5 of New York City. Ten of these facilities are
6 now operating. We also have an active pipeline
7 of some dozen additional facilities in earlier
8 stages of development.
9 This record of achievement clearly
10 would have been impossible without the active
11 and creative involvement of the Citibank
12 community development group. We look forward
13 to a continued partnership in meeting the
14 health care needs of New York City's
15 underserved community.
16 Thank you.
17 MR. LONEY: Thank you, Ms.
18 Kotelchuck.
19 Mr. Hamilton.
20 MR. HAMILTON: Good morning. I'm
21 executive director of the Hartford Economic
22 Development Corporation and the Greater
23 Hartford Business Development Center of
24 Hartford, Connecticut.
25 These companies provide technical
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2 assistance, loan packaging and subordinate debt
3 financing for small and medium-sized businesses
4 in Hartford and the surrounding region.
5 Both organizations have provided loan
6 assistance for business startup and expansion
7 projects located in low and moderate-income
8 neighborhoods. Since 1983, we provided more
9 than 19 and a half million dollars in loan
10 assistance resulting in the retention of almost
11 1700 jobs and the creation of another nine
12 hundred new jobs in those areas.
13 Since we are often considered a
14 lender of last resort, these much-needed funds
15 help to create jobs in companies and in
16 communities that can provide goods and services
17 that ordinarily would not be accessible to the
18 residents of these communities.
19 Of the four hundred fifty clients
20 that we serve annually, more than 60 percent of
21 our loans are given to minority and women-owned
22 businesses. The ability of the Economic
23 Development Corporation in the business
24 development center to provide services at no
25 charge for more than twenty years is directly
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2 related to the support of outstanding corporate
3 citizens like the Travelers.
4 In our early years Travelers donated
5 management and technical resources to our firm.
6 Travelers also provides a million dollars in
7 funds and loan pool targeted for women and
8 minority-owned businesses, certainly a group
9 which has and continues to have in many cases
10 access to capital.
11 Travelers has consistently been
12 represented on our board of directors and has
13 helped share our growth in contributions to the
14 community. On January 1 of 1997, Travelers
15 converted its original low interest loan of one
16 million dollars to a grant. This generosity
17 will enable our organization to continue to
18 resolve this loan pool for a considerable
19 period of time.
20 As you might expect, Travelers'
21 involvement in our community has not been
22 limited just to the companies I represent. A
23 $100,000 grant in 1986 to the Connecticut Small
24 Business Development Center, and funding for
25 the Womens Business Enterprise Specialist
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2 Program have enabled these organizations to
3 flourish and become the entrepreneurial center
4 at the Hartford College for Women.
5 This program has become a national
6 model for helping women entrepreneurs gain
7 self-sufficiency. The center continues to be a
8 collaborative effort between corporate, public
9 and private entities.
10 In 1997 the Travelers Foundation gave
11 the Entrepreneurial Center a $75,000 grant to
12 help provide small business loans for women.
13 Lastly, as chairman of the board of
14 the United Way of the Capital Area, I have seen
15 firsthand Travelers' commitment to assuring
16 that those with the greatest needs and the
17 least resources are served by the United Way
18 agencies in our community.
19 In the last four years alone,
20 Travelers' employees have contributed more than
21 three million dollars to the community
22 campaign. As to the Travelers' corporate gift,
23 that total ballooned to more than 4.2 million
24 dollars.
25 Travelers corporate concerns is
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2 consistently positive in most, if not all,
3 areas of concern in Hartford and the region.
4 It is for these reasons and others too numerous
5 to mention in the time allotted that I speak in
6 favor of combining Citicorp and the Travelers.
7 I am certain that the new entity will do even
8 greater good than is being done in the
9 communities they currently serve.
10 Thank you.
11 MR. LONEY: Thank you, Mr. Hamilton.
12 Ms. Abernathy.
13 MS. ABERNATHY: Good morning. Thank
14 you for this opportunity to speak on behalf of
15 Elaine Edmond, executive director of the Harlem
16 YMCA.
17 I'd like to say that there is a new
18 Citibank branch opening on 134th Street and
19 Eighth Avenue in Harlem.
20 Citibank has been and active
21 supporter of the Harlem YMCA since the 1971
22 inception of our National Salute to Black
23 Achievers in Industry Awards Dinner. They have
24 been our leading sponsor, generally donating
25 annually towards our various youth programs.
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2 Recently as a corporate sponsor they
3 contributed considerably in support of the
4 Jackie Robinson Youth Center. They stay in
5 constant contact with us, seeking additional
6 ways to collaborate with the Harlem YMCA, to
7 continue to support our youth programs and the
8 community.
9 Citicorp Citibank and the Harlem YMCA
10 have had and continue to have one of the most
11 positive relationships in the Harlem community.
12 Citibank is one of the very few large
13 institutions that has remained consistent in
14 their support of our community needs.
15 Their financial support has enabled
16 the Harlem YMCA to offer, in addition to our
17 youth programs, a wide variety of innovative
18 programs for the YMCA families we assist. We
19 have been able to increase and expand our
20 outreach services to a larger portion of our
21 community.
22 In recent years the population of
23 Harlem has changed to a multicultural,
24 multiracial diverse population with different
25 challenges. With Citibank as a staunch
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2 supporter we are able to meet some of these
3 challenges. We provide full-day services to
4 preschool children ranging in ages from 2.9 to
5 5 years old. Our after-school activities also
6 assist parents who need child care until 7 p.m.
7 for students ages 16 to 17 who require a safe,
8 secure structured environment.
9 Citibank recognized our increased
10 need of services when welfare reform required
11 custodial parents to join the work force.
12 Citibank approached us with ideas and financial
13 assistance to fulfill this new demand from our
14 community.
15 I came today to give testimony so
16 people can be made aware of the vital
17 assistance the Harlem YMCA receives from
18 Citicorp Citibank. The needs of the Harlem
19 community continue to increase, and so does the
20 need for financial support.
21 It is comforting for us at the Harlem
22 YMCA to know our collaboration with Citibank is
23 still a supporting one.
24 Thank you.
25 MR. LONEY: Thank you, Ms. Abernathy.
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2 I have a couple of questions. First
3 of all, Mr. Towery, I'm not sure if I am clear
4 totally. I understand that you were testifying
5 that there are a number of things that Citicorp
6 has done for you, loan access programs and such
7 as that, but either I missed it, or you didn't
8 say whether they have actually made loans to
9 your organization or through your organization.
10 MR. TOWERY: Yes, they have. The
11 mortgage on our building, our headquarter
12 building is with Citibank, one million six I
13 think it is. They've made several small
14 business loans through our revolving loan fund
15 that we participate and usually fill gaps, the
16 banks help the banks and with blended rates and
17 participated in several of those, and then I
18 think I mentioned that their expertise helped
19 us actually start that revolving loan fund.
20 MR. LONEY: Okay, thank you. Anybody
21 have any questions of the panel?
22 MS. KENT: I have. Ms. Abernathy, is
23 that a full-service bank?
24 MS. ABERNATHY: Yes, the new one
25 that's opening. As a matter of fact,
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2 ironically the vice-president and two of the
3 managers came to visit me yesterday. They came
4 to look at the branch, the Harlem YMCA offices
5 and their services there, because being that
6 they were new in the community they wanted to
7 familiarize themselves with us, and I had the
8 opportunity of meeting them then. They will be
9 on the corner of 134th and Seventh Avenue in
10 Harlem. I didn't bring my notes from the
11 meeting, but I believe they are opening in
12 August.
13 MS. KENT: That's what I'm trying to
14 ask, are they opening a full-service branch,
15 not just a --
16 MS. ABERNATHY: No, it's a
17 full-service bank in Harlem.
18 MR. LONEY: I have a question of
19 Mr. Flake.
20 Don't you miss Washington?
21 (Laughter)
22 That's not really my question, but I
23 thought I'd ask it anyway.
24 REV. FLAKE: Actually, there is
25 something wrong with me, I haven't even had
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2 withdrawal from that.
3 MR. LONEY: One of the things that is
4 interesting from your perspective, given your
5 distinguished career in Congress, a number of
6 folks have come in and argued the illegality of
7 this transaction saying that the law as it
8 presently stands is against this transaction
9 being approved.
10 One might anticipate that one with
11 your perspective of having spent sometime in
12 Congress might share that, and it's interesting
13 to me that you don't seem to, and I wonder if
14 you could talk to me about that a bit.
15 REV. FLAKE: Well, one of the things
16 I learned in my 11 years in Congress is that
17 the wheels of progress there generally turn
18 relatively slow.
19 Most progressive moves in this nation
20 have been made outside of the political
21 process, with the political process ultimately
22 catching up and then jumping in front, and
23 doing what is necessary to clear the way.
24 I would argue that to wait, I'd
25 rather see us move forward, and if there are
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2 going to be legal challenges, allow those
3 challenges to move through the Court process,
4 even if it goes all the way to the Supreme
5 Court, to make some determinations that I think
6 are in the best long term interests, not only
7 of the industry in general, but in the
8 long-term interests of America.
9 I don't think we can afford to
10 continue in what I call the substandard state
11 relative to other countries of the world
12 waiting for Congress to act. I think it is
13 imperative that there can be a process that
14 people can at least have an opportunity to
15 evaluate, gather some data from, and I think
16 this may wind up being the model for future
17 mergers and will serve as a major impetus to
18 put forward the process that I think is very
19 archaic and outdated.
20 So I think history of our nation has
21 always been, regardless of what the law is in
22 the pure sense of the word, there are other
23 interpretations of the spirit of that law, as
24 has been evidenced by other changes that have
25 taken place in the financial services industry
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2 and those changes have taken place in spite of
3 the limitations of the Congress.
4 MR. ALVAREZ: We've been privileged
5 with this panel and other panels in the last
6 day and a half to hear from community groups,
7 organizations that are doing real work in the
8 trenches and helping a variety, a diverse
9 variety of needs and one of the points that you
10 made today, and others have made is that banks'
11 support of your program is very important and
12 allows you to do what you are doing.
13 Others have suggested that there is
14 room for banks to do, to support these groups
15 and to direct activities themselves and perhaps
16 banks are relying too much on organizations
17 such as yours and funding organizations such as
18 yours and retreating from doing direct
19 activity, direct lending, direct investment
20 which really competes with your organization,
21 but would be other means to the community.
22 My question is, do you have that
23 sense? Do you have the sense that banks are
24 relying too much on other intermediaries or
25 organizations that are in the trenches of the
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2 community and are withdrawing their own direct
3 involvement in the community?
4 MS. ABERNATHY: I would --
5 MS. ROBINSON: I'd like to address
6 that, because Bridgeport Neighborhood Fund is a
7 community development bank, and so we are
8 making loans.
9 What I find with the type of lending
10 that we do, it's such a very peculiar niche and
11 you have to have a great deal of knowledge, not
12 only about the community, but also typically
13 about the borrower. Lots of times you're not
14 just looking at financial information about
15 that borrower, but you really need to know
16 something about either the individual or the
17 not-for-profit background and you're making a
18 loan as much on that as you are on any
19 financial information that you're getting.
20 I think it would be very difficult
21 for a conventional bank to have the type of
22 knowledge that we have and that we need to make
23 the kind of loans that we're making, and I
24 think that's one of the reasons that the six
25 banks support us because they recognize that we
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2 are better capable of making those loans.
3 Also, we make small loans. Our
4 typical loans are between $200,000, the
5 transaction cost for any banks to try to handle
6 a loan of that size would just be prohibitive,
7 so either the borrower would be getting charged
8 more fees or we'd really be costing the bank a
9 lot of money to do those types of loans, and,
10 actually, we'll do loans down to thirty
11 thousand dollars, so I just don't think it
12 would be make sense that a bank would put in
13 resources and try to make the type of loans
14 that we do.
15 MR. LONEY: Ms. Abernathy?
16 MS. ABERNATHY: Yes. I think the
17 fact that the familiarity of the population of
18 our communities with us is easier for them to
19 approach us than it would be directly going to
20 the large institution. I think being
21 intermediaries your supportive of the community
22 needs in that respect.
23 MR. HAMILTON: I would just like to
24 add one point to that. One of the things that
25 we're seeing in our community, perhaps the
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2 intermediaries, that the bank have used us
3 somewhat as a research or laboratory in a sense
4 and we're now seeing a tremendous amount of
5 activity in marketing, if you will, to the
6 small business segment by a number of the banks
7 in our community.
8 So I do believe that they have made
9 an amazing discovery that you can lend in these
10 markets to this type of business, and have it
11 be profitable. I think there will always be
12 the niche that is spoken of here that you need
13 some specialized type of expertise and time and
14 effort with, but you do see more, at least in
15 our marketplace, more involvement of the area
16 banks as they get more into small business
17 centers, small business lending, and marketing,
18 specifically, the small minority-women-owned
19 businesses as they continue to emerge as a
20 major force in the economy.
21 MR. TOWERY: You may I say that I
22 understand the appeal of wholesaling products
23 and services that larger banks have, but my
24 caveat would be that there is a risk of getting
25 out of the retailing of their products if those
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2 intermediaries are really large in terms of
3 geographic interest. Community intermediaries,
4 our little resolving loan fund a big loan for
5 us $150,000, but I do think community-scale
6 intermediaries, national regional
7 intermediaries, I'm sure there is a wonderful
8 function for them and requirement there, but I
9 think relying on just large scale
10 intermediaries at the experience of retailing
11 their products and dealing directly with local
12 communities is not a very good idea.
13 I haven't seen that huge trend in any
14 way, but I do think it's a risk worth watching.
15 REV. FLAKE: As a community developer
16 is what I do more so than what I was doing in
17 politics, I think it is critical for us to
18 understand that the actual loan of the bank
19 requires that they have a system by which they
20 can measure some standards and some
21 accountability.
22 I think the worst thing would be to
23 listen to some of those who basically would
24 draw us back into a process that would be
25 nothing but a replication of what happened with
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2 Model Cities and some of the other programs,
3 and that is that there would be dumping of
4 monies into communities through other kinds of
5 intermediaries and those monies would not be
6 accountable, and I don't think you would get a
7 product.
8 I think the way that the system works
9 now is in the best interests of most
10 communities in that the banks have identified
11 the most accountable, most capable
12 organizations for the delivery of their
13 product, and I think it has worked extremely
14 well, and to spread that out to interests that
15 are not necessarily concerned about that kind
16 of development, but are concerned about the
17 ongoing survival of the organization, or
18 concerned about having a voice, the reality is
19 that is not the bank's function, and,
20 therefore, we have to be very careful in making
21 sure that we do not demand of a bank that which
22 jeopardize its ability to be able to do what it
23 is in fact certified and organized to do, and I
24 would just urge that to have that caution as we
25 move forward.
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2
3 MS. KOTELCHUCK: Speaking from our
4 perspective, this is the first time that we're
5 aware of banks such as Citibank embracing
6 primary care as and integral part of community
7 development, which we believe it to be, and as
8 such, primary care is really a developing area.
9 It's a direction that the health system is
10 moving in.
11 It is a new area for lending and for
12 development, and it's been our experience that
13 an enormous amount of work is needed and an
14 enormous amount of expertise is needed in terms
15 of what will work in a particular community,
16 what a group needs to be successful in this
17 area, and Citibank has been quite supportive in
18 terms of the development of that expertise on
19 the part of our group, and I hope that this is
20 useful to others in terms of breaking into the
21 area of primary care from lending and other
22 communities.
23 MR. LONEY: Thank you. Any other
24 questions of this panel? If not, I thank you
25 all very much.