q 

d 

CALIFORNIA REINVESTMENT COMMITTEE 

GkDQE.Loaey 

presidino officer 

Boanl of Governors 

Federal RiServc system 

Washington, DC. 20551 

RE: cdifornfa Rchrm Committee tcdmony for Citkorp I Trsvelem 

-. 

TkcalifomiaRein- committee lcgrets it c9nnot presentlb testimony io 

person We authorize the her City Press I Community on the Move tn enter our 

testimony into the record, and request your consent on this matter. 
-- 

; 

Testimony of the California Reinvestment Committee 

RE: Citicorp / Tra~krs Merger 

June 25, 19y8 

Panel Eight 

we would like to exrend OUI pppno;mon to the Federal Reserve for inviting public comment on 

tbc Citiuxpffravekn proposed merger. J am repnxnting the Cahfomia 

Rciovestrnent Committee (CRC) !ium San Franciscu. California. We regret that we cannot 

attend in person and with our coahtion embers. who represent nearly 200 communiry-based 

organizations around California. 

For a number Of crilkal rcasor& described below, we urgently request that th: Federal Re&zrvc 

deny Travelers applkation to acquire Ciricorp Tk cmx of our argument rests on thz records 

Travkrs and Citicorp have established in wmmunities of color. and on how thir merger win 

adversely affect low-hum communitks. As you have heard or may bear in subsequent 

testimony from othx groups, both Travelers and Ciikorp have programs supporting community 

investment and charitabk giving Yet both groups also ban poor histories of serving pcopk of 

color, and of underserving low-inconr communitks. In addition, tk annouuced 0115 b&on 

dollar CRA pkdgc lacks scope, size, and detail fnr an instimtion ti tire and scope of the 

proposed Citigroup. 

Citibank has one of the worst reinvestment programs for a maJor California financial insritution 

The tank has a record of scvercly undcrscrving Hispanics in the state. California is at kast 30% 

Hispanic. yet only 12% of mongage applications taken by Citibank in California in 1995 were 

from Hispanics. In 1996. rhat number plummeted 1o only 4% of mortgage applications Over 

that same period of time. the number of applications accepted from white applkanu increased 

tEaliy 10%. 

For many years the bank rucivzd below satisfactory mtings on irs CRA pe.rformaocc evaluations. 

Oddly enough the CRA rating for Citibank improved in 1996 BS tbcir lending record to 

Hispanics was decimnted. And just when the0 rat@ began to improve, the Bank also dropped 

ifs commitment to low-income peopb? and began to pander to moderate and high-income pe.opk. 

The Bank hau systematically eliminated low-cost Products, such as thove Citibank compexiton 
offer apecifkahy designed to ttmxt the needy of low-income consumers. According to C&bar& 

iimrarure. rbr ‘Basic Banking Account” has a monthly service charge of S6.50, and is ordy free if 

youdoSI0,000dofiarsinbusinesswfthtkm IlrocwEZCkckingprogramisanofire 

account only ifyou keep a bakncc of SLSOO donam Clearly. low-income account holders wer~ 

not in mid whem the programs were. developed. 

TIE Cii developed a smaU-bruiness loan prodwt which has a minimum loan requirement of 

5100.000 dollars. This minimum tcquimmen1 prevents most small burinesses owned by peopk 

of color Or bu+xres that &de in low-acOmc cotnmunitiea finm quaHying. Instad, t& 

commurlit~ lE2d.s lormr, in amounts of s10,OOO to s40,ooo. 

l-k California Reiavcstmnu Commimc IMY trkd unsuccea.sfuIly to work with Citibank. Since 

1992, Citibank has refused to adopt uxnmuniry ninnstnnxtt n~ommendatiot~ provided by The 

California Reinmvesancnr contmittce. 

If one looks at Travekrs’ record of se.rving people of color, the picture is qually harrowing to 

that of Citibank’s As you may already know, there is an outmanding housing discrimination 

complaint againat TravekmGroup. The yuit alleges that Travekrs dismim&tes in the provision. 

underwriting. and terms and couditions of homeowners immmnce tohomeownemandhomesin 

AYkan-An&can and/or latino ocighborboods. ‘Fl;rvrlcrs maimaim a minimum policy vake of 

S25O,fXYJ dollars in meuopolitan Washingtoo, D.C. This excludes more than 90% of homes in 

;mdominantly A&an-American and Latin0 neighborhoods from qu&ying for Travekrs 

hornowners insurance. 

In what may be an effort to right tkir wrongs, Travekrs and Citicorp have delivered a $115 

billion dollar conmdtmcnt to commtmities. Unfortunately, this pkdgc is minuscuk for an 

in.uimrion the size of the ptoposed Citigrotlp. Tbt califorma Reinvesmk nt conlmitree has been 

working with banks for 11 ppn to develop colrummity reinvesnruh goahandinatlourtimewc 

hvenn1had0n:bankmea!3ue its goah barod on the bank’s deposit bax. Banks such as Bank 

of Amcrica. Wa.shington Mutual, Wells Fargo, as welt as others, have measured their CRA goats 

based on a pxcemage of the bank’s assets. Currenrly, the irxlusny standard is 8% of assets. If 

the proposed C&&ronp were to nvise its goal amount to retlcct its assets,. as it should, the pkdge 
would & to be incrcaacd from $1 I5 billion to $560 bin ncariy a Hx)96 iocrcase. 

~“8 IDOK impw-tanf tlt&~ the six of tk cottunitnknt. is how the commiancnt win impact 

communitks. W . tpmvidcszero aswance that it IvFII benefit low-incorn peopk 

because the commitment k&s details on how programs wiU be devtlnped and delivered. For 

exampk, ttx proposed Citigroup pledges to %xpand the availabihty of commercial and 

horneowrmrs insuratrc co~t’age to low and moderate income customers.” pt does not describe 

any details on how this progtiun wig be developed and dclivercd. Considering Citibank’s and 

lravekr’s bistorks of tmtkractig communitks of color, WC are not convinced that thss pkdgc 

is backed up by a ckar D of tk nteds of low-income areas and communitks of 

color. nor a concmtc 00 mtt&mCnt that the proposed Citigroup will indeed rm tMc chronically 

underserved communitka. 

It is aho di.qcouraging that over h&f of the commitment or $59 billion dollars, is committed to 

CO~NM~ credit which irdxks student bans, credit cards, and orkr consumer loans. Loans. 

such as tbosc for student& am not usually htcluded or appropriate in CRA commitments. In 

addition, there is no language in tk co mmitmcnt that .say these products will be priced for lowincome cotlsumf?rs. 

Aside horn the cgreoious CRA record of both knding institutions and the apparent lack of 

commitment to CRA in U’s? proposed institution, this merger raucs srious concerns regarding 

sar2 and sound banking pm&es and tutfair competition. 

Federal deposit insurulce. normally ns~rvc.4 just for banks, dots not protect it~rance activities. 

Trkre are no protc4Xi0ns that shield deposita shOtrId the insurance aftiliate in Citigmup encounter 

probkemu. In onr opinion, dcposifors are eaposed to undue risk if Bank’s deposita arc used to 

hclpafaihnginsmanaaffiliatc. 

Ths merged ~titutions wouki create unfair como&tion. No other fmancial titutionc are 

alloti to combine banking and ins~raaa at tk kW that Travtkrs and Citicorp proposed to 

do. Approving the merger would give the f?mposed Citigroup unfair market advantage. It is also 

our understanding that Travelers is rquestiog to account for the merger as a “pooling of 
immst.” Using this form of accountio~ mthud makes rk new institution appear hay 

stronger th it ndly is, tbmby wroqiidly imwiq investors. 

TbeCRCandics190mrnberorgrmire~~s~lyncommodthattbeFtdcnlRwemdmy 

Travckrs application to squire cilirorp. Tk mqirlg kL-dmions have extremely inadqviuc 

nxords scrviug co- of color and the 1998 CRA pkdge ir a hollow and meager offering. 

The merger crcatcb unfair cumpctitiog and is. at hi.3 time, not in the long-term interest of tk. 

law. It is an unufe merger. and 0Dc that shows no ccnm2f.e promise fo kern the communities 

where it does bwincss. 
To whom it may concern at the Federal Reserve: 

I authorize hlatthen, Lee of Inner City Ress. or tvhomerer he designates, 

to read the following comments during my scheduled appearance at the 

CiticorpTravelers merger hearings on Thursday. Ala!, 25 in Nen I’ork 

City on m\- behalf as a representative of the Wisconsin Rural Development 

Center. hlatthew Lee is also authorized to ans\ver an) questions that ma> 

arise regarding these comments. 

I \vould have preferred to make these comments myself. but unfortunateI> 

the Federal Reserve has not agreed to use readily a\-ailable technologies to 

allon. testimony from people who can not afford to travel to New \‘ork. 

SincereI!_, 

S_____________________ 

Hubert J. \.ar Tol 

Banking Issues Consultant 

IT-isconsin Rural Development Center 

I\.isconsin Rural Development Center testimony to the r-ederal Reserve on 

the CitiCorpTravelers mergers. 

June 25.1998 

Ken. J.ork Cit) 

hfy name is __ ______._. Hubert [‘an To1 of Sparta, i\.isconsin. has 

asked me to present these comments toda!, on behalf of the \Visconsin Rural 

Development Center. hfr. Van Tol also serves as a board member of the 

National Community Reinvestment Coalition and is a co-chair of NCRC’s 

Legislative ‘Regulatory committee. 

Thank you for the opportunity to testify today. \I.e \vould have 

preferred the opportunity to testify In a location more convenient to our 

membership, but u:e nonetheless bring this message to you from our 

members. Don’t allov., this illegal merger to take place! 

Wisconsin Rural Development Center has &en assessing the credit 

needs of our communities and working with the banks of IVisconsin for the 

past five years. CVRDC is a member of the National Communit! 

Reinvestment Coalition and we endorse NCRC’s position on thus merger as 
it has been communicated to the Federal Reserve in writing. Our members 

know that the consolidation in the banking industry has not provided them 

with benefits that are worth the increased fees. They doubt that further 

consolidation across the whole range of financial services will bring them 

any more benefits than banking consolidation has. 

Our members are primarily from rural and small town Wisconsin. 

They are the people who work hard, play by the rules, and often find the 

deck stacked against them. Even if they could do so, our members would 

never dream of making an application to the Federal Reserve for the 

privilege of breaking the law. They don’t think that vvay, and even if they 

did, they would have no hope of succeeding When they hear the details of 

what Citicorp and Travelers are proposing to do with this merger they just 

shake their heads. They knov~, why government regulators are so niiling to 

bend and break the law on behalf of powerful corporations, but they 

wonder if our democracy really has to be that way. 

The Bank Holding Company Act makes very clear that any bank 

holding company acquiring another company, which is engaged tn activities 

which are impermissible for a bank, has two years to divest themselves of 

those impermissible activities. The Federal Reserve has ruled very 

erpiicitiy in previous cases that during the two year waiver period the 

acquiring institution may not engage in cross-marketing and cross-selling 

be+ ,en the ba,; and the business in question. The two year waiver period 

is granted in the law solely for the purpose of providing a reasonable 

length of time for the bank holding company to divest itself of the 

impermissible businesses, without having a fire sale. The three additional 

one year waivers were only intended for use in cases in afhich the bank 

holding company had made a good faith effort to divest itself during the 

two year period, but was unable to do so. 

With this application Citicorp and Travelers are throwing the lava, 

Federal Reserve precedent, and common sense out the nindow. They seek 

nhat they believe should be an automatic two year waiver, not so they rviii 

have time to divest their insurance underwriting business, but so they nil1 

have time to integrate the different businesses while convincing Congress to 

change the lavv. They present their application with the assumption that 

thev are automatically entitled to a tvvo year naiver -- and it seems the 

additional three one-year waivers as well-even though they have no 

intention of divesting their insurance underwriting business. They have 

made it verv clear that they intend to use the hvo year period to build and 

develop their insurance business by cross marketing and cross selling 

between the banking and insurance sides of the business. They are rubbing 

our faces in their blatant disregard for current banking law. 

It is clear that the Citicorp and Travelers want Congress to pass a 

financial modernization bill; it is also clear that the Federal Reserve wants 
Congress to pass a financial modernization bill; but such a bill has not 

passed and in fact may not pass in the next t\vo years. The responsibility of 

the Federal Reserve is to enforce the laws and regulations as they are 

v.ritten, not as particular Federal Reserve officials or arrogant corporate 

leaders may nish they were Hritten. 

IVhile we agree that the CiticorpTmvelers CR-A pledge. \vit.h near]! 

half of its dollars in credit card lending, is a bogus pledge, we are not 

raising communit)- reinvestment issues or convenience and needs questions 

at this hearing. Any question of the adequacy of Citicorp’s CRI-2 record and 

the future CRA commitments of the merged entit! is overshadow,ed by the 

legal questions raised by this proposed merger. If corporations like 

Citicorp and Travelers are allowed to ride rough shod over the la\T. in this 

wa!. it w?ll mean that virtually everything about our democracy is up for 

sale. 

We ask the Federal Reserve to do the right thing; den!. this 

application and tell Citicorp and Travelers that if they wish to change the 

law. thev are entitled to do that in the same way that eveqbody else in this 

counts-is; by petitioning Congress to change the la{\.. But until that time 

the!- must play by the rules; just as our members do. 

Thank you very much. 
TESTIMONY ON CITICORP/TRAVELERS INSURANCE MERGER 

Phyllis Salowe-Kaye, Executive Director 

New Jersey Citizen Action 

New Jersey Citizen Action, and the New Jersey Affordable Housing Network, emphatically 

opposes a merger of Citicorp with Travelers Insurance Croup. We do so for the following 

reasons: 

1) The merger is illegal under current law; 

2) There is an issue of safety and soundness; 

3) Citibank comes into this merger with a less than impressive record of service to low- moderate 

income communities in New Jersey, and 

4) Travelers Insurance activities are not regulated under the requirements of the Community 

Reinvestment Act, a situation which is a threat to all low- moderate income residents of New 

Jersey. 

Speaking to the first point, it almost seems silly to be addressing the illegality of this merger under 

current law when we all know that changing the law is what this is all about, Both entities have 

been lobbying Congress to pass The Financial Services Act of 1998 that would (PRESTO) make 

this ah legal. But until that happens, this merger is premature and dangerous. (Afterwards, it will 

only be dangerous.) While Citigroup claims that the merger is legal so long as the new entity 

divests itself of Travelers underwriting business within two years, in their May 4th press release, 

there is nr antion of su. h divestiture and no good faith attempt to share a plan for how this 

might happen. We don’t believe they’ve given it a thought, Clearly, they expect to have one foot 

out of the gate when the legislation that they have lobbied for so heavily is finally passed. Why 

should the Federal Reserve give them that advantage? 

On the second point, this merger brings up the issue of safety and soundness, no-one seems to 

know what this sewn together entity will look like or how it will behave once it has been created. 

It could be a monster. Godzilla is a fabrication. This one is real, and once it is set in motion with 

no rules to govern half of its limbs and part of its brain, it will be too late. This has the potential 

for exposing taxpayers to another situation like the S&L bailout. We oppose mixing insurance, 

banking and securities until there is a complete investigation of how to preserve financial safety 

and soundness in the context of unlimited cross-industry ownership. As a result of this merger, 

Citigroup could become dangerously exposed to sudden crises, either of their own making or due 

to events beyond their control that can wipe out assets. The Citigroup merger is being hailed by 

them as creating a diversified conglomerate offering an array of banking, insurance and securities 

products to 100 million customers in over 100 countries. Instead of diluting risk, Citigroup may 

actually overextend themselves and pursue even riskier loans and investments in an effort to grab 

market share and profits. This has been known to happen. Remember, Citicorp received constant 

oversight by the Federal Reserve Board and the OCC when it overextended itself in developing 

countries in the 1980s. This merger could create “companies too big to (be allowed to?) fail,” 

which in times of trouble would mean costly government bailouts in order to prevent economic 

catastrophe. We do remember the S&L bailout. We’ll never forget who paid for it. 

1 
In an event beyond their control, would some tutme emergency require huge policy payouts 

forcing Citigroup to draw down the resources of federally insured Citibank in order to bail out 

Travelers? Without protections would this leave the depository institution in precarious tinancial 

condition? Clearly, this particular $700 billion combination of banking, insurance and securities 

threatens the safety and soundness of this country’s financial system. 

The third issue, the poor quality of Citibank’s service to low- moderate- income communities is a 

matter of record. While they claim some improvements over the last year, their 1996 New Jersey 

data is abysmal. Loans by Citicorp to African-Americans were denied 2.4 times more than 

Whites, a number far higher than the national denial rate of ah banks. The record shows that this 

bank has clearly underserved a significant portion of minority and low and moderate income 

people and neighborhoods in New Jersey. They trail their peers in all categories we analyzed with 

the exception of having the same denial rates to Hispanics as ah lenders. Citibank has made a 

lower percentage of its loans to African-Americans, Hispanics, potential borrowers in minority 

census tracts, low/moderate income households and low/moderate census tracts than ~ lenders as 

a group. They need to do better. 

Although Citigroup has pledged $115 billion to lending and investing in low- moderate income 

communities and small business, it is difficult to project fiorn that pledge how much of that money 

will actually find its way to low- moderate- income people in New Jersey when they include under 

“lending”, student loans, credit cards and other types of consumer loans. Furthermore, the 

location of bank branches will become irrelevant criteria for determining service to urban areas 

and low- moderate-income residents if cross-marketing bank loans to policyholders becomes the 

primary means of marketing loans in New Jersey. And we are talking about a bank that strives for 

tUy automated branches truly “people-less facilities.” 

Enter Travelers, and issue # 4. 

Citizen Action and the Affordable Housing Network have held some promising meetings with 

Citibank about how they can better meet the needs of New Jersey, but nothing has been finalized 

yet and our recent discussions have only emphasized the lack of clarity regarding the intentions of 

their bride-to-be, Travelers Insurance Company. 

Travelers is a real Neanderthal when it comes to recognizing and understanding their 

responsibilities to the low- and moderate income communities ofNew Jersey. Here’s an example. 

Questioned about a Fair Housing Act complaint filed against Travelers last year which accused 

them of not insuring homes valued at less than %250,000, the answer of the attorney for First 

Trenton Indemnity, their property-casualty insurer in New Jersey was that actually, in New Jersey, 

they are most successful in marketing to homes of a lower value somewhere between 

$200,000 and $225,000. That should make aspiring homeowners in Newark, Trenton and 

Camden breathe easier. 

But that’s not the worst of it. We still can’t get any written answers about the size or composition 

of Traveler’s property and casualty business in New Jersey and we have received contlicting 

information about Travelers Born their own legal departments and well-meaning but 

2 
unknowlegable members of Citibank’s staff On a Tuesday, we are told that New Jersey was one 

of the top ten markets for Travelers Property and Casualty and that they write lots of 

homeowners policies in New Jersey. On the following Monday we got a call telling us that almost 

all the wonderful things that were announced in the Citigroup Press Release won’t be done in New 

Jersey because such an insigniticant number of homeowners policies has been written by 

Travelers. Two days later, Citicorp tells me that Travelers market share is 4.9% and yesterday, 

the New Jersey Department of Banking and Insurance told me that Trenton Indemnity is the 6th 

largest insurer of homeowners in the state. Not great, but certainly not chump change. Am I 

missing something here? 

Vague press releases with huge mega-pledges are useless ifthey are not accompanied by specific 

monetary and geographic commitments for products and programs that are developed with the 

input of the people who most affected by the merger and I don’t mean the stockholders. 

Citigroup must sit down and discuss community reinvestment plans with community groups all 

over the country. The Citicorp/Travelers commitment makes no reference to particular 

geographic areas where they expect to make loans and investments. I hardly think this 

information will be more forthcoming when they are safely protected by a change in Federal rules 

about mergers unless full disclosure is required. 

In their press release, Citigroup makes the following pledge: to be (and I quote) “fair and 

transparent in dealing with our customers and their communities, so we earn their trust and 

support.” In light of the above lack of clarity and candor regarding the nature of Travelers 

current business in New Jersey, or its future commitment, or again, its plan to divest itself of 

underwriting business under the current law, I would say that “transparent” is light years away 

They haven’t made it yet out of “opaque” and into “translucent.” The only thing that is 

transparent here is their clumsiness in trying to avoid making a clear commitment at all. 

This merger must be stopped. 

3 
i 

NEVi JERSEY 

* +~~lT~ZENACT~ON 

June 10, 1998 

James Michener, Esq. 

General Counsel 

Travelers Insurance P.C. 

Tower Square 

Hartford, CT 06183 

Dear Mr. Michener: 

It was a pleasure speaking with you. I would appreciate it if you would send 

me the following general information about Travelers, its operations and its 

policyholders. 

J4 SsnUlmm 

wl*nr-o(*mru 

‘C-Cal PAM 

Ra, Ronam Tulf 

< 5 L (1) A Travelers organizational chart showing the various businesses 

Rll-Tw~*rcalmWWV- Fra”VW_ L and products to better understand the relationships between them; 

JOM u,arpn ,*Nrruf., NlSL.~~.W.?dTMII 

m - 3om*lW NsmulMuyIokXLEUU W&m Dldman Mbw&t,,W&-,Dm, 

;.1 ,’ i 

(2) Exact figures for the number of Travelers policyholders (both 

I nattonaLly and those that reside in New Jersey for all businesses); 

Muu* caba 

Nrt I(aurumo ,-I., 

&qmL-amn-TRldLTd- 

-, lFLc,o 

(3) A breakdown of policyholders, nationally and in New Jersey, for 

types, length and relative value of the policies they have; 

LoUl1031 RW. F E. GIYti cMmwr.y “IWn - Enrrpnv CWMUYHdl- (4) A demographic breakdown of Travelers pohcyholders in New 

Edrnrn ,~PUW W-I ‘~“P&l%.Yof-“lKI Rr RnglMld Jocuon 

b Gersey, by the standard ways such things are broken down: age, gender, race, 

SL MsmleWl~U~E clwurrn R$ I(.X.n. myme, family status and census tract; 

Frank OeMana ,WY, ’ 

NJ lcdusfnsl um cuncd 

AU” I(autm 

,b,. (,; /~~~_ 

carvnummm Hbr*n Olhnema 

(5) Compensation figures for the top five highest-paid executives in 

DlSmo I Harm0 MDncm the company for the past couple of years; 

A,e,,ISX,W “Non o( EWmor wa*srr hnn( 3 PaSti uormry ~++#6) g ~~$,$,~ mr / ‘d ome breakdown/accounting of the New Jersey basedW&am Go %rn” “WLW wm W”. ne.?m 90a mvestments Travelers has, especially those in low and moderate-income 

- 

An” r..may 

1- 

hP”M OlSMn WemaU~ 

areas; 

Hoam Pm- &AJbS.¶E~~ 

dKIAc-7 

“UW WM 

Ccmnl”“lymnr wonna 0, tins. ‘aQl1038 

‘d c h 7) A full description of Travelers’ social investing program, 

Nrn0ial “Oun*LO 

co”no, 0r&J *la,* c‘Wsg* LadIS .4Fr ‘including a list of social investments made in the past five years; 

--p 

(8) The 1997 Annual Report. 
James Michener, Esq. 

June 10, 1998 

Page Two 

Thank you for your cooperation. 

Phyllik Salowe-Kaye 

Executive Director 

PSWdem 

cc: The Honorable Elizabeth Randall, Commissioner 

NJ Department of Banking and Insurance 

Cynthia Codella, Deputy Commissioner for Insurance, DBI 

Gail Simon, Chief of Division of Life and Health, DBI 
Delaware Community Reinvestment Action 

Council, Inc. 

601 N. Church Street, Wilmington, DE 19801 

Telephone: 30% 654-5024 Fax: 302- 654-5046 

Testimony by Rasbmi Rangan, executive director, 

D&ware Community Reinvestment Action Council, Inc. 

Before tbe Federal Reserve System, New York 

June 25,199s 

My name is Rasbmi Rangan. I am the executive director of tbe Delaware Community Reinvestmeot Action 

Council, Inc. (“DCRAC”)-an eleven year old non-profit citizeos’ advocacy organization whose mission is 

“to eosurc equal access to credit sod capital for the under served populations sod communities throughout 

Delaware.” I am also a Board member of the National Community Rciovestmeot Coalition and a member 

of Inner City PrcssKommoni~ oo the Move. 

Witbwt taking away the important role that groups who have and will testify in favor of this merger 

apptication play and tbc support tbcy enjoy from the bank@ community, we are the “Community” 

Reiovesbncm experts. we assess a bank’s performaoce as a whole, ioclusive of its afJ&tc5 aad 

subsidiaries and in every geography the bank is chartered to do business. We assess local, regional, and 

nationalimpactofabaokmcrgerwourcommunity. 

We are opposed to the merger of Travelers Group and Citicorp. I will speak on a number of adverse 

issues. 

The announced merger is an illegal proposal under the federal Bank Hokiiog Compaay Act (“BHC Act”) 

and the intent tbercof, sod evea m&r tbe Federal Reserve Board’s (“FRB’s’) owe prior precede& and 

reg&tioos. The BHC Act prohibits a BHC from owniog insorance underwriting or agency o~emtions; the 

BHC Act was eoactcd precisely to prohibit combioations like Travelcrs - Citicorp. Even Travelers states 

that, under current law, it would have to divest its insuraoce undenvriting operations. The e&bairman of 

ti Federal Reserve Board (“FRB”) Paul Volcker says, “I tind it bard to believe the law permits the 

combioatioa. Glass SteagaU is still here.” There arc substantial argom&s that Travelers should bc 

mqoired to divest insurance operations prior to any consmnmatioo of this proposal. Underwrit& Life end 

property & Casualty Iasmance bas been found by the Federa Reserve Board to NOT BE CLOSELY 

retatedtoba&ing. 

The announced merger is an mmthical proposal. Back in 1956, when tbc BHCA was coa&zd, the two 

year waivers gmnted to the Baok Holding Companies (“BHCC”caught ) off-guard, to come into compliance 

(with separating insurance and banking), made perfect sense. Forty two years later, to cxpcct these twoyear waivers (particularly in hopes that lobbyiog efforts would crumble these tire walls) is tantamount to 

extortion. 

Of much coocero to us is the fact that discossioas behvcen the applicants and the Federal Reserve System 

prior to the merger anoouncemen t make a mockery of today’s and tomorrow’s proceai@s. Tbe following 

arcafewquotes,citationiotbedctaikd tesrimony that has been submitted along with relevant exhibits, that 

give US grave concern 

Our mission is 40 ensure 

7 

ual access to credit and capital 

for the under served populations a d communities throu&out Delaware 

through Education, Advocacy, and Legislation” 
Citicorp CEO Mr. Reed “[tlhere were enough discussions [with Fed officials] for US to know that there 

wan’t a legal problq’ [T]here arc all indications that [the merger] will be looked at favorably.” ‘Top 

officials with the two companies said they discussed the deal before Monday’s aanouncemcnt with Fed 

Chairman Alan Greenspan.. The executives characterized conversations with Greenspan.. as 

supportive.. .” “Appearing at the same news conference, Citicorp head John Reed said executives from 

both firms had spent the last four weeks “making sure with the regulatory authorities tbat it was possible.” 

At a public hearing before the Delaware Department of Insurance, Mr. Matthew Lee of ICI’, presented his 

arguments and cross-examined witnesses concerning 

1. any assmances the Federal Reserve System (the “FRS”) may have given Travelen that the FRS 

will allow the retention and integration of Travelers insurance underwriting operations, and 

cross-selling and data sharing with Citicorp’s banking operations, and 

2. whether Travelers bas made any financial projections regarding its condition if it is required to 

divest its insurance underwiting activities, and/or is not allowed to cross-sell or share data with 

Citicorp’s banking operations 

No le@nate assessment of the prospective financial condition of the Applicant is possible without 

exploring at least 

1. the likelihood that the Applicant will be able to retain its insurance underwriting operations, and to 

integrate cross-market with Citicorp’s banking operations, and 

2. the implications, including financial implications, if the Applicant subsequently, as required by 

current law, divests its insurance underwriting operations. 

Under oati the Travelers witness claimed that Travelers has NOT made any such financial projection, and 

stated that he was aware of a telephone conversation between Travelers’ counsel and the general counsel of 

the FRS between the March 30 and March 3 1 letters, and that it had been conveyed to bim that all that the 

FRS’ general counsel had said in this conversation was, ‘Thank you for the letter.” Contradicting this 

testimony is an article in the American Banker, May 29, 1998, “[d]uring that call, Mr. Matigly said he 

told the lawyers that cross-selling plans should not interfere with the divestiture requirement or give the 

company an unfair competitive advantage.” 

The fact that lobbying efforts will be stepped up to ensure that Glass Steagall Act is repealed brings to the 

forefront our concerns regarding the ethics of the management of the proposed Citigroup. 

To write to Mr. Mattingly, of the Feds, stating that the clients (Travelers’), “are comfortable profeeding 

with the transaction provided you are not uncomfortable with the type of practices outlined above” and to 

add “ask that you advise us if you disagree with the approach and analysis we have outlined in this letter” 

is playing games with the community and calls into question the ethical standards of the management. 

Tellingly, it reflects on the Federal Reserve Board as well. It is rather apparent from the March 30/3 1 

letters to the Feds, that a tacit approval to use a common brand name for all products, price breaks for 

packaged deals, share customer data base., and provide one statement, has been granted. Implied in the 

comnumication is the fact that unless these activities are permitted, the merger will not be aanounced. 

Even if Travelers were allowed two years to divest, the Application is infonnationally incomplete in that it 

does not provide any projections or information regarding the prospective impact of such divestiture on the 

financial strength of the proposed Citigroup. The Application should bc dismissed as informationally 

incomplete. 

2 
The proposed merger is an expensive “bet”. We have been led to believe in the d&e of “too big to 

fail”-look at Japan. Tax payers will be stuck with bailing out these giants, should they fail. The 

sm-vivlng banks will be stuck with hefty premiums. Does any one remember the S&L crisis? Most megabank mergers today tout the advantages of electrooic banking and technology. Can you imagine, within 

this environment, the impact on safety and soundness, when with one stroke on the key board you can move 

your deposits. Paxticularly, when the entity which is a large insurer of properties in a geography struck by 

natural catastrophes happens to also be your bank! What about the implied subsidy-FDIC insurance. 

This proposal raises tcmcerns with Communities’ convenience and needs. This merger cannot and will 

not be convenient for, nor is it needed by, our communities. 

Travelers’ current subsidiaries have a troubled record of consumer compliance, as evidenced by lack of 

compliance with the Home Mortgage Disclosure Act (‘YIMDA”), predatory and allegedly discriminately 

practices, as stated by Ms. Mary Harris of Dover, Delaware. 

Travelers Group symbolizs communities’ anti-trust 

We do not trust Primerica Financial Service agents in our communities. 

We do not trust Commercial Credit loan officers in our communities. 

We do not trust Property Casualty Insurance insuring our commuaities. 

We do not trust Travelers Group, in our communities. 

Travelers Group has insurance underwriting policies tbat have a disparate and discriminatory impact on 

the minority commonity seeking insurance policies. 

Travelers Group’s Commercial Credit violates fair lending and consumer disclosure laws. 

Travelers Gnxtip’s Primerica targets minority and low-.& moderate-incor &lies for eh.xnsive, 

predatory, and self-serving lending, investing, and insurance sales. 

Citicorp’s subsidiaries have a disparate record of lending in Delaware. The Applicant’s non-binding, 

non-specific lending pledge is more than half credit card lending (which other banks have not included in 

their pledges), and bas no specific commitment to Delaware. 

Citicorp and its banks, which are subject to the Community Reinvestment Act (“CRA”) have in recent 

years abandoned low and moderate income (“LMI”) neighborhoods, and communities of color. This is 

retlected by Citicorp’s massive branch closings and downgrades, by Citicorp’s automatic teller machines 

(“ATM”), electronic banking and fee policies, and by Citicorp’s lending record, which disproportionately 

excludes and denies African Americans and Hispanics and applicants in LMI census tracts. 

The proposed combined company would be worse than its constituent parts: 

1. Citigroup would disproportionately exclude LMI neighborhwds and communities of color from 

Citicorp’s normal interest rate, high technology products and sewices, while 

2. Citigroup would target these communities with Primerica’s and Commercial Credit’s misleading, 

overpriced loans and insurance. 

CRA Pledge 

Given our experience with mega-pledges with no geographic specificity, we remain unimpressed. 

This Applicatioo should be denied. 

3 
THE DELAWARE COMMUNITY REINVESTMENT ACTION COUNCIL, INC. 

1. MISSION 

2. PURPOSE 

3. PROGRAMS 

4. FACT SHEET 

5. ORGANIZATIONAL STRUCTURE 

6. CURRENT BOARD MEMBERS 

7. EXECUTIVE DIRECTOR RESUME 

8. HISTORY 

9. PAST EXPERIENCE AND ACCOMPLISHMENTS 

10. CURRENT ORGANIZATIONAL BUDGET 
Il. DCRAC MISSION 

Our mission is “to ensure equal access to credit and capital for the under served 

populations and communities throughout Delaware through Education, Advocacy, 

and Legislation”. 

In order to accomplish our mission we shall:: 

. Ensure that all Delawareans are aware of their rights and responsibilities under 

the Community Reinvestment Act and other fair lending laws, and 

. Ensure that Delaware lending institutions meet their communities’ entire 

banking, credit, and capital needs. 

The under served communities are: 

. Low and moderate income, 

. Minority, and 

. Distressed neighborhoods 
2. DCRAC PURPOSE 

EDUCATION 

Educating our constituency on the 

availability and desirability of 

community reinvestment, and 

community, economic, and housing 

development activity. 

Our constituency is made up of: 

. low and moderate income 

families and locations and 

minority community 

. lending community and other 

private sector 

. regulatory community and 

other public sector 

. non profit organizations 

ADVOCACY 

4dvocating on 

lehalf of the under 

;erved populations 

md communities 

.hroughout 

Delaware to the 

xtblic and private 

;ector communities. 

LEGISLATION 

Oversight of public 

policy and legislative 

changes which impact 

Delaware’s 

under served 

populations and 

communities by 

monitoring impending 

legislation, analyzing 

impact, disseminating 

information and 

reacting. 
3. DCRAC PROGRAMS 

EDUCATION ADVOCACY 

EDUCATION OUTREACH BANK MONITORING NEEDS ASSESSMENT 

Grass roots Grass roots Bank analysis Survey 

. Workshops l Marketing . Public Perception l Public 

. One-on-One l Special events . Non-profit 

Counseling . Public Files 

Larger Larger Data analysis Task Force 

Constituency Constituency . Housing . Housing 

. Conferences l Marketing l Small Business l Small 

. Publications l Special Events Business 
4. DCRAC FACT SHEET 

NAME Delaware Community Reinvestment Action Council, Inc. 

ADDRESS 601 North Church Street, Wilmington, DE 19801 

COMMUNICATION TELEPHONE: (302) 654-5024 FACSIMILE: (302) 654-5046 

I 

EXECUTIVE DIRECTOR 

# BOARD MEMBERS 

Rashmi Rangan E-MAIL: rashmi@bellatlantic.net 

Currently, Eleven 

AVERAGE ATTENDANCE 

# REGULAR MEETINGS 

# EXECUTIVE COMMITTEE 

60% 

Four 

Five 

AVERAGE ATTENDANCE 

# REGULAR MEETINGS 

15% 

Twelve 

FEDERAL I.D. # 

INCORPORATION 

51-0329119 

Delaware. March 3 1. 1988 

I GEOGRAPHY SERVED State of Delaware 

TYPE OF SERVICE 

TARGET POPULATION 

Policy, research, advocacy, education. 

Lower Income families, minority communities, and targeted census tracts, 

throughout the state of Delaware. 
. %!pl!n8 sd!~siau~ed pw sy~ohuau 

. ya.Ieasa~ 

]+-OJd ~uauraSeueu~ @sap) ‘ ~uamdolaciap 78 (uo!pJualualdw! 

uogeeluauraldlu! ‘ uoyeniena ‘ (qa 

. 

e uretio&j ~uauIa~etu?m mawdo[aAap) ‘ slesodold ‘ )uamaSeueur ‘ %I~JO)~UOLLI ‘

[eas!d watuafieueur 78 %ynoaae aalloldlua tslgauaq SKI fsau!lap!nZ (.ala 

. le!aueug IuawafieueK [e!aueuy) s!sic[eue ?g lueti pue (esodold I%I!~M 

. a!yqnd suoqelax 

IeUalul pue lelualxs uogea!unu_uuoa 

[IeJaq IewaluI pue lewalxa leuo!lez!ue%o q~o.18 

I 

aizyaaxg lopaJ!a 

s)as thyod lepueuy ?y )aa[o&j t)y$sJaAo sahlas se poddnc; taamosaa sa.uH 

I 

S ‘ ZINV3lIO ’ ?VNOID lLWLLL3nHLcS 
6. CURRENT BOARD MEMBERS 

Sharon Caulk 

Walter Clark 

Barry Davis 

B. Durosomo 

Juana Fuentes 

Waldron Giles 

Vandell Hampton 

Vanessa McCleary 

Joe Myer 

Dolores Solberg 

Dorothy Taylor 

Robert Watson, Jr. 

Bruce Wright 

Through PSA Credit Union provides an alternative to access to credit and capital. 

Provides understanding of legal ramifications of social injustice. 

Provides financial, board development, & crisis management skills. 

Understands impacts of Public Policy, Leader in the Nigerian community. 

Can use the Human Relations Commission’s authority to enforce the laws. 

Well known and respected in the Small business community. 

Represents rural community’s concerns. 

Can rally the housing counselors to share predatory lending information with their clients. 

Leader in the non-profit community serving housing production and consumption. 

Represents the needs of Kent and New Castle County citizens. 

Herself a victim of predatory lending, supports this campaign. 

Well respected in the grass roots, Realtor, religious, and legislative community 

DCRAC’s outreach person in the lower income communities of Sussex County 
7. EXECUTIVE DIRECTOR RESUME 

C Related EAperience 

Manage DCRAC programs, internal and external organizational growth, fiscal stability; develop relationships with 

the public sector, the private sector, the non-profit sector; Challenge, testify, take legal recourse in response to 

merger applications by banks; Prepare educational and informational materials; Provide technical and resource 

support to the Board of Directors and non-profit organizations; Manage media and community relations; Serve as 

a point of contact for all Community Reinvestment Act and Delaware banking related inquiries. 

enence 

Housing Counselor, NCALL Research, Inc. (October 1993 to December 1994) 

Research Associate, DCRAC (September 1990 to September 1992) 

Education 

M.A. Urban Affairs and Public Policy, University of Delaware (1993) Major: Energy and Urban Policy. 

M.A. University of Lucknow, India (I 983) Major: English Literature. 

B.S. University of Lucknow, India (I 979) Major: Chemistry, Zoology, and Botany. 

A seat on the Board of Directors of the National Community Reinvestment Coalition 

A one year term as a Community Advisory Board member on The News Journal’s Editorial Board 

A seat on the Board of Directors of the Peoples Settlement Association Federal Credit Union 

Active member on several housing issues and small business issues groups in Delaware 

Community Reinvestment Award of Excellence 

presented by the National Community Reinvestment Coalition, 1998 

Minority Small Business Advocate of the Year 

Presented by the U.S. Small Business Administration, 1997 
IS. DCRAC HISTORY 

ORGANIZATIONAL BEGINNINGS In 1987, then State Representative Jim Sills (now Mayor, Wilmington) also 

a professor at the College of Urban Affairs and Public Policy at the University of Delaware, enlisted two Ph. D. 

students to research “redlining” practices of Delaware’s full-service banking institutions. These studies 

documented discriminatory lending and hiring practices and gave DCRAC the leverage to challenge 

reorganizational plans of several banks. As a result, Delaware Trust Company, Bank of Delaware, and 

Wilmington Savings Fund Society signed a five year contractual agreement with DCRAC. 

PEOPLE INVOLVED Dr. James H. Sills, Jr. founded the organization in 1987. After Dr. Sills’ historic election as 

the first African-American Mayor of the City of Wilmington, Mr. Keith Booker took over the reigns in I992 and 

served four years as its chair. Mr. Jamal Mubdi-Bey served as Vice-Chair horn 1988 through 1995. Various 

Board members from the community over the years actively participated in the organization. Students and Staff of 

the College of Urban Affairs and Public Policy, University of Delaware provided research and management 

support. Board member Dolores Solberg who took leave of absence to serve as acting Director 

CONTRIBUTION TO THE DELAWARE COMMUNITY Housing Counseling programs were introduced 

statewide. Secondaty Mortgage Assistance programs were developed. Several smaller lending institutions agreed 

to voluntarily comply with CRA and to make deposit account investments in the Peoples Settlement Association 

Federal Credit Union, 

PAST FUNDING provided by Allen Hilles Foundation; Speer Trust Commission; FCC National Bank; Gannet 

Foundation; Delaware Housing Coalition; Delaware State Housing Authority; Housing Capacity Building 

Program; City of Wilmington; Wihnington City Council; Wihnington Savings Fund Society; Grant-in-Aid; New 

Castle County Council; and Sponsors of “Celebrate CRA” event. 
I 9. PAST EXPERIENCE AND ACCOMPLISHMENTS I 

EDUCATION 1 ADVOCACY 1 LEGISLATION I 

Quarterly newsletters 

(Ten thus far) 

Bank analysis of over 20 local banks. Constantly responding to new 

legislation introduced in the House and 

the Senate. 

Workshops 

(over 40 attended by more than 150 

families) 

Conferences 

(panelist on over 10 local, regional and 

national conferences) 

Data analysis of home lending since 

1990. 

Shared concerns with the larger 

community on Bank Modernization 

Act through newsletters and other 

media. 

Challenged several CRA bank mergers Actively involved in strategic planning 

and the policies of the Federal Reserve conducted by Center for Community 

Board. Change to respond to the bank 

modernization act. 

CRA training 

(Community groups in Dayton- Ohio, 

NCRC, and NCALL Research staff) 

Built a strong network of professionals 

in the CRA, Housing, Small Business 

field locally, regionally, and 

nationally. 

Negotiated four CRA commitments 

Established Housing Counseling 

profession. 

Addressed concerns with fingerprinting requirement by banks to open 

accounts. 

Addressed concerns with predatory 

lending and “gag orders” in CRA 

challenges. 

Director wrote columns in the News 

Journal. 

Initiated the implementation of Addressed concerns with “credit 

secondary mortgage assistance scoring” and its repercussions on the 

programs. community. 
(10. DCRAC BUDGET FISCAL YEAR 1998-99 

Expense Category Education Advocacy Legislation 

(incidental\ 

TOTAL 

Wages& Benefits 24.485.00 I24.485.00 0.00 48.970.00 

Postage&Telephone 1 1,800.OO I 0.00 

Supplies & Equipment 2,400.OO 1 2,400.OO I 0.00 

875.00 ) 875.00 0.00 1.750.00 

1,920.OO 1.920.00 0.00 3,840.OO 

3,ooo.oo 3,ooo.oo 0.00 6.000.00 

Rent 1.200.00 1.200.00 0.00 2.400.00 

Travel & Traininn 

I Events I 5.000.00 I 10.000.00 

I Miscellaneous 1 620.00 I 0.00 1 1,610.OO 

42J70.00 I 42,200.OO 0.00 84,770.OO 

I Contracts and fees 

I Fund raiser 

11.270.00 I~- 0.00 I .oo 11.270.00 I 

I 15.450.00 I .oo I 20.000.00 

Total 42.570.00 42.200.00 0.00 84,770.OO 

‘Includesaudit, fees, insurance, etc 
April 16, 1998 

New York Times 

ESSAY I By WILLIAM SAFIRE 

Don’t Bank On It 

WASHINGTON -- “Mere size is no sin,” William Howard 

Taft is supposed to have said, refuting the 

trustbusting philosophy of his predecessor, Theodore 

Roosevelt. (At the time of the apocryphal remark, Taft 

weighed 300 pounds.) 

When a big bank on the West Coast decides to merge with 

a big East Coast bank, that doesn’t bother me. All the 

stuff about synergies and cost-saving layoffs and global 

reach will be meaningless soon enough; future banking 

will be done on the Internet, every home a branch, and 

today’s giants will be undercut by speedy cyberbankers 

unencumbered by overhead. 

Far more troubling is the kind of marriage proposed by 

Citibank and the Travelers Group of insurance companies 

and stock brokerage. That would require changing the law 

that keeps banks -- where individual deposits are 

insured up to $100,000 by the Federal Government -- 

separate from other enterprises. 

With remarkable chutzpah, these companies have’ embarked 

on a course that blithely assumes that change in law. 

They think they can count on Republicans in Congress who 

say that the 1933 Glass-Steagall Act is a Depression-era 

relic. Fears that a market collapse could affect banks 

are old hat, these descendants of Dr. Pangloss insist. 

Break down the fire wall and let the Federal Reserve 

keep a benign eye on everything financial; we don’t even 

have to fear fear itself. 

Not so fast. Suppose the Big Quake afflicts California. 

Or maybe a Category 5 hurricane, which comes every 

decade or so, rips along the expensive expanses of a 

place like Long Island. That would put a lot of pressure 

9 Produced by the Natiunnl Community Reinvestment Coalition 202-628-8866 
on even the most reinsured insurance company. 

If you heard such news, and you could switch your money 

out of the bank affiliated with that insurer with a 

keyboard stroke, wouldn’t you be inclined to play it 

safe? And wouldn’t that Internetted panic cause a run on 

the superbank? 

That’s being alarmist, of course. Such disasters are 

just as unlikely as a market crash (which we all assure 

each other can never happen again). But before the cash 

cow of Chase Manhattan starts making cow-eyes at the 

thundering herd of bulls of Merrill Lynch, Congress had 

better take a close look at the downside of upsizing 

across the old boundaries. 

1, No private enterprise should be allowed to think of 

itself as “too big to fail.” Federal deposit insurance, 

protecting a bank’s depositors, should not become a 

subsidy protecting the risks taken by non-banking 

affiliates. If a huge “group” runs into trouble, it 

should take the bank down with it; no taxpayer bailouts 

should allow executives or stockholders to relax. 

2. What about privacy? Our bank already knows the 

details of our buying habits. Won’t the affiliated 

stockbroker and insurance salesman have access to the 

superbank’s records? Do we want a bank that handles our 

credit cards to be calling us at dinner time as a 

financial-service telemarketer? 

3. Let’s not be in such a big rush to knock down 

barriers. The Government’s biggest financial mistake of 

the past generation was to raise deposit insurance to 

$100,000 while allowing housing S.& L.‘s to plunge into 

commercial lending. That all but removed the element of 

risk from foolish or corrupt loans and helped bring on 

the S.& L. debacle. Good fences make good banks. 

4. Beware the slippery slope to crony capitalism. Paul 

Volcker, former Fed chairman, is less troubled than I am 

about an amalgam of financial services, provided the Fed 

is the supervisor. “But there is an Anglo-Saxon 

10 Produced by the National Community Reinvestment Coalition 202-628-8866 
tradition separating banking and commerce,” he says. 

“I’d continue to draw the line between finance and 

business.” 

There’s the rub. If commercial banks invade mutual 

funds, stock brokerage, investment banking, insurance 

sales and the like -- or get invaded by them -- that 

“finance” is likely to spill over into “commerce and 

industry.” That’s the seamlessly interconnected 

philosophy. And that’s the path of Japanese keiretsu, 

the cozy network of insider financial dealings that 

crushes competition and breeds inefficiency. 

“Mere size” can be a virtue when it reduces prices. But 

the fewer the competitors, the more collusive the 

pricing. 

Our financial institutions can go global without going 

gaga. 

I’ve never knocked greed, but this spread-eagled 

“universality” is getting out of hand. Let bankers be 

bankers. 

11 Produced by the National Community Reinvestment Coalition 202-628-8866 
Delaware Community Reinvestment Action 

Council, Inc. 

601 N. Church Street, Wilmington, DE 19801 

Telephone: 302- 654-5024 Fax: 302- 654-5046 

Testimony by Rashmi Rangan, Executive Director, Delaware Community Reinvestment Action 

Council, Inc. (DCRAC) 

Before the Delaware State Bank Commissioner at tbe Public Hearing 

ia the matter Travelers Group’s Proposed Acquisition of Citibaak Delaware and its Subsidiaries 

June 23,199s 

Gwd morning.. My name is Rashmi Rangan. Today, I speak on behalf of DCRAC (of which 1 am 

executive director), Inner City Press/Community on the Move (“ICP”) of which I am a member, and on 

behalf of myself as a consumer of banking services and as a tax paying citizen 

We are here to strongly urge you to: 

1. deny this application 

2. ask you to request further information on this application 

3. ask that you send a representative to the public meeting the FRB has scheduled, for June 25 and 

26, 1998, in New York City, and 

4. Ask that you defer ruling on this Application until the issues of the legality of the overall 

combination have been resolved. 

I will speak on a number of adverse issues, which are hereby entered into the record before the 

Commissioner. 

We are opposed to the merger of Travelers Group and Citicorp Since we are opposed to the merger as a 

whole, it goes without saying that wz are opposed to mergers of parts. This merger does not serve the 

convenience and needs of oar communities. The legislative environment within which the merger is 

announced raise ethical concerns. Finally, we are concerned with the issues of tinancial safely and 

soundoess of the proposed Citigroup and the impact of these concerns on the larger community. 

The announced merger is an iUegal proposal. 

The ex-Chairman of the Federal Reserve Board (“FRB’) Paul Volcker has publicly questioned whether 

Travelers can legally acquire Citicorp and its subsidiaries (including Citicorp Assurance Co.). “Vol[c]ker 

Rips Big Banking Merger, Questions legality of Citicorp de&‘, American City Business Journals, Inc., 

June 1,1998, which reports: ‘ “I tid it hard to believe the law permits the combination. Glass Steagall is 

still here.” said Vol[c]ker, who led the country in its successful fight against runaway inflation during the 

198Os...’ 

Most fundamentally, the larger proposed acquisition (of Citicorp, Inc., Citibank Delaware’s parent, by the 

Tmvelers Group) of which this Application is a part would be an ILLEGAL combination, under the federal 

Bank Holding Company Act (“BHC Act”) and the intent thereof, and even under the Federal Reserve 

Board’s (“FRB’s”) owe prior precedents and regulations. Even Travelers states that, under current law, it 

would have to divest its insurance underwriting operations. We are glad to note that Governor Meyer, in 

his t&imony before House Banking Committee, agrees that these “activities would have to be divested 

Our mission is “to cnsurc equal acccs to credit and capital 

for the unda served populations and communities throughout Delaware 

through Education, Advocacy, and Legislation” 
under current law.” There are substantial arguments that Travelers should be required to divest these 

operations prior to any consummation of this proposal. 

The BHC Act prohibits a BHC from owning insurance undcrwiting or agency operations: the BHC Act 

was enacted precisely to prohibit combinations lie Travelers - Citicorp ICP’s April 13, 1998 Protest (a 

copy of w&h the FRB should have forwarded to you) provided some of the relevant citations. 

Underwriting Life and Property & Casualty Insurance has been found by the Federal Reserve Board to 

NOT BE CLOSELY related to banking. “The plain and unambiguous language of Section 4 of the 

Act...by its terms prohibits a bank holding company from acquiring or retruning control, directly or 

indirectly, or any company other than a bank unless that company’s activities are authorized under one of 

the non-banking exceptions in the Act...Under the 1982 amendment to section 4(c)(8) of the Act, the Board 

no longer has the discretion to petit a bank holding company or any of its nonbank subsidiaries to 

underwrite or sell insurance beyond the seven situations set forth in the statute.” (Concurring Statement of 

Governor Angell, in Citicorp/Familv Guardian Life Inswancc Co,, 76 Fed Res. Bull. 997 (1990)). The 

proposed Citigroup will bc engaged in marketing a product it is not allowcd to sell. The proposed 

Citigroup, rather than preparing to strip itself of non-permissible activities, will be preparing for merging 

the non-permissible activities witbin the charter. 

The announced merger is an unethical proposal. 

The Glass Steagall Act (“GSA”) of 1933 separates securities and insurance, and the Bank Holding 

Company Act (“BHCA”) of 1956 separates insurance and banking. Back in 1956, when the BHCA was 

enacted, the two year waivers granted to the Bank Holding Companies (“BHC”) caught off-guard, to come 

into compliance (with separating insurance and banking), made perfect sense. Forty two years later, to 

expect these two-year waivers (particularly in hopes that lobbying efforts would crumble these fire walls) is 

tantamount to extortion. I quote from comments filed by Mr. Matthew Lee to the Federal Reserve Board 

(“FRB”) that provide a clearer analogy of what this merger application means. “A city passes a local law 

requiring all apartment buildings to have fire escapes, but gives two years for owners of existing buildings 

to install such fire escapes. Forty two years later, a real estate developer announces it will construct a new 

building, without fire escapes, counting on a hvo year safe harbor during which time it will lobby City 

Council to repeal the fire escape law.” 

The proposed Citigroup has no intentions of divesting itself of Insurance activities (non-permissible and 

very profitable). Rather, it intends to invest these two years (and additional three year waivers that the 

Federal Reserve may, again not an automatic extension, grant) to lobby Congress to repeal the GSA 

which has withstood demolition attempts since 1979, and amend the BHCA so that the proposed CitiGroup 

can concentrate its economic resources ($7.5 billion income and $50 billion revenues) and financial 

services (insurance, consumer finances, brokerage & investment, banking). Citicorp employs full time inhouse lawyers, outside legal and consulting firms, and has a multi-million dollar lobbying budget. 

Citicorp CEO Reed’s statement, quoted in the American Banker of April 7, that “[tlhere were enough 

discussions [with Fed officials] for us to know that there wasn’t a legal problem,’ Mr. Reed said...“[Tjhere 

are all indications that [the merger] wilI be looked at favorably.” B. Rehm_ Megamerger Plan Hinges on 

Congress, American Banker, April 7, 1998, at 1. See also: ‘Top officials with the two companies said they 

discussed the deal before Monday’s announcement with Fed Chairman Alan Greenspan.. The executives 

characterized conversations with Greenspan... as supportive...” Reuters newswire, April 6, 1998, 19:24 

EDT, Regulators Likely To Okay Citicorpmmvelers Deal. See also: “Appearing at the same news 

conference, Citicorp head John Reed said executives from both firms had spent the last four weeks “making 

sure with the regulatory authorities that it was possible.” Agence France Presse, April 6, 1998, Travelers, 
Citicorp Chairmen Confident of Federal Merger Approval 

More recently, as oxwzns about these communications and their still partially withheld contents have 

grown, Citicorp (and the FRB) have in part reiterated, and in part chang@ their positions. See, e.g., J. 

Morrison, Fed’s Hand in CiticorpKravelers Deal Questioned, Reuters newswire, May 27, 1998: The 

amount of private written correspondence and talks with Fed officials is unknown A spokesman for 

Citicorp said the pre-application talks with Fed officials were appropriate. ‘We feel that all the 

notifications that we made to regulators and officials on a very confidential basis were totally appropriate 

in keeping tith the usual comnwnications between the regulators and those institutions that are regulated_’ 

the Citicorp spokesman said. A Travelers spokeswoman could not be reached for comment... [A] 

spokesman for the Federal Reserve emphasized that while applicants like Citicorp and Travelers may bold 

private talks with statr, it is the board members at the Fed who rule on the request. “It’s up to the board to 

make the decision, not the staff, and the board members do not meet on a specific application with anyone 

except the stafF here,” Fed spokesman Joe Coyne said. He added that it is unlikely staff members would 

help an applicant formulate its application. “The staff would never do anything like that,” he said. 

In terms of the proposed Citigroup’s reliance on buying time within which to lobby Congress for change, I 

again cite from Mr. Lee’s comments to the FRB. Section 4(a)(2) of the BHCA (12 USC 1843(a)(2)), in 

some circumstances gives a company up to two years from the date it became a BHC, to divest its non 

permissible activities. The FRB has conditioned approvals (United Kenhxky/L.ouisville Trust Co.,) upon a 

commitment from the applicant that divesting of non-permissible activities will take place prior to 

consummation, (Marine Bancorp/Coast Mortgage, 58 Fed Res. Bull. 505,506 (1972)) direct& 

termination of non-permissible activities “at the earliest practical time and to undertake no new projects in 

this line of activity”, and (Baltimore Bancorp/Charles street Savings and Loan Ass’n), while allowing hwyear period maintained that divestiture would ordinarily be required prior to consummation. 

One theme of my counterpart, Mr. Matthew Lee’s of ICP, arguments and cross-examinations at the 

Delaware Insurance Department’s public hearing was the pre-merger announcement discussions between 

Travelers and the Federal Reserve Board. In that light, Mr. Lee cross-examined Travelers’ general counsel 

concerning 

1. any assurances the Federal Reserve System (the “FRS”) may have given Travelers that the FRS 

will allow the retention and integration of Travelers insurance underwriting operations, and 

cross-selling and data sharing with Citicorp’s banking operations (including in light of the letters 

from Travelers’ and Citicorp’s counsels to the general counsel of the FRS, discussed in the June 2 

comment and discovery request), and 

2. whether Travelers has made any financial projections regarding its condition if it is required to 

divest its insurance underwiting activities, and/or is not allowed to cross-sell or share data with 

Citicorp’s banking operations. 

Travelers’ general counsel stated that he was aware of a telephone conversation between Travelers’ counsel 

and the general counsel of the FRS behveen the March 30 and March 3 1 letters and that it had been 

conveyed to him that all that the FRS’ general counsel bad said in this conversation was ‘Thank you for the 

letter.” 

Inconsistent with this testimony is an article from the American Banker newspaper of May 29, 1998, in 

which long-time banking reporter Barbara A. Rehm reported that “[d]uring that call, Mr. Mattingly said he 

told the lawyers that cross-selling plans should not interfere with the divest&e requirement or give the 

company an unfair competitive advantage.” B. Rehm, Citi Protester Critical of Fed Counsel’s Role, 

American Banker, May 29, 1998, at 2. 
Asked to e~plti the immsistency between his testimony as to the substance of this call (i.e. that it 

consisted only of “Thank you for the letter”) and what Mr. Mattingly told reporter Barbara R~~III vm said, 

Travelers’ general counsel stated that be stood by hts testimony, and noted that all he bad testified to was 

what he was TOLD bad been said on the call. 

There are= serious questions of fact that should be resolved in this proceeding. This is relevant to the 

prospective financial condition of the proposed acquirer. If Travelers did receive asswance from the FRS’ 

general counsel, it reflect positively on future financial strength -- but it would reflect adversely on the 

integrity factor. If Travelers did not receive any assurance, that is relevant to the future tinancial strength 

of Travelers - and Travelers’ purported failure to make any financial projection of the implication (I) 

having to divest insurance underwriting operations or (2) of being precluded from cross- marketing and 

sharing data would reflect adversely. 

The proposed merger raises concerns on future financial strength of the acquirer. 

Another theme of my counterpart, Mr. Matthew Lee’s of ICP, arguments and cross-examinations at the 

Delaware h~surance Department’s public hearing was (and will be) that no legitimate assessment of the 

prospective fmaocial condition of the Applicant is possible without exploring at least 

1. the likelihood that the Applicaot will be able to retain its insurance underwriting operations, and to 

integrate cross-market with Citicorp’s banking operations, and 

2. the implications, including financial implications, if the Applicant subsequently. as required by 

current law, divests its insurance underwit+ operations. 

Under oath, Travelers general counsel claimed that Travelers has made no fina.ncia.l projections as to the 

impact divestiture would have on the financial strength of the Applicant. This is either not credible, or 

shows a lack of managerial resources at the Applicant. 

Can you imagine going to bank to borrow money for your business without projecting your financial 

statements to reflect the impacts on your revenue and expenses of a very real eventuality and/or a very real 

possibility that the basis of your projections may change! To assume that cash receivables from divesting 

willkeepa mammoth entity in business when the rationale for merger is the opportunity, “as Weill said 

Monday, with undisguised glee, “This should be fantastic for the expansion and sale of our insurance 

products.” (Citicorp, Travelers in Behemoth Merger, Tribune, 4/7/98) is irrational. The proposed 

Citigroup’s financial strength is merely an illusion. On these grounds alone, the merger must be denied 

We now know that prior to announcing the merger on April 6, 1998, there were meetings between the 

regulator and the regulated where certain assurances were sought before announcing the deal. 

3. If Travelers did receive assurance from the FRS’ general counsel, it reflects positively on future 

financial strength - but it would reflect adversely on the integrity factor that must also be 

considered. 

4. If Travelers did not receive any assurance, then the financial future of Travelers requires greater 

scrutiny. Particularly, in light of Travelers’ purported failure to make any financial projections 

based on: 

(A) having to divest insurance underwriting operations, or 

(B) being precluded from cross-marketing and sharing data. 

The Travelers witness claimed that Travelers has NOT made any such fmancial projection, and stated that 

he was aware of a telephone conversation between Travelers’ counsel and the general counsel of the FRS 

between the March 30 and March 3 1 letters, and that it had been conveyed to him that all that the FRS’ 

general counsel had said in this conversation was, ‘Thank you for the letter.” Contradicting this testimony 
is an article in the American Banker, May 29, 1998, “[dluring that call, Mr. Mattingly said he told the 

lawyers that cross-selling plans should not interfere with the divestiture requirement or give the company an 

unfair competitive advantage.” 

Even if Travelers were allowed two years to divest, the Application is informationally incomplete in that it 

does not provide any projections or information regarding the prospective impact of such divestiture on the 

financial strength of the Application, or of the proposed Citigroup. The Application should be dismissed as 

informationally incomplete. 

The Commissioner should obtain, enter into the record and consider the DEDI transcript and record. The 

transcript raises other adverse issues, including managerial issues, about the Applicant. 

The proposed merger is an expensive “bet”. 

Since the announced merger plans of Travelers and Citicorp, newspaper headlines across the nation have 

highlighted the uncertainties. For example, The News Journal, 4/7/98, ‘Gigantic merger is risky”, 

American Banker, 4/7/98, “Megamerger Plan Hinges On Congress”, New York Times, 4/7/98, “Shaping a 

Colossus: The Law; A Challenge to the 1930’s Division of Financial Power”, New York Times, 4/S/98, 

“Shaping the Colossus: The Investors, The Citigroup Deal: A Day After, Cooler Heads Evaluate Merger”, 

American Banker, 4/8/98, “Fed Seen Gcttiig In a Bind Over Citi Divestiture”, Washington Post, 4/9/98, 

“Citicorp-Travelers Deal to Test Old Regulatory View Laws Ban Bank-Insurance Mixture”. Reuters, 

4129198, “Travelers must divest insurance--Meyer”. 

We have already addressed the illusionary future financial strength of the acquirer. We now raise some 

serious concerns about the impact of the merge on the larger community. We have been led to believe in 

the doctrine of ‘loo big to fail”. Contradicting this faith is Japan. It is important to point out that the 

largest fmancial institution in the world is Tokyo Mitsubishi-a Japanese bank. 

Tax payers will be stuck with bailing out these failed giants. Does any one remember the S&L crisis? The 

surviving banks will be stock with hefty premiums 

Etbicll Concerns 

The fact that lobbying efforts will be stepped up to ensure that Glass Steagall Act is repealed brings to the 

forefront our concerns regarding the ethics of the management of the proposed Citigroup. 

To write to Mr. Mattingly, of the Feds, statiog that the clients (Travelers’), “are comfortable proceeding 

with the transaction provided you are not uncomfortable with the type of practices outlined above” and to 

add “ask that you advise us if you disagree with the approach and analysis we have outlined in this letter” 

is playing games with the Federal Reserve Board and calls into question the ethical standards of the 

management. Tellingly, it reflects on the Federal Reserve Board as well. It is rather apparent from the 

March 30/3 1 letters to the Feds, that a tacit approval to use a common brand name for ail products, price 

breaks for packaged deals, share customer data base., and provide one statement, has been gmntcd 

hnplied in the communication is the fact that unless these activities are permiw the merger will not be 

announced. How can these activities be permitted? 1 repeat an earlier quote,“The plain and unambiguous 

language of Section 4 of the Act...by its terms prohibits a bank holding company from acquiring or 

retaining control, directly or indirectly, or any company other than B book unless that company’s 

activities awe authorized under one of the non-honking exceptions in the Act...Under the 1982 

amendment to section 4(c)(8) of the Act, the Board no longer has the discretion to permit B bank 

holdig company or any of its nonbank subsidiaries to underwrite or sell insurance beyond the seven 

situations set forth in the statute.” (Concurring Statement of Governor Angell, in &omffamil~ 
Guardian Life Insurance Co_ 76 Fed Res. Bull. 997 (1990)). 

I understood the purpose of granting some transitional time was to permit the newly created Bank Holding 

Company to begin and execute a divestiture plan. It certainly does not sound like a divestiture plan to me. 

The proposed merger faces severe opposition. 

News media has highlighted the severe opposition to the merger from the Nader group, ICP, DCRAC, and 

other community activists across the nation. Congresswoman Maxine Waters has stated she will introduce 

legislation to block the review of merger applications of institutions accused or found guilty of money 

laundering charges (The Associated Press, 4/9/98, “Citicorp/Travelers Merger Hits Snags”). The article 

goes on to detail the pending investigations by the US Department of Justice, Swiss and Mexican 

Governments into allegations that Citibank laundered drug money for the jailed brother of the former 

Mexican President. 

News media has also begun investigating campaign contributions to the Senate Banking Committee chair, 

Scn. D’Amato (The Associated Press, 6/Z/98, reporting on a story by The New York Times), “D’Amato 

went to bat against depression-era regulations that hamper bank, insurance and securities business mergers 

after a meeting with Sanford I. WeilI, cbainnan of Travelers Group, and other prominent Wall Street 

executives. Travelers and its subsidiaries have contributed more than $375,000 to D’Amato-controllcd 

committees, including $190,000 to New York’s republican State Committee.” 

Communities’ convenience and needs 

The proposed merger will have adverse impact on the communities’ convenience and needs. Let us 

categorically state, that this merger cannot and will not be convenient for, nor is it needed by, our 

communities. 

Travelers’ current subsidiaries have a troubled record of consumer compliance, as evidenced by lack of 

compliance with the Home Mortgage Disclosure Act (“HMDA”), predator and allegedly discriminatory 

practices, as stated by Ms. Mary Harris of Dover, Delaware. Citicorp’s subsidiaries have a disparate 

record of lending in Delaware. The Applicant’s non-binding, non-specific lending pledge is more than half 

credit card lcmling (which other banks have not included in their pledges), and has no specific commitment 

to Delaware. 

Travelers Group symbolizes communities’ anti-trust. 

We do not trust Prime&a Financial Service agents in our communities. They have been insinuating 

themselves into our homes and our bank accounts misrepresenting themselves as financial 

planners/advisors. Since when did we begin calling our sales people advisors? 

We do not trust Commercial Credit loan officers in our communities. Since when did loan sharking 

become mainstream lending? 

We do not trust Property Casualty Insurance insuring our communities Since when did we legitimatize 

insurance redlining and insurance discrimi~tion? 

We do not trust Travelers Group, in our communities. We do not trust Travelers group-period. 

We charge Travelers Group to have insurance. underwiting policies that have a disparate and 

discriminatory impact on the minority community seeking insurance policies. The Fair Housing Council of 

Greater Washington filed complaints with the Department of Housing & Urban Development. The 

complaint includes structuring its rating territories so that minorities pay a bigber price. Matched paired 

testing, conducted by the Fair Housing Council documented disparate treatment of minorities. I submit into 

evidence Rangan Exhibit C that summarizes their report 
We charge Travelers Group’s CommerciaJ Credit with violating fair lending and consumer disclosure laws. 

We have forwarded a complaint referred to HUD from an elderly black couple. To give you an insight on 

the Harris’ case, they went to Commercial Credit for a $7,000 loan. They coded up borrowing $52,000 

($11,000 of which were closing costs) against their home on which they initially owed less than $13,000. 

They did not realize that they bad paid five points and an $8,890 premium for credit life insurance! 

We charge Travelers Group’s Primer& with targeting minority and low-and moderate-income families for 

expensive, predatory, and self-sewing lending, investing, and insurance sales Primer& targets 

community leaders to become Primerica’s Financial Service Agents Their designation of their sales 

personnel as “Financial Planners/Advisors” is a misnomer. They will now have a few more wares to 

peddle to the unsuspecting families who meet with the sales agent under the assumption tbat they will help 

them plan and invest their finances. 

We remain concerned with the company’s and the agents’ compliance with fair lending and disclosure laws. 

Most of all, we arc concerned with the financial rape of our lower income and minority communities. 

Issues of predatory lending-which violate all statutory laws--merit scmtioy. We remain gravely concerned 

over regulatory oversight of the various aspects of financial business condo&d by the thousands of 

Primer&x Finaocial Services agents. 

Citicorp 

In the Wihningto~ DE MSA in 1996, Citibank Mortgage made 2 1 loans to whites, and none to African 

Americans. In the Wilmington, DE MSA in 1996, Citibank FSB made 18 loans to whites, and none to 

African Americans. 

Citicorp and its banks, which are subject to the Commuoity Reinvestment Act (‘CRA”) have in recent 

years abandoned low and moderate income (“LMI”) neighborhoods, and communities of color. This is 

reflected by Citicorp’s massive branch closings and downgrades, by Citicorp’s automatic teller machines 

(“ATM”), electronic banking and fee policies, and by Citicorp’s lending record, which disproportionately 

excludes and denies Afiicao Americans and Hispanics and applicants in LMI census tracts. 

The Travelers Group is a strange conglomeration of upscale businesses (for example, Solomon Smith 

Barney) on top of a profit engine of predatory businesses aimed at lower income, more predominantly 

minority consumers - for example, Primerica Finance Services (“PFS’), and the nationwide subprime 

lcndcn Commercial Credit and Travelers FSB. As ICP and DCRAC demonstrated to the Office of Tluifi 

Supervision (“OTS”) in a six month proceeding in 1997, these last three businesses arc all inter-connected: 

the PFS agents push high interest rate home equity loans to LMI, disproportionately minority consumers, 

loans “manufactme# by Commercial Credit, and now booked through Travelers FSB (to evade state 

laws). Even in that first proceeding in which ICP raised these issues, the OTS concurred with many of the 

comxms ICP raised, and imposed, based on Travelers’ record, unprecedented consumer protection 

safeguards on its conditional approval of Travelers FSB. See, e.g., OTS Press Release and Order of 

November 24, 1997, especially Conditions 14-17 thereof. Condition 14(a) acknowledges that PFS (and 

now Travelers FSB, which is subject to CRA scrutiny) make the type of mortgages referred to in Section 

103(aa) of the Truth in Lending Act; Condition 15 acknowledges that the new Travelers FSB pays broker 

fees of folly 3.4% of the loan amount. 

While the unprecedented conditions the OTS applied to Travelers FSB and PFS by no means fully resolve 

these companies questionable practices, it appears that if this proposed merger were tilly &cctaat& the 

detailed conditions so recently imposed by the OTS would become void or moot, and/or would not 
necessarily be applied (as they should be) to Citicorp’s operations, including but not limited to Citibank 

FSB. Ofparticular import is Condition 14(a), requiring that all PFS customers “are properly and 

completed apprised of the financing options reasonably available to them through the New FSB and the 

costs and risks associated with each option.” Inter alia, this requires the type of “referral up” (i.e. ensuring 

that an “A” credit borrower is given an “a” priced loans, even if the borrower initially approaches, or is 

approached by, the conglomerate’s “B&C” unit) that ICP has asked the FRB to require of diversified bank 

holding companies which own both ‘A” priced banks, and “B&C” lending subprime finance companies. 

Travelers, to which based on adverse practices that ICP documented to the OTS, these consumer 

safeguar& and training requirements were imposed by the OTS, is now applying to the FRB to become a 

bank holding company, and to acquire, inter alia, Citibank FSB, to which no such protections apply. The 

FRB must inquire into (including at the requested evidentiary hearing) and act on this issue, in this 

proceeding. 

Travelers’ Commercial Credit s Minorities for Hiah Priced b 

In the Charlotte, NC MSA in 1996, Commercial Credit Loan made 19 loans to African Americans, and 23 

loans to whites. For comparison’s sake (and the comparison is relevant and significant, in light of the 

proposed combination), Citibank Mortgage in the Charlotte MSA in 1996 made 10 loans to whites and 

only one loan to an African American; Citibank FSB in the Charlotte MSA in 1996 made 40 loans to 

whrtes and no loans to African Americans. Both Citibank Mortgage and Citibank FSB arc normal interest 

rate lenders; they both disproportionately exclude minorities from their marketing and lending. Commercial 

Credit Loan, Inc., is a high interest rate lender -- it target and lends to minorities at a much higher rate than 

they arc represented in the demographics of, or other leaders‘ data in, this MSA. 

This exemplifies the discrimina tory pricing / separate-and-unequal structure that the proposed Citigroup 

would have. This proposal should be denied 

Commercial Credit and PFS Vio&_HMDA: Travelers Has A- This But Has Onl\ Comrmtte&~ , 

Address It In Two States. and Has Not Corra Its HMDA Data 

In 1997, ICP raised to the New York State Banking Department (the “NYSBD”) the fact that Travelers’ 

Commercial Credit’s loans in New York were reported as virtoally all “race not available,” and argued that 

Commercial Credit was violating HMDA’s requiremen t that lenders and their aEliates are required to 

request, record and report race and national origin information about applicants, so that the public and 

regulators can enforce the fair lending laws. Travelers repeated denied that it was violating HMDA. 

However, the NYSBD (and Connecticut Banking Department, to which ICP also raised this issue) both 

found that Travelers and Commercial Credit had been violating HMDA. This is evidenced inter alia by a 

letter from Commercial Credit to the NYSBD, dated July 30, 1997, stating that: 

The purpose of this letter is to conlirm our conversation today. You have advised that it is the 

position of the [NYSBD] that Primerica Financial Services Home Mortgages, Inc. and its 

representatives (collectively, “PFSHMI”) are deemed aBiliates of Commercial Credit Plan 

Incorporated of Georgetown (“CCPIG”). Therefore, it is the Deparlmcnt’s position that in taking 

mortgage loan applications, PFSHMI is acting on behalf of CCPIG and must comply with the 

requirements imposed upon lenders under WDA] In accordance with our discussion, we will 

promptly clarify our policy to require PFSHMI to make a visual observation if the applicant does 

not voluntarily complete the HMDA questionnaire during a face-to-face interview. All information 

collected in this manner will bc compiled for CCPIG’s HMDA reporting purposes. 

Clearly, Commercial Credit (and PFS) violated HMDA in 1996 and previous years. Commercial Credit’s 

1996 HMDA data has not, however, been corrected ICP has requested from Travelers and Commercial 

Credit their 1997 Loan Application Register (“LAR”), to see ifthat data complies with HMDA; ICP will 
be submitting further ccanmcnts after it receives and reviews tbis data. In 1996, for example, in two 

markets in which Citicorp is subject to CRA, Buffalo and Rochester, Commercial Credit Plan, Inc. 

reported tbe following data: 

Buffalo- three loans to whites, one loan to an African America& and fully 56 originations reported as 

“race not reported;” no denials at all reported. 

Rochester-- two loans to whites. none to minorities, folly 40 originations reported as “race not reported; no 

denials at all reported 

Further note that tbe “commitment” to come into compliance with HMDA quoted above was only made to 

New York and Connecticut regulators; it was never made to the OTS, nor is it referenced in the OTS’s 

Nowmber 24. 1997, conditionai Order. 

Travelers, Citicorp’s proposed merger partner, does have subsidiaries (its finance company, Commercial 

Credit, the insured depository institution it uses, Delaware-based Traveler Bank & Trust, FSB, and its 

retail distribution affiliate, Primerica Financial Services [“PFS”]) which target LMI and minority 

communities -- but only with higher than normal interest rate loans and overpriced and 

less-than-lidly-explained insurance products Travelers has recently bad to admit to systematic violations of 

the Home Mortgage Disclosure Act ( “HMDA”), rcflccting adversely on the managerial record of the 

proposed acquirer. 

Travelers & Citicorp 

The proposed combined company would be worse than its constituent parts: 

1. Citigroup would disproportionately exclude LMI neighborhoods and communities of color from 

Citicorp’s normal interest rate, high technology products and services, while 

2. Citigroup would target these communities with Primer&x’s and Commercial Credit’s misleading, 

overpriced loans and insurance. 

As an example, consider the following 

Commercial Credit Loans, Inc. is one of Travelers’ subprime (higher than normal interest rate) lending 

units. III the Greensboro, NC Metropolitan Statistical Area (“MSA”) in 1996, Commercial Credit Loan, 

Inc. made 10 loans to A&can Americans and 25 loans to whites. For comparison’s sake (and the 

comparison is relevant and significant, in light of the proposed combination), in this MSA in 1996, 

Citibank FSB made 13 loans to whites, and none to African Americans; Citibank Mortgage made seven 

loans to whites and none to African Americans. Elotb Citibank Mortgage and Citibank FSB are normal 

interest rate lenders; they both disproportionately exclude minorities from their marketing and lending. 

Commercial Credit Loan, Inc., is a high interest rate lender -- it targets and lends to minorities at a much 

higher rate than they are represented in the demographics of, or other leaders’ data in, this and other 

MSAs. For farther example, in the Charlotte, NC MSA in 1996, Commercial Credit Loan made 19 loans 

to Aiiican Americans, and 23 loans to whites. Citibank Mortgage in the Charlotte MSA in 1996 made 10 

loans to whites and only one loan to an African American; Citibank FSB in the Charlotte MSA in 

1996 made 40 loans to whites and no loans to African Americans 

Citicorp’s disparate record raises a “red flag” (or presumption) that discrimination is occurring; this 

proposal should be dcnicd on this ground alone. 

CRA Pledge 

On May 4, 1998, Citicorp and Travelers announced what they call a % 115 billioq 10 year “commitment” -- 
ICP states for the record that this announcement does not address the adverse issues raised and documented 

in ICP’S April 13, 1998, Comment. 

ICP has conducted the following analysis of the pledge” 

The press release (that is all it is - let the record reflect that the FRB refused to monitor or enforce 

Chemical Banking Corporation’s and Chase Manhattan Corporation’s press release ‘~commitment” of late 

1995) is sub- headlined, “Includes Insurance for the First Time” - but there is very little detail on this, no 

dollar volume is assigned to insurance, it is essentially a continuation of Travelers’ limited programs to 

date. In fact, Travelen owns Primerica Financial Services, which pitches term life insurance of 

questionable quality (and higher than normal interest rate home equity loans) to working class people. The 

point would be to clean up inequities in Travelers / PFS’ existing insurance operations, which this 

announcement does not do. 

At page l-2, the only dollar break-out in the Announcement is set forth: $6 billion of the purported $115 

billion will be “targti for the Center for Community Development Enterprise. 

AtIer issuing the Release, Citibank disclosed this break down for the remained of the $115 billion: $59 

billion: credit cards and student loans $20 billion: “affordable housing” $30 billion: small business. 

ICP notes: other banks do not include credit card lending in their CRA commitments - here, it is nearly 

half of Citibank’s pledge. 18% interest rate credit cards, to college students and through “take one” hand 

outs by ATMs, arc simply not CRA-relevant loans See below. 

On page two, Citibank claims to have improved its record in 1997 - even iftrue, that would not resolve the 

adverse issues of record in this proceeding, given the stark racial disparities in Citibank’s 1996 lending (see 

ICP’S 52-page April 13, 1998, comment). 

Page 3 shows that the purported ““inclusion”” of insurance in the pledge is limited to property casualty 

insurance, and is little more than a continuation of Travelers existing programs. Travelers’ “Urban 

Availability of Insurance” program is said to have been founded in 1994 - but is only operational in four 

cities, none of them b&g New York (Citibank’s and Travelers’ headquarters, and where Citibank takes 

most of its deposits). Expanding this program to “as many as six new cities” over three years is not a 

me&ngtid benefits, and hardly constitutes “one plus one equaling three,” as the Release quotes Mr. Weill 

as saymg. 

That Citicorp and Travelers purport to be “focus[ing] public attention on this critical need” exemplifies the 

arrogance and/or paternalism of these two companies. The tirst step for these companies would be to get 

their own house in order - for Citibank to stop closing its few remaining branches in modest income 

neighborhoods, and to address the racial disparities in its mortgage lending, and for Travelers to commit to 

clean up its higher than normal interest rate and fee home equity lending, as only two examples. It appears 

to ICP that the Companies are trying to DIVERT public attention from these company-specific issues, by 

doing such things as paying for an annual test that will measure the financial skills of high school seniors 

(page 4, near bottom). 

Even as to the one category that the Announcement breaks out -- the $6 billion targeted at the Center for 

Community Development Enterprise - little detail is given, Low Income Housing Tax Credit are lumped in 

with “investments in housing securities” that could involve buying Fannie Mae securities that institutional 

investors not subject to the CRA already buy. Virtually all other banks break out tax credits for 
investments in loan funds, etc. - this lack of specificity is telling. 

The formal “pledge” set out on page six is intangible, to say the least: 

1. The Companies “pledge” to be ‘Yranspwmt” (Pledge #I): WOE: the lack of specificity in this 

Release is not a good start to the pledged “transparency”); 

2. The Companies pledge to “mcdemiz [their] products” -- which has been Citibank’s justification 

for closing many of its branches in low income neighborhoods, claiming that more and more people 

access Citibank over the Internet: 

3. The Companies pledge to “take an even more visible role as a fmancial sector leader” - given the 

massive lobbying budgets of each company, not really the problem that needs to be addressed: etc.. 

As to Messrs. Reed and Weill’s joint quote, it is unclear if they are committing that. for example, the 

Primerica door-to-door sales people would start offering Citibank’s products - or continue offering 

Travelers FSB’s and Commercial Credit’s high priced, relatively low quality (but more profitable) 

products. Significantly, the release ends with a listing of Travelers’ operatins companies, including 

Primerica Financial Services and Commercial Credit -- presumably part of the pledge, with their 

questionable and higher than normal priced (many credibly say “predatory”) products. 

This Application should be denied 

We again urge you to: 

1. deny this application 

2. ask you to request further information on this application 

3. ask that you send a representative to the public meeting the FRB has scheduled, for June 25 and 

26, 1998, in New York City, and 

4. Ask that you defer ruling on this Application until the issues of the legality of the overall 

combination have been resolved. 
3el. 

. ..-_ _ ,..____-\-_ ,_.. -_-. 

Wednesday, June 3, 1998 65 

FNYSE, AMEX, Nasdaq and mutual ttind reports . . . . B6-8 

Finance 

lomplaints filed 

vith insurance 

. . . . . . . ..*.*......*...............*. 

mergers fought from a new angle 

Have a Ihsincs Lip’? Call 324.2876 

or e-mail njbiz~neffsjoumal.com 

b INSIDE: 

New home sales 

in April break 

;I Iwold BO 

zgulators in Del. 

By JONATHAN D. EPSTEIN 

sta,, reporter 

Taking R new tack in their eftq l,o block or delay major bank 

,rycrs, n community activist 

mp in Wilmington and its New 

rk.based partner hsve filed 

~tesls with Debwnre insurance 

:ItIators against two major finrial services mergers. 

‘The mwe by the Delaware Corn. 

nily Keinvestmcnt Action Countogether with ISronx-hased 

ICY City l’rcss/Community on the 

~w. marks R rare ~ccnsion when 

,,munity activis& have been able 
_ 

THE NEWS JOURNAL 

. . . 

to mergers 

FROM PAGE 85 

“If You are in the subprime business, You’re gouging a community. 

If 7ou’P.e gouging a community 

You re violating all applicable conI 

sumer protection laws,” Itangan 

said. “We don’t want them to be 

able to peddle more wares to a 

larger customer base.” 

l’rav~lers and Citicorp an. 

nounced their $80 billion merger 

April 6. &s part of the deal, ‘travel. 

ers, an Insurer, is applying to a~_ 

qulre Delaware-based Citicorp AS_ 

sorance Co., which insures only 

the risks of Citicorp or its affili_ 

ates. 

I’rospect Heights, Ill.-based 

Household agreed the next day to 

buy Ijencficial fbr more than $8 bil. 

lion, Including subsidiaries Central National Lift Insuranr:e ~0. 

and Wesco Insurance Co. 

‘I’hc msurance prot.ests are an 

unusual slep for the two community organizations, which have 

teamed up frequently in the past 

two years to protest major banking 

mergers using the 1977 federal 

Community Reinvestment Act. 

The law requires banking regulators to take into consideration the 

comments of communities and 

community activists about a 

bank’s lending record in low-income or minority areas. 

These two mergers also involve 

insurance subsidiaries, however, 

giving the groups a new venue for 

their protests - which also have 

been filed with the Federal Reserve Board and the federal Office 

of Thrift Supervision. 

But insurance laws don’t give 

community groups as much 

weight, forcing them to rely on 

more limited guidelines that 

merely require regulators to consider the concerns of the “insurance-buying public.” And that’s 

given Travelers and Citicorp a 

chance to fight back. 

The companies argued that the 

activists don’t have the right to 

challenge the merger at the state 

level because Citicorp Assurance 

Co. doesn’t insure the general public. 

Insurance regulators mostly 

sided with the companies, ruling 

that Rangan can participate but 

only as a consumer, not a representative of DCRAC, because she is 

not a Delaware attorney and the 

organization itself would not be affected by the merger. 

On Household’s mde, the a0 

tivists accuse the company of 

shedding its Iraditional conmlercial banking business two years 

ago because chief executive 

William I? Aldinger preferred to 

focus on the higher-rate and more 

profitable consumer finance business. 

And they said the company’s 

plans to shut down several Beneficial lending operations, merge or 

sell &neficial’s community bank 

and thrift subsidiaries, and close 

hundreds of consumer finance offices nationwide will only hurt 

consumers, especially in 

Delaware. 

“It is impossible to see how this 

proposal ,_. offers any real benefits, 

particularly to low- and moderateincome consumers and people of 

color, in the state of Delaware,” 

wrote Matthew Lee, executive director of lnncr City Press. 

However, Household officials 

counter that the activists are unfairly using government lending 

data for Household that fail to reflect the company’s actual 

record, because most of its operations are not subject to government reporting. 

Officials also defended the company’s higher rates, saying that 

most of its customers don’t have 

major banking relationships and 

are more likely to default than typical bank customers. 

Finally, the operations slated 

for closure generally duplicate 

what Household already has or believes it can do more effectively, 

Household assistant general 

counsel Paul R. Shay wrote in a 

letter to Lee. 
grilled 

buyout 

Activists ask 

about tacit 

Move, wanted to know if the Fed 

had offered the company any guarantees that it would be able to get a 

two-year waiver allowing it to crosssell banking and insurance products to a broader customer base despite federal laws barring banks Fed from underwriting insurance. 

support 

By JONATHAH D. EPSTEIN 

Staff reporter 

Community groups squared off 

with attorneys from Travelers 

Group Inc. at a Delaware Insurance Department hearing Thursday, as the activist groups from 

Delaware and New York tried to 

block Travelers’ planned purchase 

of Citicorp and its Delaware insw 

ante subsidiary 

Taking advantage of an opportunity to cross-examine company officials - not allowed in banking 

hearings on mergers-the activists 

peppered Travelers attorneys with 

questions about discussions the two 

companies had with senior Federal 

Reserve officials - including 

Chairman Alan Greenspan -prior 

to the merger announcement. 

Through more than six hours of 

testimony and cross-examination, 

the activists tried to determine if 

Fed officials - whose approval is 

required for the merger to go 

through-gave the companies any 

kind of tacit advance support or 

advice for their merger plans, 

In particular, Matthew Lee, executive director of New York-based 

Inner City Press/Community on the 

on 

plan 

Travelers’ attorneys, for their 

part, acknowledged the discussions but denied that Fed officials 

had provided any assurances. 

And they argued that such 

questions were irrelevant to the 

hearing, which dealt only with the 

acquisition of the Delaware insurance subsidiary. But Lee argued 

that his questions addressed the 

future financial strength of the 

company and the integrity of its 

officers, issues that the Insurance 

Department must consider, 

Travelers and Citicorp announced their record-setting $70 

billion merger April 6. As part of 

the acquisition, Travelers is acquiring Citicorp Assurance Co.! a 

Delaware-based company that insures Citicorp and its banking and 

credit-card subsidiaries against 

potential loss from lending activities. As a result, the merger is subject to approval from state insurance regulators. 

The merger is particularly controversial within the industry because it would unite the secondlargest commercial bank and one 

of the nation’s largest insurance 

companies. Decades-old federal 

banking laws bar banks from underwriting most forms of insurSeeTRAVLERS - back page 
Travelers: Activists 

firm’s future 

FROM PAGE 67 

ante and limits their securities activities. Citicorp’s insurance underwriting is permitted because of 

its internal nature. 

Travelers - which is technically acquiring Citicorp and becoming a bank holding company 

- is counting on a Fed waiver giving it two years to come into compliance with the law. The Fed is 

also authorized to grant up to 

three one-year extensions after the 

waiver expires. 

In the meantime, Travelers and 

Citicorp are hoping that Congress, 

which has been trying to change the 

law for more than two decades,, finally will approve legislation lifting 

barriers between the banking, insurance and securities industries. 

Lee and Rashmi Rangan, executive director of the Wilmin&onbased Delaware Community Reinvestment Action Council, questioned the future financial strength 

of the combined company if banking regulators require it to sell it.3 

insurance underwriting business to 

comply with federal law. 

Travelers and Citicorp, backed 

by more than a dozen attorneys 

from New York and Washington, 

fought back. 

“This is not the Fed,” said Edward P Welch, a partner at Skadden Arps Slate iVIeagher & Flom in 

Wilmington, representing Travelers. “This is the Delaware Insurance Commission. What we’re 

talking about is one tiny Delaware 

insurance company at the bottom 

of the chain. It only does a limited 

amount of business.” 
“;o,?;; , FNYSE, AMEX, Nasdaq and mutual lund rccports . . . . BIGI 2 

Friday, June 19, ;998 IT.9 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

I I;IVC ;I Ih\i~~css lilf! C‘;dl 324.2976 

or c-rwil tljl~iz~newsjtrumaI.corn 

4ctivists re 
Citicorp: Conflict claimed : 

in merger with Travelers 

FROM PAGE 89 

ernment waivers to allow them to 

legally continue operating both the 

insurance underwriting and banking businesses, while cr”~.xell!ng 

the products to each other‘s c”s. 

tomers - a key part of rhe mer;ey. 

That set off a lYrestorm of crIt1. 

cism from oixervers, activjst; and 

even members of Congress. Both 

the Fed and the banks ioon citi6ed 

publicly and in conureszional hear. 

ings that no pwantees of rqulatory approval were granted. while 

&o noting that it is the eniire Fed 

board of g”verr,ori. not the rtaf a:- 

tonlevi or Grccn5Lun ;1!onc. that 
OFFICE OF THRIFT SUPERVISION 

APPROVAL OP APPLICATION FOR CONVERSION TO FEDERAL SAVINGS 

BANX CHARTER, HOLDING COMPAKY ACQUISITION AND TRUST POWERS 

ORDER NO.: Y7-12C 

Travelers GrOup, Inc., CCC Holdings. Inc. and Commercial Credit 

Company (joinrly. the "Holding Companies"), seek approval of the Office 

of Thrift Supervision (the "OTS") co convert The! Travelers Bank, New'ilrx, 

Delaware (cr.e "Bank"), from a Delaware-char& *LPrml ccmmercln? bani t9 a 

“New FSB”) pursuant to 12 U S X 5 

1464(e) and 12 C.F.R. § 552.2-6: to acquire ttx New FSB p:jrswnr CQ 12 

[J.S.C. 5 1467a(e) and 12 C.F.R. § 574.3; a-d f>r the nerd FS~ to ?r.gjage 

in trust opprntions pursuant to 12 U.S.C. 5 1464inl and 12 r.F p.. 53 

545.96 and 550.7 icogather. the 'Applicaeinns"1. The Ba-.k h-.r: deposits 

ir.sure3 by the Bank Insurance Fund PBIF”) an3 ;1rapo,qe9 tc: retain EIi 

depcsit insurance afcsr the conversi,2c. 

The ii has COT.~:~~:-F--: -tie .+clica::ozs. s3 'ti;4;"::'e:::& b, 

reprezen:atinns by the Fielding Cnn,par.ies, zhe Ba?k and ch?ir a:tcrr.cys, 

cnder the factors set forth in 12 U.S.C. 4: iq64isl. I,I’;.z~II) and 

1467aCe) nr.3 12 C.F.R. §§ 545.96, 550.2. 55?.2-1. 552.2-6 and 574.3. ad 

urder the CaxnUnity Relnvdstment Act, 12 L'.S,C 5 2901 " m., ilncl tnil 

DTS regulations thereunder, 12 C.F.R. PST: 563s. :n add't1x; fh.? OTS 

has considered a dig1?SC from the NoTrheast Keginnal Office. 3~. ar.aiysis 

prepared ty Corporate Activicics, bn analysis from Compliance Policy and 

a leqel opinion Prom the Business Transartians Division. w 

the OTS h+s considered comments on the Applications sllb,mictp&py Inner 

Clr,y PressiCommunity on the Move, Brcnx. Naw York. and Delaware 

Ccxmunity Reinvestment Action Canci?. Inc., Wilningcon, Celnwarr. 

This az~roval order shall also 8erve ar notice to the New FSB chat 

For the reascns set forth in the Northeast Regional Office d:qeqt, 

-he analysis from Corporate Activities, an 3na;ysls from Compliawe 

Pclicy and ‘he Business Tranaaccions Division legal opinion, the 

Dir‘ectcf fir.dr <hat the Applications satisfy th+ applicable a~;pr-cx'al 

Ytandards, crovided that the conditions set fsrth brl9.v are sarisfied. 

A,ccordingly. the Applicaticns are hereby approved, sl.l!;jcct cr. tn+ 

f3llovir.~ conditions: 
-2. 

1. The pr?pn3ecl Kransactlon shall be consummated no later than 120 

calendar days after the date of this approval order, unless an exter.sinn 

is c~ranted fgr good cause by the Norcheasc kegional Director, CT his 

cles1gnee r”Regional Lirector”J ; 

2. or. ChC bueiness day prior r13 the cute of c:3r.3unlPat i?n of t’3.e 

prol‘osed transaction, the chief fiwncia: officers of SIX hank a~,,? ?,e 

fielding C~zxpar.ies shall certify to the Reqianal Director, in writin?, 

that no nacerial adverse events or material adverse changes have 

riccurred with respect to th:: financial condition or operations cf -he 

Bank and tticz Holding Companies since the date cf the finar,cial 

statements submitted with the Applications; 

3. The eaxk will obtain a:? reyuirecl regulatory ar.d sharehglder 

apprlWa1 E prior c3 ccnsnmmation, will acL to sa:isfy ali reql:irsrr,ents 

and conditions imposed by the OTS. anl will ccn,ply vl:h all appl:sab:e 

laws, rules and regulations; 

4. No later than 5 calendar days from the da:e #of consummati.?n of tt.? 

COr.“aXBlOn, the New FSB shall file with the Regional Director, a 

certificarx>n by legal conneel scaring tS= effective d=~re of the 

;.:in:iersior. er. d th?.t rhe c~n.ier‘sii;.? k;s ,,s+:, c;,,-.j\:ill::;.e,~~ ir- ai_,:.i,.:.da::,.e 

wi:h the provisions of all applicahie la,% and rigulacions, c~he 

Applications, this Order and the represcntatinns by the Holding 

C@-npar.i?S, the sank and their ar;torneys: 

5. The N~‘.G FSB ancl the Hio:dinq Companies subsidiary securit.i-5 

brokerage eiltit ieS, or any of the Holiing Corrpanies’ subsidiaries that 

eqage Lr. securities brokerage (“Broker Dealer”) must be operated aa 

8eparate legal encities so chat: 1) their respecrive acccur,rs and 

retards ax-? not intermingled. 2i each observes the procedural 

formalities 9f separate legal titles, 3) each is h.sld out to the public 

as a separate enterprise. and 41 r.eithrr daminates the other to the 

ex7~er.c char. one is treated as a mere depar:nent of the other; 

6. A rrajarity of the New FSB’s board of directors must n?t be corzprised 

sf, lojivid~als who are directors 0: emp:oyees of any seruricles 

affiliate; 

7. TM N-U FSB and the Broker Dealer a?= prohibited from sharing ccr~mnn 

officers ur.less prior Wrlt~en approva? is 3btaineA frcm rhe Regicr,a: 

Cireccor. which shall’be based on criteria such as regulatory 

compliance, experience. character, ir.tenrity and the ability to parfsrm 

both duties; . 
12 C.F.R. Section 550.10; and any ocher addic:cnal or suc‘cessor 

3t.steme*t9 cf policy or regulations addrcssicg these subjects. The 

off i=ers and directors of the New FSB and the Broker sealer are 

prohi’oited from Using their influenca to: a) cake advantage of 3 

business opportunity for the securities affiliate’3 henefle when :he 

“nporcuzir_Y is of prescnc CT potential advar.tn,gje co the NW FSB; ~j: 3) 

?);ilce the securities bfflliace In a Positior. that leads to, or cau:d .-i - 

,3reate the appearance of a pten:ial conflict of ir.:eres-; 

The Ne.u FSB, its Hnldir.5 Ccqxni~s and thy ~r7k~r 3~,:1e: ,*r< ;..:r:e;c 

f~ the prwisions of 12 C.F.R. Section 563.76. Offers and sales sf 

Securities at atI Office Of Savings Association, and related policy 

established in OTS Thrift Bulletins 23-2, InterA3ency Statement “1: 

Retail Sales of Nondeposit InVestITent Products (the “InterAgencY 

Statement”), and 23a, Limited ExcePtions to Prohibicicns on Sales of 

Savings Institution’s Securities. and eny additional or SUCCBYS”~ 

statements of policy or regulations addressing these suhjeccs. 7t.e h‘ew 

FSB and the :i”ldl!Ig COmPanieS shall ensure COmFllancG by the Broker 

r&ale= with, at a mir.imum, the General Guidelines in ~isclos~~res and 

ndverclsing se: fortt. in the IncerAgency scnr.em~r.c wheneve:‘ the ~r”ker 

3:aler “1 their representatives market. or offer for sale, deposit 

1 I x:::‘re c: rl-.e K?V, ‘SE; 

1C. The New FSB shall “Perate wLtr,ir. the Parameters of the suhr.-~lr.Cecl 

business plan. Any gropnsed major deviations or material changes from 

zh.e 9uiJmitted plan, and in ganicular those p?r:nining to the 

crss;-morkering of deposit and non-dzpcsit p:odccts, shall reeeiv~ tt,e 

prior wricter. non-objection of the Regicnsl Cirector. The request f.or 

ck,,nnge sb.sll be submitted a minimum of 30 days before the praPz9efi 

charqe is anticipated. In the e”:nt Of a r,rCFCSd contractual ch?sr.g!e 

invclving service Providers. a revised plan shall te subnltted c3 :he 

Region,?1 Director a !?ini?Um Cf 15 dlys prior e” entering inc” iIhe 

pertaining t3 transactions wfth 

the OTS for review shall be provide;! to 

receive his written non-o;“]eati”n priar 

12. The New FSE’s CRA plan shall be subject to any future chanrjes in 

regl_,irerc.ents contained in regulatory policies or regulations zh.ac. :he 

CTS , “:I its own. or acting in concert with other f insncial ins:ituri”n 

regulatory agencies, determines are appropriate for depcsitory 

Instlruciocs: 

13. any ct.angrs that the New fSB ir.ltiates to ies CL\ plan within the 

chre- yaar period following approval @f the APPlicationa eha11 he 

aubjecr: cc the prior written approval of the Re$i”n,s; Director: 

14. within 43 &Ye of consummstion. ths New FS3’s Con;pliance Clfficer 

shall develop a Plan to: 
(a: mnnltcr the sales practices of Prirreri,:a Financial Services Wme 

Mortgages, Ix. i”PFS”) representatives to ensure tha: al: CUSCC~,BTS. 

particularly those who have applied fnz high loan-ho-value ratio 1oar.s +-- 

and fcr mortgages referred CO in Saccinn 103Caa) OE the Truth in Lending 

AC:. are properly and completely apprised of the financing 0pcior.s 

reasonably available to them through t,he New FSB and the c3sts and risks 

associated wiCh e,?ch qtion: 

(hi provide compliance training Co PFS ager,cs, underwriters and ot:.er 

appropriate personnel in tha loar. approval prwess un regulatory ma:~.ers 

?nd consuxr protection issues assoriaced vrir.h high loan-co-vaiue rac~c \c 

loans and far mortgages referred ~0 !n SecClnn 103Caa) Of the Truth in 

Le4ir.g Act : 

(cl place controls and review procedures in the loan approval pr.~cess 

CC ens’~re that, on applications for high loan-to-value ratio 13ar.s ar,d 

fnr mcrtgages referred to in Section 103iaa.l of the Truth in Lending sr 

Act, die co>sid?ra:ion is given to the c~sr~m?r’s ability co repiiy; and 

Any tire perloci specified herein. may be extended by the Nsrcheast 

Regions? Pirector. 01‘ his designes, for g,?od ca~usc, far up tc 120 

calendar days. 
Office of Thrift Supervision NEWS 

1700 0 611,11, NW, VhhinpB,. C.C. sow T.llp~*n. !W, w,-3.77 

FOR RELEASE at 4:30 p,m. EST For further information 

Monday, November 24, 1997 Contact: William Fulwider 

OTS 91.83 202/906-69 I3 

-PPROVES -Em GROyE 

FOR FEDEUL TH v 

WASHINGTON, D.C., Nov. 24, 1997 -The Travelers Group, Inc. received approval horn 

the Office of Thrift Supervision (OTS) today to canvcrt its Delnwur-chz?.‘tr-d corc_rr.esiz.l br.nti w a 

federal thrift charter. The new institution, Travelers Bank&Trust, FSB, will,operate out ofNew& 

DCI. 

OTS also granted the new thrift full trust powers which will be conducted &rough an agency 

of&x located in New York. Travelers Bank & Trust till be a subsidiary of Commercial Credit 

Company, which is a subsidiary of Travelers Group. OTS approved both as thrift holding 

compsnies, es well as another Travclcrs subsidiary, CCC Holdings, Inc. The conversion to e thrift 

will permit Tmvelers to consolidate its mongage lending operations and trust activities in one 

institution, using the powers afforded by the federal thrift charter. 

As pert of its npproval, O’TS imposed D number of conditions that Travelers must r%lftll 

regarding CRA and lending concerns noted by OTS, as well as by two groups that protested the 

applica!ion. 

Travelers will have no deposit bese outside Delawere, but will do most of its lending 

activities outside the., state. OTS noted that Travelers has t&en the view that its CR% obligntion 

extends throughout all of the communities whm it does business and ha9 made M initial pledge to 

make Rt leut $430 million in home cquiry Iosns to low- and moderate-income borrowers over the 

next three ycsrs. Moreover, OTS end Travelers expect that home equity lending will Increase 

beyond this level as Travelers’ business plan unfolds. The new thrift’s CRA plan must comply with 

-more. 
-5- 

17. Tha New FSS eholl not mke any lurdlng daciaione, In Whdls or in 

part, on any prohibited bee18 including the mge or location of a 

dvrlling. 

Any time pcrio0 #pacified heroin mry bQ Qxtsnded by tha NWthQaQt 

n~glorul Dirmctar. or hia deslgnro, for good cause, for VP ta la0 

caleudar days. 

By OrdQC of the Director of the Office of TbriCt BupQrvic&n, or 

nar dQrignes, l rzcctive November 34, 2.997. 

. 
Office of Thrift Supervision NEWS 

FOR RELEASE at 4:30 p.m. EST For tiher information 

Monday, November 24, 1997 Contact: William Fulwider 

OTS 97.83 202/906-6913 

OTS APPROVES TRAVELERS GROQ 

FOR FEDEQL TH v 

WASHINGTON, D.C., Nov. 24, 1997 -The Travelers Group, Inc. received approval from 

the Office of Thrift Supervision (OTS) today to convert i:s Delaw~~-ch~+~tr-~ cor~~?e.~iz.l b:nic w a 

federal thri!? charter. Tne new institution, Travelers Bank k TN& FSB, will operate out of Newark, 

Del. 

OTS also granted the new thrift full trust powers which will be conducted thrcugh an agency 

office located in New York. Travelers Bank & Trust will be a subsidiary of Commercial Credit 

Company, which is a subsidiary of Travelers Group. OTS approved both aa thrift holding 

companies, as well as another Travelers subsidiary, CCC Holdings, Inc. The couversion to B thrift 

will permit Tmvelets to consolidate Its mortgage [ending operations and trust activities in one 

institution, using the ~OWCIY afforded by the federal thrift chslter. 

As part of irs approval. OTS imposed a number of conditions that Travelers must fulfill 

regarding CR4 and lending concerns noted by OTS, as well as by two groups chat protested the 

application. 

Travelers will have no deposit base outside Delaware, but will do most of its lending 

activities outside the, state. 07’S noted that Travelers has taken the view that IU CR4 obligntion 

extends throughout all of the communities where it does business and has made an initial pledge to 

make at least $430 million in horns equity loans to low- and modsrate-income borrowen over the 

next I~I;C ycm. ,Morsover, OTS and Travelers expect &at home equity lending till inmase 

beyond this level u Travelers’ business plan unfolds. The new thrift’s CRA plan musl comply with 
Travelers approved - 1 

any future changes in rcgulatoty requirements, and changes to its plan within the next three years 

must have the written approval of OTS. 

OTS said the former Travelers Bank, as a state-chartered entity. was exarnincd by the Federal 

Deposit hsumnce Corpontion (FDIC) for CRA purposes and received a “satisfactory” rating on its 

last CRA examination. 

Additionally, the thrift must develop a plan covering high loan-to-value ratio loans and high. 

cost mortgages to: a) monitor sales practices to ensure that all customers, particularly those applying 

for these loans, am apprised of available financing options: b) provide compliance training to agents, 

under,v$ters and othsr pcraonnel; c) cnsurc that due consideration is given to the mortgage 

customer’s ability to repay; and d) ensure that senior thrift management exorcises appropriate caution 

in approving these loans and addressen the thrift’s ability IO mtincain customer and public confidence 

in its lending operations. 

Other conditions In the O+S approv=l order require that the new rhnft clear with OTS ali fee 

payment arrangements for agents marketing Its home equity loans; that it not make any lending 

decisions on any prohibited basis. including the age or location of a dwelling; and that the new thrift 

follow ngulations and guidance pertaining to the cross-marketing and sale of non-deposit products 

and ar.y transactions with aMHate companies within the Travelers farrily. 


June 23, 1997 

Office of Thrift Supervision 

Attn: Messrs. Corcoran and Sjogren 

1700 G. Street, N.W. 

Washington, DC 20552 

RE: Additional Comments Protesting and Requesting Oral Argument 

on Traveller’ Applications--expanded now to include Security 

Pacific Financial Services 

Dear Messrs. Corcoran and Sjogren: 

We again join with the Imrer City Press/Community on the Move’s protest now 

expanded to include Travellers’ acquisition of Security Pacific Financial Services. 

Additionally, today I met with an elderly African-American couple to assess the 

nahtre of their victimization by Commercial Credit. Attached is their signed and 

dated letter to me. Their problems are listed below. 

April 1996: The Harris’ went to Commercial Credit for a $7,000 loan. They were 

offered a consolidation loan package to pay off all other debts. They were paying 

approximately $800/month in all their debts and were reluctant to consolidate their 

auto (2 years left with approx. 300Imonth payment) loan and their Commercial 

credit loan (2 years left with approximately 150/month payment). Their Farmer’s 

Home loan and the loan from a bank cost them another 350/month--both were for 10 

years. The Harris’ were given a good faith estimate for $20,001 on April 29. 

May 1996: Settlement statement--The Harris’ have signed a settlement statement 

which shows that they borrowed $52,022.64 Tom Commercial Credit. There is 

1 
clearly a grave discrepancy here. Line 1600 shows 52,022.64 as the loan amount, 

yet the points are charged on the basis of a mortgage of $49545.37. Additionally, 

the Disclosure Statement, Note and Security Agreement shows amount financed as 

49,545.37 and principle as 52,022.64. The points (2477.27) that were tacked on to 

the loan do not reflect in the amount financed. How in the world was Commercial 

Credit going to collect on this. 

Question, why is the principle different from amount financed? 

Further, analysis gives us some clues on Commercial’s tactics. The Harris’ were 

paying 83.34/month for the first year for the points and would have paid 

125.34/month thereafter for 19 years. The 5 points over the twenty years would 

have cost the Harris’ $29,577.60. If Commercial were to claim that 83.34 in the first 

year and 125.34 thereafter additional mortgage payment was going toward 

insurance--might I add, that the Harris’ did not realize that they borrowed 8828.91 to 

pay for a 10 year credit life insurance covering the principle 

Nowhere in the paperwork have I seen the actual interest rate that the Harris’ were 

paying. In the disclosure statement I do notice that the regular monthly loan 

payment without insurance is $384.36 (extrapolating it to the amount financed 

$49,545.37 for 20 years, I get a 7% interest rate--excellent deal if there were no 

catches). The APR is a whopping 10.80 percent. If this was a simple loan from a 

bank, the points would have been added to the total mortgage--which would then be 

$52,022.64 and at 7% for 20 years the Harris’ would have paid $44,316.07 in 

finance charges versus $72,278.63 that they would have paid with Commercial. 

(Harris’ are looking to refinance--they have an excellent credit and in no way can 

Commercial claim risk minimizing strategies that add on unnecessary financial 

burden). 

Inadequate disclosure: When Harris’ went to closing, they knew that they were 

paying off $33,038 and receiving $6,999.78. They did not see the numbers, 

subsequently reflected in the settlement sheet which include a closing cost of 

$11,984.18. Loan discount fees were 5% (assuming borrowing $49,545.37 this 

equals $2477.27 accurately reflected on line 802); a Credit Life Insurance premium 

of $8828.91 (In Mrs. Harris’ words, “I am not stupid. If I knew I was paying 

$8828.91 for a ten year credit insurance premium, I would have said no.“)--at 7% 

for 10 years this works out to a monthly payment of $96.73, more than enough to 

2 
buy a $300,000 term life insurance, 

Borrowers did not know that there were prepayment penalties and this note carried 

a demand feature. The Harris’ firmly believe that when they signed the documents 

the form was relatively blank. They knew that their payments will be 467.70 per 

month for 20 years--and were quite comfortable with this payment. They did not 

know that they had to only pay 384.36/month for the mortgage. They pay their 

home owners and their taxes on their own. To date they know that they pay a little 

extra every month for insurance. 

Why should they have paid an additional monthly insurance premium when they 

have already financed it at a usury cost of 96,73/month for a 52,000 ten year 

coverage! 

Excessively high and duplicate charges: In the Settlement sheet, line 1103 is a 

title examination fee of $150; line 1108 is a title insurance fee of 75.00 (1109 and 

11 IO lenders and owners coverage is not applicable!).--title search fees in Dover, 

Delaware run around $75.00. Document preparation fees of $125 is an excess 

(most do not even charge any) Recording fees run at about $8/page and a total of 

$7 to record--did Commercial record 9 pages!. 

Prepayment penalties: The Harris’ did not know that paying off their mortgage 

early would cost them a hefty sum (5% of unpaid principle if paid off in the first 

year, 4% within two years, 3% within 3 years, 2% within 2 years and 1% within 5 

years). They also did not know that cancelling insurance would cost them on the 

basis of “Rule of 78”--I myself do not know what this is. 

Inaccurate application of payment toward principle: A payment history versus 

what should have been applied follows for a one year period--this is assuming the 

rate to be 7% amortized over twenty years on a 49,545.37 loan. 

The absolutely haphazard and random manner, in which Commercial applied the 

payments of $467.70 (see the following table) each month toward principle against 

the $384.36 that should have been amortized following standard amortization 

schedules resulted in paying down the loan by only $871.25 versus $1177.57. 

3 
Due to the prepayment clause--not adequately disclosed--attached to the insurance, 

when the Harris’ wanted to have the premium applied to their principle, only 

$7,026.63 ofthe $8828.91 was applied. It cost the Harris’ $1802.28 to insure for 

$.52,00 for one year. The pay off balance on 06-09-97 was $46,541.95. 

We urge you to investigate the Commercial Credit’s lending policies and practices 

for fair lending violations. We also urge you to interview Ms. Harris and carefully 

review facts as I have stated herein. Upon OTS gaining the Hanis’ approval, I will 

gladly share documentation with you. Once again, we protest Travellers’ 

reorganization plans, request a hearing on this matter, and request additional time to 

prepare our testimony. Thank you for your attention. 

4 
Analysis of Horn Mortgage Disclosure Act Data 

18824885 

Rochester, N8w York 

MATER ROCtESTEKCOMMUNlTY RElNUESTMENT 

COAllTRlN [GRCRCI 

P-0. Rox as41 

Rochester, New Ywk l4604 \,\ 
EXECUTIVE SUMMARY 

This guide, issued by the Greater Rochester Community Reinvestment 

Coalition (GRCRC), contains analysis of lending patterns in 

Rochester. GRCRC was convened in 1993 to generate discussion about 

lending patterns in Rochester. The Coalition is releasing this 

guide to home mortgage lending to continue the ongoing discussion 

on this subject. The guide is based on an analysis of 1993, 1994 

and 1995 HMDA data.i 1995, is the most current year for which data 

is available. 

Some of the most significant findings of the guide are as 

follows: 

. In 1992 the suburbs had a lending rate that was one hundred 

and fifty percent (150%) higher than the city lending rate. 

In 1995 that gap had narrowed so that the suburban lending 

rate was only thirty-five (35%) higher than the city's 

lending rate. 

. In 1995 the disparity in the lending rate between white and 

minority moderate income had been eliminated. 

. Denial rates for minority loan applicants continue to be two 

or three times the rate for white applicants. 

l There has been no improvement in lending to rental units in 

the city since 1992. 

While significant improvements have occurred in the last four 

years much work remains to be done. The Coalition believes that 

by continuing to work with area banks, the city, county and 

community we can continue to improve on the work that has been 

done. We can also address the problems of high minority denial 

rates and lack of rental lending with innovative solutions. 

We would like to see members of this community use this guide to 

support the banks that are lending in the city, particularly in 

the low and moderate income and minority neighborhoods in the 

city. We would like to hear from individuals about their 

experiences with area banks in obtaining mortgage loans, small 

business loans and personal loans. 

We challenge the banks who have not made any significant 

improvement in their lending performance since 1992 to do better. 

A number of banks are lending aggressively and prudently in the 

city's underserved neighborhoods. It can be done. If banks 

continue to underserve our low income communities we should ask 

ourselves whether we should,continue to bank with them. 

1 Some of the HMDA analysis was compieted using HMDA Works, a 

software program developed by the Center for Community Change. 
INTRODUCTION 

In May of 1993 the Coalition issued a report about mortgage 

lending in Rochester. The repor: was based on an analysis of Home 

Mortgage Disclosure Act (HMDA) data for 1992. The report found 

that lending in inner city neighborhoods was one qyarter of 

lending in the Metropolitan Statistical Area (MSA) and that 

moderate income minority census tracts had significantly lower 

rates of lending than moderate income white census tracts. 

In April 1995 a report on the comparison of denial rates for home 

mortgage loans in the Rochester MSA between blacks, Hispanics and 

whites was released. That report found that black and Hispanic 

applicants had a denial rate that was two or three times as high 

as white applicants. This disparity existed across all income 

groups. 

The Coalition is releasing this guide to home mortgage lending to 

continue the ongoing discussion on this subject. The guide is 

based on an analysis of 1992, 1993,1994 and 1995 HMDA data. It 

compares lending patterns between the city of Rochester and the 

MSA as well as in different census tracts in the city. It looks 

at denial rates amongst different racial groups in the MSA. It 

also compares the lending patterns of the nine largest area 

banks. 

The Community Reinvestment Act is a Federal law that was 

originally passed in 1977. New regulations were issued in July 

1995 and the law was considerably strengthened. The Act requires 

federally insured banks to serve the credit needs of the entire 

community, including the low and moderate income community. This 

includes having affordable mortgage products, small business 

loans and checking accounts that can be utilized by low and 

moderate income residents of the banks' service area. 

Banks must also report by census tract where their home mortgage 

loans were made; the income, race and sex of the applicants; and 

the outcome of each application for a loan. This data can be 

analyzed to measure a bank's lending performance. Beginning in 

March 1997 banks over a certain size will also be required to 

report their small business loans. 

For more information about the Coalition or the guide call Ruhi 

Maker at 716-454-4060 x737 or Sister Beth LaValle at 716-244- 

4817. 

' This report uses Home Mortgage Disclosure Act (HMDA) data 

which is a vailable for public review at the Office of Housing, 

City of Rochester which serves as a federal depository. 

3 The Metropolitan Statistical Area (MSA) includes the 

Monroe, Wayne, Ontario, Livingston, Orleans and Genesee counties. 

2 
COMPARISON OF THE CITY OF ROCHESTER TO MSA 

LENDING IN THE CITY OF ROCHESTER HAS INCREASED 

Home Mortgage lending in the city of Rochester has increased in 

the last four years and the lending gap between the city and the 

suburbs has narrowed. The Coalition's analysis of the 1992 HMDA 

data revealed a significant disparity between lending rates in 

the city and the surrounding suburbs. 1993, 1994 and 1995 saw a 

significant improvement in lending for owner-occupied mortgages 

in the city. 

TOTAL HOME MORTGAGE LOANS IN THE CITY 

1592 ::, "27 

ic>9': i 5,974 

1 9 q 4 .q 4 ?: 1 

] <; c in,, 2 , , 3 ” 

In l??;? ::hc~rc wex~e zpprcximarely 3,000 home mortgage loans made 

11;. ~11 :'in,;nc121 ins;Llt ucions in the city. That number increased 

,!:~xr:l;ltic,:l 17 ITI 1093 and 1994 during the refinance boom. Interc:ir~ 

LL~~CS ior home mortqzqe loans were lower than they had been in 

~r't~:~ir:; znci m;:nv horn@-owners refinanced their mortgages. In 1995 

:~!:!:!~‘z wlr'i ,:lmost ?,8Oc! loans in the city. 

TOTAL FHA AND CONVENTIONAL LOANS IN CITY 

.yc.‘.J< T!i?! CONVENTIONAL TOTAL 

1992 338 579 917 

1993 944 843 1787 

1994 lC1 1,335 2122 

iOO5 795 1,331 2126 

Total FHA &Conventional Loans in the City 
A breakdown of the kinds oaf loans is more illuminating. Home 

mortgage loans include FHA, VA,3 conventional home purchase, 

refinances and home improvement loans. If the increase in city 

lending was limited to refinances and home improvement loans it 

would merely be an indication of existing homeowners obtaining 

financing. However the number of FHA and conventional loans has 

doubled in the last three years. In 1992 there were only 917 

conventional and FHA home purchase loans. In 1995 there were 

over 2,000 FHA and conventional loans. 

PERCENTAGE OF LOANS IN THE CITY 

1993 1994 1995 

17.54. 20% 20% 

PercentageofLoans inthecity 

1992-1995 

Chart B 

A greater proportion of the total loans made in the MSA are now 

made in the city. In 1902 only 11% of the total loans made in the 

MSA were made in the city. In 1995 that percentage had increased 

to 20%. More loans were made in the city and fewer loans were 

macxe in the MSA as a whole. 

’ Federal (FfIA) and Veterans Administration (VA) loans are 

insured by the Federal Governmen:. 
I 

Another way to look at the lending data is to examine the number 

of loans made per 1000 housing units (HU)'. In 1993 the lending 

rate of all banks was 59/1000 HU in the city. It was 85/1000 HU 

in the MSA. 

In 1994 the gap in the lending rate between the city and MSA 

narrowed. The city lending rate dropped to 44/1000 Housing units. 

The MSA lending rate was 55/1000 Housing units. In 1994 there 

were 12,000 fewer refinances in the MSA. Interest rates were 

higher and fewer people were refinancing their mortgages. This 

resulted in a lower lending rate in the MSA. The drop in the city 

lending rate was caused by the fact that there were 1,200 fewer 

refinances in the city. 

By 1995 the city rate was 37/1000 HU and the MSA rate was 47/1000 

HU. 

Although the gap in the lending rate between the city and the MSA 

has narrowed and is a cause for celebration it still exists. The 

Coalition believes that there is still an unmet need for lending 

in the city and banks need to reach out to residents to meet that 

need. The city of Rochester has initiated a Homeownership program 

which includes help with closing costs, for Home Expo homes as 

well as rehabilitation of existing homes. Many of the area banks 

have introduced affordable mortgage products. Although housing 

prices in the city have been falling since 1994 and interest 

rates are higher, the number of first mortgages (FHA, VA and 

conventional) originated by the lending institutions has been 

maintained at the same level as 1993. The lower prices may have 

made home ownership an option for many moderate income residents 

who were previously renters. 

Given the high cost of renting in the city and the suburbs, as 

well as the poor quality of some of the rental stock, it should 

be possible to market homeownership options to many moderate 

income city and suburban residents. It is the Coalition's belief 

that lending can be increased in the city. 

' This guide analyzes the rate of lending per housing unit. 

Some analysis are done based on the rate of owner-occupied housing 

units. we have deliberately chosen to include all housing units 

because of the high percentage of rental units in the city and the 

lack of lending to rental units. Excluding the rental units would 

have resulted in a higher rate per HU which would have 

inaccurately reflected the lending pattern in the city. 

5 
COMPARISION OF CENSUS TRACTS WITHIN THE CITY OF 

ROCHESTER 

LENDING IN PREDOMINANTLY MINORITY CENSUS TRACTS HAS IMPROVED 

MEASURABLY 

TOTAL LOANS IN MINORITY CENSUS TRACTS 

1992 1993 1994 1995 

534 1,013 1,086 997 

Chart C 

CENSUS TRACTS WITH A MINORITY POPULATION GREATER THAN 80% 

The Coalition's report analyzed 1992 HMDA data to see how lendinG 

in predominantly minority census tracts compared with lending 

patterns in predominantly white census tracts in the city. We 

determined that there was very little lending in census tracts 

which had a minority population of more than 80%. Lending has 

improved measurably in the last three years. In 1992 there were a 

total of 161 loans in 80%+ minority census tracts. In 1993 that 

figure had increased to 312 in 1994 to 403 loans and in 1995 to 

417 loans. 

Despite the improvement, predominantly white city census tracts 

still have twice as many total loans as predominantly black 

census tracts. In 1994 city census tracts with a minority 

population of under 10% had 950 loans; more than twice the number 

of loans in census tracts with a minority population of more than 

80%. This is especially concerning as almost a 1000 more people 

were living in the 80% to 100% minority census tracts than in the 

census tracts with 10% or less minority population. 

CENSUS TRACTS WITH A MINORITY POPULATION GREATER THAN 50% 

Lending in census tracts with a minority population in excess of 

50% also improved. In 1992 there were a mere 534 loans in such 

census tracts. There were approximately 1,000 loans in those 

census tracts in 1993, 1994 and 1995. 

6 
LOANS IN MODERATE INCOME CENSUS TRACTS 

YEAR 1992 1993 1994 1995 

MINORITY 120 470 366 330 

RATE\1000 HH 15 58 42 39 

WHITE 487 1255 981 815 

RATE\HH 1000 22 58 45 38 

Loans in Moderate Income Census Tract Per 1000 

Household 

C!l ,a r z II 

There l:j no longer a disparity in the lending rates of white or 

mlnor:ty moderate income censu* tracts. The coalition's previous 

report had pointed out the difference in the lending rate in 

mlnorlty moderate income (50% < 80% MFIj6 census tracts versus 

white moderate income census tracts. Since income in white and 

mlnorlty moderate income census tracts is the same one possible 

cause for the disparity in lending rates was the race of the 

residents of the census tract. 

In 1992 the lending rate (Loans per 1000 housing units) in 

moderate income minority census tracts was lower than in white 

moderate income minority census tracts. The minority rate was 

IS/l000 HU. The rate in white census tracts was 21/1000 HU. 

Census tracts that had a minority population greater than 50% and 

a median income between 50% - 80% of the MSA median only had 120 

loans in 1992. 

However lending has increased iti both white and minority moderate 

Income census tracts. In 1995 the lending rates for white and 

mlnorl~y moderate income census tracts were identical. The city's 

lending rate 'was 37 loans/1000 HU. 

i: The iarea Median Family Income was $40,856 in 1992 

*loderate Ir.come i:o-80%) is $20,428 - 32,684. 
The neighborhoods represented by these minority moderate income 

census tracts are the SWAN x PLEX areas to the east of Genesee 

St. and the 14621 neighborhood in the Northeast.' These 

neighborhoods have suffered from years of disinvestment. The 

increased lending is a modest beginning which needs to be built 

upon. 
. 

DENIALS 

AFRICAN AMERICAN AND HISPANIC APPLICANTS WERE DENIED MORTGAGE 

LOANS AT TWO TO THREE TIMES THE RATE AS WHITE APPLICANTS 

In April 1995 the Coalition released a report on denial rates in 

mortgage lending in 1993. The report found that black and 

Hispanic loan applicants were two or three times more likely to 

be denied loans as white loan applicants. This disparity 

persisted across all income groups. 

1995 DENIAL RATES ACROSS INCOME LINES 

Income White Black Hispanic Asian 

Less than 80% of median 26% 36% 22% 21% 

(low-mod) 

80-99% of median 17% 31% 25% 21% 

'loo-120% oft median 14% 26% 17% 14: 

More than 120% of median 10% 25% 11% 9% 

(upper) 

1995 Denial Rates Across Income Lines 

Less man 80% 80.99% lcm-120% MOE than 120% WAsian ~ 

Applicant’s Percent of Median Income 

Chart E 

The chart above analyzes denial rates across income and race 

lines. These rates are based on denials by all the financial 

institutions lending in the MSA.. The denial rate for all ethnic 

groups decreases as income goes up. Low-mod income whites have a 

denial rate of 26%, whereas upper income whites have a denial 

rate of 10%. Similarly low-mod income blacks have a higher denial 

rate (36%) than upper income blacks (25%). However upper income 

blacks have more than twice the denial rate as upper income 

whites, Asians and Hispanics. 

0 
The following table contain the percentage of denials for the 

three groups referred to above as well as the black to white and 

Hispanic to white denial ratio for the nine banks. 

BLACK DENIALS 

As is apparent from the table in 1995 black applicants were twice 

or three times as likely to be denied loans as whites. The only 

bank which was the exception to this rule was M & T which had 

comparable denial rate for blacks and whites. 

HISPANIC DENIAL 

In 19?5 BC!13se, Fleet, Key and M & T had lower denial rates for 

Hispanic annlicants than for <white applicants. However, Hispanic_ 

were den~ei at one ant a half to two times the rate of white 

appiicants by the remaining banks. 

This dispar?t:J cannot be e:i piained on the basis of income alone 

because, fcr most banL:s it persists for black and Hispanic 

appliczr,iz whose income is greater than 100% of median or $40,:1!;< 

a year for ~~ Eamiiy of four. The disparity in the denial rates 

iiLS0 Ferzi..t!z for Fluolic;n:s whose income is in excess of l?O'< ,:‘ 

meo1z!- L.<?. ~‘:i?,ooo’a year. 

Clrrlbcirik 112s consisLentlv had one of the highest denial rates 1.::: 

black:: L:> 1993 i71'1), 1994i44S) and 1995 (55%).The high denial 

rate IS zcconc'anied by a lack of home mortgage loans to blaci: 

applicants. 

In 1994 M i T had the worst denial rate for black applicants, 41' 

of black appiicants and 353 of Hispanic applicants were denied 

loans. In contrast 17% of white applicants were denied loans. 

However id i T made more loans to black applicants (126) than a!:;' 

other bank. It also had the most loans to each of the other 

mlnorlty groups and a total of 238 loans to all the minority 

groups. 14% of it's lending was to minority groups. 

M h T's denial rate improved in 1995. Only 19% of black and 8% of 

Hispanic applicants were denied loans. Furthermore M & T 

continued to be a market leader in making loans to minorities 

Marine has improved its black denial rate which was 55% in 1993 

and 3GZ in 1995. Narlne's Hispanic denial rate has remained 

largely unchanged. It was 34% in 1993 and 32% in 1995. Both rates 

were twice the white denial rate.. Furthermore in 1994 and 1995 

Marine ,xnly made approximately 100 home mortgage loans to ail 

minority ipplicar.tc each year. 

The dispar:t:/ ic denial raies 1s very disturbing, particularly 

since iC persis;s for upper income blacks. It cannot be explalr.eL: 

away on Che nasis of income, i.e. that blacks who are low-incom+rwould be more li!kely to have poor credit history's and therefcre 

mar,: 1 i ;: '2 1 _' :o b+ 0e!lied ioar,::. 

: ,J, 
RECOMMENDATION 

In light of the data presented the Coalition strongly recommends 

that the city and county fund a testing program to ascertain the 

reason for the disparity in the denial rates for different racial 

groups. 

The Coalition also recommends that banks with a disparity in 

their denial rates fund pre-purchase counseling programs like the 

ones offered by the Home Store to better screen applicants and 

channel them into credit counseling and Home Buyer clubs where 

appropriate. 

Applicant- iiho have been denied should similarly be referred to 

credir counseling. If apprcpriate, applicants should be advised 

about tile steps they can take to improve their credit history ant 

enccurzoed to reaccly . in the future. 

Banks :-:iLh .i disparity in their denial rates should institute a 

process of blind second review for all minority applicants. They 

shoul:? ,ilso provide training on Fair Lending practices and all 

applic-.bLi~; laws to ?zheir stzff. 

1: 
, 

TABLE 1 

S.“Ni: I WtiITE I &T-I 0 I BLACK I RATIO HISPANIC ?> I B-W % H-W 8 

J j j ,:.. : ; ;I ! il I 2. 1 I 23 

I 

2.0 

/ 

22 

/ I I 

I I 

I 

:‘.‘__:’ I i .; ’ :.j I 49 / 2.3 

i 

3 9 
CITI BANK 

MARINE 14 2.88 41.5 2.36 34 

RCSB 17 2.09 35.6 1.95 33 
. .’ 

TABLE 3 

/ BY 

BANK WHITE RATIO BLACK 

% B-W 8 

CHASE 16 2.1 34 

CITI BANK 25 

i 

2.2 55 

NAT:CrJAL 

21 

M c, T i c 1.2 19 

MARINE 1 5 2.4 36 

RCSB 16 2.5 46.7 

I 

RATIO 

H-W 

.J5 

1.9 

2.2 

1.4 

.55 

.34 

0.5 

2 

2.3 

12 

47 

18 

11 

11 

8 

31.1 

41.6 
. : 

RENTAL LOANS 

LOANS TO RENTAL UNITS HAVE DECREASED SINCE 1993 

1-4 family 

Year 1995 1994 1993 

City 274 365 454 

MSA 719 822 1019 

Top 9 230 402 474 

Ea " i: c ElC/>% 

Other 489 4 2 0 545 

Fin;ncll 

Instltutlons 

Tilr- c:1.y of !iochester has over 40,000 uni:s of rental housing. 

!401-.: :: !!.~:I? S 0': (~1 f t h c' ho u 5 i n<~ stock L_C rental. The lack of leni::;:: 

'I 0ri '; i? - ? c :3 u p ;: !I t unltc was polnrred oL!t in the Coalition's 1994 

:"o;il~:~ !Jni~arCundtel\ the plc:ure has not improved much LII :hi? 

_ ri .5 ;1 I, i, K" (2 ;,<; 2 r 5 In 1003 Chere were 454 rental loans in the 

c-t,/; ';il<~L.' was onl:; one morrqage Loan for every 100 units of 

rc-n~,i lvx~sin~. This has 2 drzmstic neoative impact on the 

l+Jc;;l:~;~ ,,t Ili,l 0: ien;irlEz, as Landlor& are unable to buy or 

sell propercy, or borrow to make repairs. 

Proper';), values hzve failen in the city in the last few years. 

Aan\/ downer occupant and non-owner-occupant properties are 

mortgaged for more than their market value. That makes it hard 

for landlcrds to obtain financing. Representatives of a number 3: 

area banks have represented to the Coalition that they view 

lending to landlords as high-risk. There seems to be a percepc:gn 

III the banking community that many landlords are simply in the 

business to maximize their profits at the expense of the tenants, 

the property and the bank. Therefore many banks require at least 

308 equity in a non-occupant property before they will extend a 

mortgage. 

Whereas that characterization may be true of some landlords it 15 

unfair to landlords and to their tenants to have underwriting 

guidelines for all non-occupant properties based on a worst case 

scenario. 
RECOMMENDATION 

In the last few years many of the larger Banks have created 

affordable hcme mortgage programs for owner-occupants. The 

progrzms ha...e had more flexible underwriting criteria and low 

down payments. In exchange applicants have had to participate in 

pre-purcnase counseling. 

T !I '2 ;.I .;,; L I t I ,I :> LI reccxzending :hat the banks explore a pilot 

:,rz2r.ir I 3: Lr.::iordz i/lch A proven track record. The pilot 

I:r~;,;r,;.x, I.,.,>, _,. 

. ~,.3;1i,?C Lzndlords to obtain Home Improvement loar.s, 

r._._ L;:,::: ..: '1:';; I :- ~:r~::-,zr-_~,,. or pldrchase a new unit. Criteria could 

_..- . . .~ ;.,, ~ ! ,> ,T,j 1 0 .y < :ILS maintained the property free of 

::;i::: ':: ,: I,>: I,,:::: : 17 L .: .:~::~tc~n number of years, that the ta>:es arc 

,I.; : ,V.,~ : x :,:::L> ri:quire that the Landlord !:.ie near 

;:, :: ._ ,., ,~. ::, :~ r n.i Landlords the bank could require 

. ; ,: ; ; ,,I r z 5 ,L i 1~ complete the city fundeo traInin? 

:.: :: .,~ .~ .., IT’ Council. The point of :I!:: cr:tez:; 

.:,7.; : :,,. ‘.I: 2 <,y~ ,r: ! LA!:,I!-~~?; who will maintain the property ~ni: 

: ,I.;:ZII cow. In TeEsurn the ba:];: iiouLd ~EI,: 

I, : _ : ,, : ,. ’ :‘.~. i: I;.~: ‘;‘:z,in -, Instead of the 307. c~~~-r,:ritI\. 

.,.,:,I.., 
RANK 

M&TBANK 

KEY BANK 

FIRST FEDERAL 

FIRST NATIONAL 

ROCHESTER COMMUNITY SAVINGS BANK 7 

~; 

CHASE 7 

CITIBANK 9 I\ 

GRCRC 1996 
I ii 

KEY BANK 1 

II 

_I! 

FLEET 2 I j 

M & T BANK 2 

I 

FIRST FEDERAL 4 

MARINE MIDLAND 5 I, 

1~ 

ROCHESTER COMMUNITY SAVINGS BANK 

FIRST NATIONAL BANK 

CHASE 

CITIBANK 9 
BANK RANK 

ii 

M& T BANK 1 

I’ 

I 

FLEET 2 

! 

I FIRST NATIONAL BANK 3 11 

I 

I 

1 CHASE 3 

I KEY 5 

I 

) MARINE 6 

t 

FIRST FEDERAL 7 Ii 

1, 

ROCHESTER COMMUNITY SAVINGS BANK 8 Ii 

II 

CITIBANK 9 

CRCRC 1996 
COMPARISON OF NINE MAJOR BANKS 

The guide contrasts the lending performance of the nine banks 

with the largest deposits that serve the Rochester MSA. These are 

Chase, Citibank, First Federal Savings and Loan of Rochester, 

Fleet, First National Bank, Key Bank, M & T Bank, Marine Midland 

and Rochester Community Savings Bank. Data reported by the banks 

mortgage subsidiaries (if any) was also included. Onbank a new 

comer to the Rochester market has not been included in the 

ranking. 

The banks were given a rank based on thirteen factors: 

1 & 2. The number of minority applications and loans in the MSA 

as a percentage of the total number of minority 

applications and loans. 

3 & 4. The number of low-mod applications and loans in the MSA 

as a percentage of the total number of low-mod 

applications and loans. 

5. The volume of non owner-occupant loans in the MSA. 

6. The number of ioans in minority and low-mod census tract:; 

or :!le city. 

7. The total number of loans in the city. 

e h ‘?. The perce”Cage CI: biack and Hispanic denials. 

10 & li.Thi- black to white and Hispanic izo white denial ratio. 

1:. The Bank's loan to deposit ratio (the dollar volume of 

!iome morrrgage loans as a ratio of their deposits in the 

Rochester MSA). 

The individual ranks were placed in four categories and each ban" 

received a MSA rank, a city rank, a denial rank and a loan to 

deposit rank. These ranks were amalgamated into a composite rank. 

The best possible rank is 1 and the worst rank is 9. 
Home Mortgage Loans in Rochester MSAiCity 

2000 

1800 

e 1600 

4 l4M) 

1200 

x 1000 

$ 800 

5 600 

400 

200 

0 

Chart F 

Chart F demonstrates the proportion of lending by the nine area banks 

in the MSA and the city of Rochester. 

Total Home Mortgage Loans Rochester MSAILow-Mod Household 

1995 

Chart G 

Chart G demonstrates the Drooortion of landinn hv the nine area banks 

to all households in the MSA'and to all low-mod households in the MSA, 

including low-mod households in the city of Rochester. 
Home Mortgage Loans in Rochester MSAlMinority Household 

1995 
CHASE 

1993 Rank: 7 

1994 Rank: 8 

1995 Rank: 3 

1995 1994 1993 1992 

TOTAL LOANS TO: 

MS.4 710 902 1699 1850 

City 189 154 194 212 

Minority 109 oc 98 NA 

households 

LowPmod 191 156 403 NA 

households 

PERCENT OF LOANS IN THE CITY: 

26 1 $? 11 11 

TOTAL LOANS TO CITY CENSUS TRACTS THAT ARE: 

[; 0 5 0 i k rc 38 

7: 1 1: ‘7 r- 1 fl )’ 

I <>:-.‘-rnod ~1 ~) 1 ,_ ii 1 e5 76 

DENIALS 

x ,“%, c 5 XliITE u:,;.!:i: HISPANIC 

1?05 1'3 3, .j 12 

i99,j 12 ‘1 1 7 

1 ati: _,,_ 11 2 3 22 

Chase has improved iis overall ranking from 8 in 1993 to 3 in 

1995. Chase has been making fewer home mortgage loans in the MSA 

and in the city since 1992. However a larger percentage of the 

MSA lending has occurred in the city. In 1995 and 1994 more than 

half the loans in the city were in low-mod census tracts. In 1995 

a third of Chase's loans were in minority census tracts. Chase 

made 28 and 20 non-occupant loans in 1994 and 1995 respectively. 

In 1995 Chase increased its lending to minority borrowers in the 

Rochester MSA. 
, ‘. 

In 1995 and 1994 black applicants were denied at twice or three , 

times the rate of white applicants. In 1995 34% of black 

applicants were denied loans by Chase. In contrast only 16% of 

white applicants were denied loans. In 1995 the disparity in the 

denial rate for blackk persisted at more than 100 % of median 

income. There was no disparity for blacks at incomes greater than 

120% of median income. 
, .I 

Citibank 

1993 Rank: 9 

1994 Rank: 9 

1995 Rank: 9 

1995 

TOTAL LOANS TO: 

MSA 565 

City 107 

Minority 42 

households 

1994 1993 1992 

808 663 1068 

171 56 107 

68 47 NA 

low-mod 

households 

165 174 106 NA 

PERCENT OF LOANS IN THE CITY: 

19 21 8 10 

TOTAL LOANS TO CITY CENSUS TRACTS THAT ARE: 

>50% 22 23 4 13 

minority 

low-mod 50 54 18 31 

Citibank has persistently been ranked last three years in a row 

for its home mortgage lending record in Rochester. It is the 

largest bank in the MSA in terms of its local deposits. Despite 

that fact its volume of mortgage lending in the MSA and in the 

city has been on the decline since 1992. However a larger 

percentage of Citibank's lending occurred in the city in 1994 and 

1995. 

Although Citibank made very few loans in the city, in 1994 and 

1995, almost half the loans in the city were in low-mod census 

tracts and a quarter were in minority census tracts. Citibank has 

made virtually no non-occupant loans in the last four years. 

DENIALS 

RACE WHITE BLACK HISPANIC 

1995 25 55 47 

1994 19 44 32 

1993 19 71 25 
Citibank has one of the worst denial rates for blacks and 

Hispanics amongst all nine banks. In 1995 55% of black applicants 

were denied loans. Black applicants were more than twice as 

likely to be denied loans as white applicants. This denial ratio 

remained the same for black applicants whose income exceeded 100% 

of area median which is $40,000 for a family of four. 

Hispanic applicants also had a much higher denial rate than white 

applicants. 
First National Bank 

1993 Rank: 5 

1994 Rank: 7 

1995 Rank: 3 

1995 

TOTAL LOANS TO: 

MSA 301 

City 71 

Minority 42 

households 

1994 1993 1992 

204 415 890 

41 44 95 

20 25 

8 i; 32 49 NA 

PERCENT OF LOANS IN THE CITY: 

23 '0 11 11 

TOTAL LOANS TO CITY CENSUS TRACTS THAT ARE: 

i,;ji-mmi 

DENIALS 

RAC.E WHITiZ 

1395 8 

1994 15 

1993 9 

,’ .? 10 9 16 

ELACK 

21 

33 

13 

HISPANIC 

11 

20 

0 

FNB improved its rank and lending record in 1995. It increased 

lending to low-mod and minority households and census tracts. 

FNB is the smallest of the nine banks in terms of local deposits. 

Black applicants were twice as likely to be denied home mortgage 

icans as white applicants in 1994 and 1995. 
First Federal 

1993 Rank: 4 

1994 Rank: 4 

1995 Rank: 7 

1995 

TOTAL LOANS TO: 

MSA 863 

City 135 

Minority 65 

households 

1994 1993 1992 

1250 2264 1016 

267 292 96 

119 120 NA 

low-mod 229 215 415 NA 

households 

PERCENT OF LOANS IN THE CITY: 

16 21 13 9 

TOTAL LOANS TO CITY CENSUS TRACTS THAT ARE: 

>50% 48 61 39 17 

mlnorlty 

low-mod 65 143 108 36 

First Federal lending peaked in 1993 but declined in 1994 and 

1995. However a greater percentage of the lending occurred in the:? 

city. In 1994 and 1995 more than half the loans in the city were 

in low\mod census tracts. More than a quarter of the loans were 

in minority census tracts. First Federal made 49 non-occupant 

loans in the MSA in 1994. First Federal also initiated the 

construction of First Place, a sub-division within the city of 

Rochester which been a significant contribution in the 

revitalization of a low-income neighborhood of the city. Ground 

has also been broken on Edison Place. Funding is being sought for 

a third sub-division, Goodman Plaza. The Coalition applauds First 

Federal for its efforts in the city and urges other banks to 

emulate its example. 

DENIALS 

RACE WHITE BLACK HISPANIC 

1995 8 26 18 

1994 8 24 

1993 6 21 

^C 

L ,. 
Black applicants were three times more likely to be denied home 

mortgage loans than white applicants. Hispanic applicants had a 

lower denial rate than white applicants in 1994 but a higher one 

in 1995. Black applicants at 120%+ of median income had 

comparable denial rates to white applicants. 

2” 
, . 

Fleet 

1993 Ra"k: 1 

1994 Rank: 2 

1995 Rank: 2 

1995 1994 1993 1992 

TOTAL LOANS TO: 

MSA i,247 1,747 3,423 1,979 

CLt.d 1?5 34? 555 297 

i41flOrltj' i3 i 146 235 NA 

households 

PERCENT OF LOANS IN THE CITY: 

!C 20 16 15 

TOTAL LOANS TO CITY CENSUS TRACTS THAT ARE: 

1 (2 ,,*: - :,, : : L ! ‘: “69 2 4 7 120 

i li Lh,: ~,J:.I~ four yi:art Fleer. has maintained 15-20" oi it's 

lc"dir?o 11, the city. 1" 1994 and 1995 approximately 80'. of Fleet:; 

loons II, the city were in low-mod census tracts. Almost 25% were 

I" !ni"Grlty cf"r"s tz3cts. Fleet made 80 non-occupant lozns in 

the !*?SA in 1944, more thar. any of the nine banks included in this 

quide. 

DENIALS 

RACE WHITE BLACK HISPANIC 

1995 20 43 11 

1994 10 28 10 

l?93 11 25 11 

Black applicants were three times more like 

than white and Hispanic applicants. In 1995 

ly to be denied loant43% of black 

applicants were denied loans, compared to 20% of white and 11% of 

Hispanic applicants. The difference in the denial rate persisted 

II ‘t 1OCY and 120: of i4FI. However, at 120% of MFI the gap between 

the 'black and white rate was narrower. The denial rate for 

3 i. 5p 2 II i c :j ,; Do i'e SOI ,?f YFI was negligible. 
Key Bank 

1993 Rank: 3 

1994 Rank: 1 

1995 Rank: 5 

1995 1994 1993 1992 

TOTAL LOANS TO: 

MS.4 996 1,999 2,361 1,803 

City 127 448 246 204 

M i n 0 r i t >' 85 143 85 NA 

households 

low-mod 294 502 574 NA 

household:; 

PERCENT OF LOANS IN THE CITY: 

13 22 10 11 

LOANS TO CITY CENSUS TRACTS THAT ARE: 

,5 L’ ‘, ,] ‘7 137 58 48 

:n I no r i i ',J 

L ,.::g-:r.ori 8: 405 103 101 

In lC,94 Key fi,jnk'5 iending more than doubled in the city as a 

percenLsqe of its MSA lending. In 1994 Kev made the most number of 

loans to minority applicants in the MSA, it made the moss number 

of loans in the city as well as in low\mod census tracts. 90% of 

Key bank's loans were in low\mod cen5u.s tracts and more than a 

quarter were in mlnorlty censu* tracts. 

Unfortunately this lending performance was not maintained in 1995. 

Not only did the absolute number of loans in the city and MSA drop 

dramatically, 75% of the loans were home improvement loans as 

opposed to home purchase loans. Most of low\mod loans were Home 

Improvement Loans. 

DENIALS 

RACE WHITE BLACK HISPANIC 

1995 26 35 9 

1994 18 17 10 

i “ci3 12 30 25 

::ey was the only bank among the nine surveyed that had comparable 

denial rates for black and white applicants in 1994. However its 

black denial rate was higher than the white rate in 1995. 

t:isoan~~c appiicants had lower denial races than white applicants 

in &4 ainc 1905. 

31 
M&T 

1993 Rank: 2 

1994 Rank: 2 

1995 Rank: 1 

1995 1994 1993 1992 

TOTAL LOANS TO : 

MSA 1,285 1,718 2,470 1827 

City 492 407 328 207 

Minority 296 238 223 

households 

low-mod 671 477 665 

households 

PERCENT OF LOANS IN THE CITY: 

38 24 13 11 

TOTAL LOANS TO CITY CENSUS TRACTS WHICH ARE: 

>50% 111 101 82 35 

minority 

low-mod 331 405 167 88 

M & T has steadily improved its lending record in the city of 

Rochester over the last four years. In 1995 almost forty percent 

of its loan origination in the MSA were in the city. In 1994 and 

1995 70 % of M & T 's loans in the city were in low\mod census 

tracts and 25% in minority census tracts. 

DENIALS 

RACE WHITE BLACK HISPANIC 

1995 15 19 8 

1994 17 43 35 

1993 18 29 20 

In 1994 M & T denial rates for black and Hispanic applicants were 

amongst the worst of all nine banks surveyed. 44% of black 

applicant and 35 % of Hispanic applicants were denied loans; oniy 

17% of white applicants were denied loans. This disparity in the 

denial rate persisted for applicants at 100% > of median income. 

On the other hand, M & T originated 238 loans to minority 

applicants in 1994, more than any of the other area banks. 

In 1995 the disparity in the black and white denial rate had 

narrowed. However, it persisted even for blacks at 120% of MFI. 

The denial rate for Hispanic applicants was lower than the white 

rate. 
The Coalition applauds M & T for its record of lending in the 

city, and in low\mod and minority neighborhoods in the city. As 

is apparent from the guide M & T has one of the best records of 

lending to the city, the low and moderate and minority community 

in Rochester. The Coalition has had an ongoing relationship with 

M & T for over two years. We have had a number of meetings with 

them where our input was solicited and proffered. M & T has 

provided the Coalition with a letter of understanding which we 

will work on implementing. 

33 
Marine 

1993 rj,nk: 5 

1994 Rank: 5 

1996 Rank: 6 

1905 1994 1993 , 1992 

TOTAL LOANS TO: 

MSA 1,925 1,706 1,874 1,992 

City zi;9 380 224 211 

M 1 n 0 r 1 t :' 

!lousei;o?riz !O@ ?6 137 

icw-rncc: 0i:o 492 628 

housc!lol<ji; 

PERCENT OF LOANS IN THE CITY: 

1 I: ?- L_ 12 13 

TOTAL LOANS IN CITY CENSUS TRACTS THAT ARE: 

: ‘_, 0 1 1 .1 60 1; (1 

:7, : 1.) ,) :~ I ',I 

I Gi.i -!r;, ~',, ,,L <, .~ .; j 8 L' 109 95 

-7 . _~,, i I.<.‘: :.j,: : ;:l“ !~lcrea:;<:d the number of loan; ir made Ian the city. 

"owe v 13 1~ ,, 1 mo 5 r 6 i1 ':> of those loans were home improvement loans. 

~ir~_uzll.] ~11 t:ht? Loans were in low\mod census tracts and 25'; 

wc r r: I n m:nor1ty census tracts. 

Similarly in 199s 56% of the lending in the city were Home 

Imprcvement loans which averaged $10,000 a loan. This pattern has 

existed 511?ce 1992. At first glance Marine's lending record in 

the city, in minority and low\mod census tracts and to minority 

borrowers Looks good. However a more detailed analysis reveals 

that most of such lending is limited to Home Improvement Loans as 

opposed to first mortgages (FHA\VA, conventional and refinances). 

In 1995 50? of Marine's lending in the MSA was comprised of Home 

Improvement loans. However 60 -80% of it's lending in minority 

census tracts, in low-mod census tracts and to minority borrowers 

was comprised of Home improvement loans. 
DENIALS 

RACE WHITE BLACK HISPANIC 

1995 15 36 32 

1994 14 42 34 

1993 15 55 34 

Black and Hispanic applicants have a denial rate that is two to 

three times the white denial rate in the last three years. 

Although, the black rate has improved from 55% in 1993 to 36 % in 

1995 it is still twice the white denial rate. The Hispanic denial 

rate has remained at 34%. 

The disparity in the denial rate persisted for higher income 

blacks 

The Coaiition has had a series of meetings with Marine in the 

last two morl:hs, following Marine's announcement that chiiy were 

proposln'q cc acq-lre First Federal Saving's and Loan of 

Rochester. During the meetings the Coalition raised a number of 

concerns with Marine. In response to the issues raised by the 

Coalition Nariric !~a:; committed to the following actions: 

1 “t?conll n<l .; member oi the Federal Home Loan Bank. ^ 

,_ C~ntlnu~~r:q ::hi? .ic::ivitLes of First Federal's home bi:: 1ding 

5 ~~:u 5 I il 1 c1 r ;', ijliG. 

3. :.:.irkI?i:~~rl~j t:tlell~ ~il~:ordc~bLc mortgage product, Marlnii "-1 '0 low 

mod 2nd minorIt;- Individuals in Rochester. 

4. Provldino qranc:; for pre ,and post purchase counseling. 

5. Crc‘5L;~ni; 8 Ms~~;nt, Ciclren's Advisory Council which ~1~11 

inciude Coalition membership. 
RCSB 

1993 Rank: 7 

1994 Rank: 5 

1995 Rank: 8 

1995 1994 1993 1992 

TOTAL LOANS TO: 

MSA 1,139 1,557 2,808 2,457 

City 179 344 378 342 

Minority 100 166 166 NA 

households 

low-mod 341 359 728 NA 

households 

PERCENT OF LOANS IN THE CITY: 

16 22 14 14 

TOTAL LOANS TO CITY CENSUS TRACTS THAT ARE: 

>50% 63 85 102 76 

low-mod 132 200 154 133 

RCSB increased its percentage of lending peaked in city in 1994. 

However, most of the loans made in the city, in 1994 and 1995, 

were home improvement loans. Low\mod loans were HI. Approximately 

25% of city loans were in minority census tracts and almost 60% 

were in low-mod census tracts. 

DENIALS 

RACE WHITE BLACK HISPANIC 

1995 18 47 42 

1994 17 36 33 

1993 14 49 39 

Black and Hispanic applicants were denied loans at two or three 

times the rate of white applicants. In 1995 47% of black 

applicants, 42% of Hispanic applicants and 18% of white 

applicants were denied loans. 
. ~-2~. 

GREATER ROCHESTER 

COMAtUhTTY ~rh’W-sTh,lEN-l? COAIJTION 

P.O. BOX 39541 

ROCHESTER, NEW Y@_pK: 14604 

June 23, 1998 

Ms. Jennifer J. Johnson 

Secretary 

Board of Governors of the Federal Reserve System 

20’” and Constitution Ave., NW 

Washington, DC 20551-0001 

Re: Citicorp-Travelers Application 

Dear Ms. Johnson 

I am writing to you on behalf of the GREATER ROCHESTER COMMUNITY 

REINVESTMENT COALITION (GRCRC). GRCRC is a coalition of thirty not-for profit 

organizations and individuals based in Rochester, New York. GRCRC was convened in 

1993 to genera& discussions about lending patterns in Rochester, New York. 

GRCRC is opposed to the proposed merger of Citicorp and Travelers Group and is 

requesting that the Federal Reserve Board turn down the proposed Citicorp-Travelers 

merger application. It is GRCRC’s position that the Citicorp -Traveler’s Group should not 

be approved while Financial Modernization legislation is pending in Congress. GRCRC is 

not opposed to financial modernization. However modernization needs to occur through 

legislation and not by piecemeal approval of individuals mergers. Financial institutions, 

that are insured by taxpayer dollars have community reinvestment obligations to fulfil. 

Their safety and soundness are also issues of concern to all of us. There needs to a public 

dialogue accompanied by legislation, before financial institutions are permitted to engage 

in the business of banking jnsurance and securities on the scale envisioned by the 

merged institution. Legislation must ensure that the interest of consumers will be protected 

and that the Community Reinvestment Act will be extended to the entire financial 

institution, including the insurance and securities subsidiary. 

I will not belabor the policy issues raised in the press and by other groups opposed to the 

merger. The point I want to make here is that GRCRC would oppose the merger 

irrespective of Citicorp’s record of lending in Rochester, New York. Unfortunately, an 

analysis of their HMDA and small business lending data consistently finds them at the 

bottom of the large financial institutions in Rochester. 
Ms. Jennifer J. Johnson 

June 23. 1998 

Page 2 

Citicorp’s presence in Rochester. New York is through it’s subsidiary, Citibank NYS 

(Citibank). In 1996 Citibank was ranked second in terms of total dollar value of local 

deposits. Citibank had over $1.6 billion in,deposits locally. However Citibank ranked last 

in terms of HMDA loans originated in Rochester. 

1. HMDA Analysis 

In 1996 GRCRC released a report on HMDA data for Rochester New York for the years 

1993-1995. The report ranked all major 9 banks, doing business in Monroe County, on 

therr Home Mortgage Data Act (HMDA) record. Citibank had the worst record of 

lending, in low and moderate income neighborhoods, of all 9 banks and ranked last, 

all three years in a row. During that period Citibank also denied mortgage loans to Black 

applicants at 2 -3 times the rate it denied them to white applicants. A copy of the report is 

attached to these comments. 

GRCRC has analyzed 1996 HMDA data which will be released later this summer. The 

HMDA numbers show that Citibank had the fewest number of loans of all the largest 9 

banks in Rochester in each of the following categories: 

l total number of loans in the MSA. 

l total number of loans in the city. 

l number of loans to Black/Hispanic households in the MSA. 

l loans lo low-mod income census tracts. 

l loans to low-mod income households in the MSA. 

1996 is the most current year for which HMDA data is publicly available. 

In terms of marketshare. Citibank’s HMDA market share was under 2% for the MSA and to 

low and moderate income households in the MSA; 1% for loans in the City of Rochester: 

under 1% for loans to Black/Hispanic households in the MSA and in low and moderate 

income census tracts. Citibank had 45 loans in the City of Rochester, compared to M&T 

Bank. which had 188. Citibank had 11 loans to Black and Hispanic households in the 

MSA. M&T had 98. M&T had local depositi of $1.02 billion. (A HMDA marketshare 

analysis for 1996 originations is attached to these comments.) 

Furthermore, in 1996. only 4% of Citibank’s total HMDA loans were in low-moderate 

income census tracts. The other large banks percentage of loans in low-mod income 

census tracts ranged from a high of 22% (Key) to 11% (First Federal, now merged with 

Marine Midland). Only 2% of Citibank’s loans were to Black/Hispanic households. 
Ms. Jennifer J. Johnson 

June 23,1998 

Page 3 

Citibank has consistently had a high denial rate for Blacks and Hispanic applicants. In 

1996, 54 % of Black and 31% of Hispanic applicants were denied home mortgage loans. 

The white denial rate was 19%. GRCRC has documented this disparity in denials for 

1993-l 995 as well. A map of the City of Rochester, which displays the census tracts in 

which Citibank did not make home mortgage loans, in 1996. is attached. Citibank did not 

make home mortgage loans in approximately half the census tracts in the City. Pie charts 

depicting racial composition are overlaid on the map. A review of the map shows that 

Citibank did not make mortgage loans in a significant proportion of minority census tracts. 

1. Small Business Lending Analysis 

GRCRC has also analyzed small business data for 1996. The seven largest banks 

originated 80% of the small business loans in terms of dollar volume. Citibank ranked four 

out of seven in terms of small business lending in Monroe County. 

Citibank was not a market leader in small business lending. A market share analysis of 

1996 small business loans in Monroe County is attached. Citibank originated $9 million in 

small business loans in low and moderate income census tracts in Monroe County. 

Marine Midland, the market leader in that category, made $50 million. Citibank made $1.6 

million in loans to businesses with revenues under $1 million in low and moderate-income 

census tracts. M&T, the market leader in that category, made $ 7 million in small business 

loans. 

A map showing the census tracts in the City of Rochester in which Citibank originated no 

small business loans is attached to these comments. Pie charts depicting racial 

composition are overlaid on the map. A review of the map shows that Citibank did not 

make small business loans in a significant proportion of minority census tracts. In light of 

this data, GRCRC requests that the Federal Reserve considers the Fair Lending 

implications of Citibank’s lending practice. 

2. Branches 

Citibank has 13 branches in Monroe County. 11 branches are in suburban Monroe County 

and two are in the City. Of the City branches one is downtown and one is in the Northeast 

quadrant of the City. The lack of branch presence in the City may partially explain 

Citibank’s lending record. 

GRCRC is a coalition of thirty not-for-profit organizations. It was convened in 1993 to 

generate discussions about lending patterns in Rochester and to ensure that the credit 

needs of low-income and minority residents of our community are met. GRCRC seeks to 

support long-term solutions, which provide resources, knowledge and skills to build 

community and individual net wealth. 
Ms. Jennifer J. Johnson 

June 23. 1998 

Page 4 

GRCRC has had ongoing discussions about the credit needs of the Community with four 

area banks. It has been our experience that the three banks with regional or local decision 

making authority. Marine Midland, M&T and RCSB have been most responsive to meeting 

the needs of our community. Quite simply put, if a community is 1 % of the market share 

of a large mega bank, the needs of that community will not be of primary interest to the 

decision makers of the mega bank. However, when Rochester represents a significant 

proportion a banks market share the regional Presidents return our phone calls and make 

sure the deal gets done, even if someone has to work on it over the weekend. I can only 

speak to the experience of our Coalition members. 

Finally, there has been a flurry of community development lending, by Citibank, to a 

number of members of the Coalition in the last two years. Needless lo say, we welcome 

such activity. We hope that Citibank will improve on its community development lending 

record whatever the outcome of this application. 

If you have any questions about these comments please feel free to contact me. I can be 

reached at 716454-4060. 

Yours truly. 

Ruhi Maker Esq 
1996 City of Rochester, Monroe County 

Small Bwness Loans 

rotal No. 

rolal Aml~ (Millions) 

.MCT No. 

.MCT Amt (MIllions) 

3usinesses ~1 Million No 

3usinesses ~1 Million Amt (Millions) 

3usinesses ~1 Million LMCT No 

3usinesses ~1 Mullion LMCT Amt 

:Millions) 

MARKET SHARE 

-~.~-.-.-._~..~__ __~~. 

Total No 

Total Amt. (Millions) 

LMCT No. 

_MCT Amt. (Millions) 

__.__ 

3usinesses <I Million No. 

znesses-<iMilliozrnt. (Millions) 

3usinesses ~1 Million LMCT No. 

.___ 

3usinesses <I Milliona LMCT Amt, 

Millions) 

_. 

_ 

14251 21/~ 

179! 325,000: 

I 

.~ 

421; 

40’ 

36% 

16% 
Rochesler hlSA HKlDA 1996 

AFI Chase Gl,l,ank FNB FF Flc,:l Kl!Y hlST E.lar,tlC ON RCSB : Top10 OFI 

ISA 25824 008 476 537 \430 ,305 825 1262 1589' 252. 1022 9306 16511 

.Ily 4250 I18 45 IO8 215 I .I8 9J 1 II8 184 19: 156' 12751 298' 

Il~ck/l+span,c H,, F.ISA 1185 51 11' 57 97 56 48 98 66: 4: 82' 

OWPJ0d tlti MSA 5411' 

576 60! 

174' 78 130' 38.1 273 270 369' 264; 

85' 

103i 253; 2298 311: 

ow-Mod lnconw CT 3553' 21 76' 15-l 199 I79 175' 286' 

897' 17' 

38: 1221 1335 2211 

il~rl~Occuparll 5: 34 41 

( 

iii; 3 39 

1 

821 31 14; 254 621 

Chase / Cilibank j FNB 1 FF Fleet Key : M&T I 

j / 1 

j Marme 1 ON RCSB OFI 

24 18 I 2,l ’ 55 51 32 4~9 : 62 1~0 4:o 64.0 

2,a 1.1 2,5 51 i 35 : 22 0,4 317 

019 a,2 ; 4.7 i ;:; 

1 

“5:; 

70.0 

4.8 4.8 4.1 ; 0.3 6.9 51.4 

3.2 1.4 2.4 7.1 5,o : 5.0 4,9 57.5 

2.4 0.6 2.1 / 8,ll 1.9 1.8 4.3 3.6 2:: ! 1 

;:i 

: 4.3 i:; ~~~ 9.1 ~~_ .L--~ _i_ Im_._~~mm mu 62.4 

69.7 .~ ~_. 

) I ~~~~~~~ .~~.~ 

.oans as % of Total in: 

.~~ ~~~ I 

.ow-ModCT 14 14 4 14 11 16! 221 14 ~16 15 12 

3lackiHispanic HH .7\ 4i 

1 

16 19 2 11 61 0 4 2 a .~~ 

Xy 16 is 9 io 15’ 11; 111 15 12 6 15 1 
Testimony on behalf of the Greater Rochester Community Reinvestment Coalition, 

regarding the proposed merger between Citicorp and Travelers Group. 

Public Hearing June 25h. 1998. New York, New York. 

My name is Ruhi Maker. I am co-convenor of the Greater Rochester Community 

Reinvestment Coalition in Rochester New York. I work as a Senior Attorney at The 

Public Interest Law office of Rochester. 

I am here today to speak against the proposed merger of Citicorp and Travelers Group. 

In the name of ‘modernizing’ the laws governing the financial institutions of this country, 

the CEOs of the largest of those institutions have been lobbying for a number of years to 

repeal the Glass-Stegall Act. Despite pouring millions of dollars of contributions into the 

campaigns of the members of the House and Senate Banking Committees, they have failed 

to achieve their goal, and there is still no consensus on what financial modernization 

should look like. 

In the face of this failure, the CEOs of Citicorp and Travelers, two of the largest financial 

institutions in the country have now decided to simply forge ahead with a merger that 

takes advantage of a loophole in the existing law, trusting that their political and financial 

clout will ensure that there fait accompli is legalized retroactively. 

This is not modernization, it is a reversion to the oligarchies of the past. As someone who 

grew up in Pakistan, I know what it is like to live in an oligarchy, where a handful of 

families controlled the economy and were free to act as if they were above the law. For 

the Federal Reserve to approve this merger under these conditions would send a clear 
signal to the elite’s of this country that their privileged status carries no corresponding 

obligations to the community. 

True financial modernization would require the systematic revision of the laws governing 

the financial industry. It cannot be done by granting piecemeal exceptions to existing 

regulations every time there is a new merger. 

True financial modernization would require the systematic extension of existing 

community reinvestment obligations from the banking industry to the insurance and 

security industries, in line with their recently acquired right to provide services formerly 

restricted to banks. 

True financial modernization would require an increase in the responsiveness of financial 

institutions to the needs of their host communities. Here I can speak from my own 

experience as a member of the GRCRC. We have had continuing discussions with four 

area banks about the credit needs of Rochester. The three banks with regional or local 

decision making authority have been far more responsive than has the mega-bank. When 

Rochester represents a significant proportion of a bank’s market share, the regional 

president returns our phone calls and makes sure the deal gets done, even if someone has 

to work on it over the weekend. When Rochester represents only 1% of an essentially 

global bank’s market, the needs of a local community are of very low priority. 

As the trend toward globalization of the economy proceeds apace, we must ensure that 

the democratic accountability of those who control the commanding heights of the 
ecoqoq~y keeps pace Otherwise false modernization is liable to land us bask in the era of 

the robber barons.