Inner City Press Bank Beat
Archive 2000 #1 (Jan. 1 - March 27, 2000)

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March 27, 2000

     The New York-based (but hardly New York-focused) titans were at it again this week: Citigroup announced it will double its stake in Japan’s Nikko Securities from 9.5% to 20% (at a price tag of $2.2 billion). Meanwhile, Citigroup is closing a branch in a low income community in Monroe County in upstate New York. Chase Manhattan is strongly rumored to be moving toward acquiring the British investment bank, Robert Fleming Holdings Ltd.; the Sunday Times (U.K.) puts the price tag at $8 billion. Hey, Chase just disclosed paying its CEO, Bill Harrison, $35.6 million in 1999. Meanwhile, Chase is moving to close yet another branch, this time in Islip in Suffolk County in New York....

March 20, 2000

      In corporate abuse news (what else?), credit card company MBNA is paying its Chairman and CEO Alfred Lerner over $20 million for 1999. According to the San Francisco Chronicle (3/14), Bank of America is paying Hugh McColl more than $50 million for 1999. Hell, John McCoy, who ran Bank One into the ground, is getting a $10.3 million severance payment, and a $3 million annual pension. So don’t cry for Mr. McCoy, even as Ryan Beck laughs at Bank One’s most recent earnings projections, and as, in a frenzy of self-hatred, plans to drop the word “bank” from its name, and its URL. A root of Bank One’s problems: its First USA credit card unit generated 7,206 consumer complaints in 1999, according to OCC spokeswoman Janis Smith. Ms. Smith added that San Francisco-based Providian generated 1,646 consumer complaints in 1999. But Providian has hired two ex-OCC employees, Konrad Alt and Chris Lewis, to handle government and consumer group relations, respectively. A group called “Consumer Action” now praises Providian -- after getting a $50,000 grant (American Banker, 3/16). The director of the Consumer Federation of America acknowledged that he met with Providian’s CEO, as a courtesy to ex-CFA staffer Lewis.   Id.

     On this consumer theme, we’ll end this edition of the ICP Bank Beat, with a letter to the editor:

Date: 3/18/00 4:05:40 PM EST
To: <>

    Found your articles on Conseco and Green Tree Finance Corporation very enlightening. Wish I had read them before I had my experience with them. It was a very frustrating experience. I experienced the following as a result of assuming an existing loan on a mobile home in July 99, which I paid off in Dec 99 because of the following:
1. Interest rate on loan increased at loan assumption.
2. Loan pay off balance higher than loan assumed.
3. Constantly tried to continue their warranty and regular issuance even though I denied such, providing my own insurance coverage. After many letters and phone calls over a 3 month period, they informed me that it was finally cleared from my records.
4. Their refusal to answer correspondence (i.e.: asked for pay off balance on Dec 1, 99. Letter never answered requiring 3 phone calls to obtain the balance).
5. Delay in processing requests. Informed that payoff balance had to be manually figured and would receive quote in 5 days. Actually took 10 days.
6. Will not accept money wire transfers on payoff requiring mail processing which further accumulates daily interest charges.
7. When pay off balance quoted, received letter saying insurance had been included in balance. When questioned they said letter was mistake.
8. When questioned on excessive interest paid on payoff, they said was due to 2 late payments. Only payment late was payoff payment which was 2 days late because of their delays in processing my requests.
9. Payoff quote requires 30 days excess interest, which they hold as a bank float for 30 days.
10. Constantly asked for a break down of how they arrived at pay off balance, which has been ignored. If they manually figured this, why is this a problem.
Have made a claim through the Better Business Bureau, but it doesn't look like it will be settled satisfactorily as they constantly drag their feet on any issue contested.

   Note that the OTS continues to consider giving Green Tree and Conseco a savings bank charter...

* * *

March 13, 2000

    Fireworks on the M&A beat this week: first global, then U.S.. The biggest news was in Germany, where Deutsche Bank and Dresdner indicated that they’ll merge, and lay off 16,000 people. The Germany daily Die Welt reported March 8 that HSBC is preparing a hostile bid for Commerzbank AG, to be unveiled prior to the target’s annual shareholders’ meeting on March 27. In Mexico, Bancomer announced it’ll merge with a unit of Spain’s Banco Bilboa Vizcaya Argentaria, to form Mexico’s largest bank. In e-mail scuttlebutt, ICP received a plea this week from the French city of Tours, reporting that Bank of Scotland is moving to close its facility in that ancient town, and lay off 150 workers (“au chomage!!”).

     In the U.S., Schwab finally filed its application with the Federal Reserve Board to acquire U.S. Trust Corporation -- challenge has already been filed, click here to view.

March 6, 2000

     The action in financial sector M&A last week was in insurance. Aetna revealed it has received a take over offer, worth $9.9 billion, from WellPoint and Dutch insurer ING (which is also trying to set up a U.S. bank). New York-based insurer Reliance Group Holdings <REL.N> said on Feb. 29 it has reached an “agreement in principle” in sell its Reliance Surety unit to Citigroup, for $580 million. In smaller deals, Minneapolis-based ReliaStar Financial announced its buying New Jersey mutual fund company Lexington Global Asset Managers; and ever-acquisitive New Jersey bank Summit announced it’s buying a string of insurance agencies. In one “old style” bank-on-bank deal, Wachovia is buying Florida’s National Bank of Commerce, the second largest bank in Orlando, to $40 million. The Office of Thrift Supervision gave its final approval to Sovereign’s three-step acquisition of the FleetBoston divestiture branches.

      Financial journalism as cult of personality: the Feb. 28 frenzy about the retirement of Citigroup’s “co-CEO” John Reed, and speculation about who Sandy Weill will tap as his successor. Bloomberg mentioned as a candidate Sandy’s son Marc -- who invested in subprime mortgage lender IMC, and then had to buy it. Reuters’ Jack Reerink jokingly suggested himself as a candidate, and told Weill that “some analysts still question your ability to manage a company.” Weill: “Really? After 35 years?” Even we have to concede that Primerica and Commercial Credit (now “CitiFinancial”) are adept at squeezing money about of the poor and working classes...

    Less adept, on all fronts, is Bank One, which issued yet another profit warning, and saw its stock fall another three percent, to $25.50. The Chicago Tribune reported that Bank One’s deposit share from June 1998 to June 1999 fell in twelve of its fourteen states. Ah, mergers -- sounds like another Wells Fargo - First Interstate. So who plays Norwest? Developing...

February 28, 2000

    U.S. M&A action centered last week in... Wisconsin. Milwaukee-based Mutual Savings Bank announced it will acquire First Northern Capital Corp. and its 19 branches for $133 million. Also in Milwaukee, Firstar lost the city pension fund’s $300 million bond account, after losing five portfolio managers to Robert W. Baird & Co.. Always acquisitive Citigroup agreed to buy the $130 million credit card portfolio of Wisconsin’s Associated Bancorp. Overseas, Citigroup confirmed its acquisition of dairy company MD Food Korea for $25 million. Answer to last week’s question: Yes, got milk.

    The real profiteers, however, are in investment banking. Schwab’s Feb. 22 proxy statement reveals that U.S. Trust is paying Credit Suisse First Boston $19.5 million for advising it during the takeover. If U.S. Trust’s shareholders vote against the deal, U.S. Trust will pay Schwab $100 million. The purpose of these questionable penalties? To focus the shareholders’ minds before they vote: sell or be left with a drained corporation. Bloomberg (Feb. 23) reports that “Schwab wanted to buy U.S. Trust... so it can provide more personal attention to wealth clients.”

February 22, 2000

      From Korean milk to South Dakota pork: this is the story of Citigroup, in the week of Feb. 14-21, 2000.

    Citigroup’s power is not limited to Washington, D.C. (where it counted on then passed the financial deregulation bill in November 1999). Last week, South Dakota’s legislature revised that state’s bank franchise task; S.D. Governor Bill Janklow said he supports the measure “because it will encourage Citibank to transfer additional business to the state.” S.D. Rep. Steve Cutler said “Citibank wants to transfer its credit card operations in other states to South Dakota, and the tax change will save the bank $9 million in state taxes.” Popular democracy at its finest...

   Democracy, of course, is founded on an educated electorate. On Feb. 17, Citigroup announced that it has ended discussions with Student Loan Corp <STU.N> to acquire the 20% of its stock that Citigroup does not already own...

    Overseas, Citigroup’s spokesman in Seoul, South Korea, Chung Hoi Seung, said “There is pending a completion to buy a Korean dairy food business.” Bloomberg, Feb. 16 -- grammatical problem in original. Now Citigroup will have an answer to the U.S. television advertisement question, “Got milk?” Sure -- got state legislatures, too....

    More merger fall-out: Deutsche Bank on Feb. 15 laid off most of its Toronto equity trading desk, tying the move to its continued “integration” of Bankers Trust. Meanwhile, DB refuses to comment on Japan’s Financial Supervisory Agency’s investigation into DB’s practices...

   Also last week, Japanese companies sued HSBC for $500 million dollars, for losses in the Republic / Armstrong scandal. Martin Armstrong, from jail, continues to blame Republic / HSBC, and the truth may yet out.

   In the Northeast U.S., the Office of Thrift Supervision has now ruled that Sovereign can’t afford to buy all of the Fleet-BankBoston divestiture branches, at one time, at least. “Sovereign did not have the financial capacity,” an analyst tells the American Banker (Feb. 18). Where were the Federal Reserve Board’s vaunted economists on this (fairly obvious) issue, before the Fed approved the Fleet-BankBoston merger?

    In further branch closing, that can no longer by tied to any merger, Chase Manhattan is moving to close its Bronx, N.Y. branch at 3821 White Plains Road.

February 14, 2000

     In deals large to small: BB&T on Feb. 7 said it will pay $1.12 billion to buy One Valley Bancorp and become the largest bank in West Virginia. At the other end of the scale, on Feb. 10 Georgia’s United Community Banks announced it’ll buy Independent Bank & Trust Co. for $32.4 million, “to extend its operations into northwest Georgia.” A secret deal (at least, “terms were not disclosed”): Wells Fargo, Allstate and Calpers joined to buy a stake in homebuilder Olson Co.. At least as to Wells, it seems like a conflict... Meanwhile, Sovereign filed a $1.3 billion Community Reinvestment Act plan with the Office of Thrift Supervision, trying to expedite its acquisition of the 284 Fleet-divestiture branches.

Overseas, Citigroup has applied to Polish regulators to buy a 75% stake in Bank Handlowy, SA, for $840 million. J.P. Morgan already has a stake in the bank. In Britain, Royal Bank of Scotland has declared victory in its bid for NatWest; Bank of Scotland has conceded defeat. In rare (attempted) poetry on the bank beat, a NatWest advisor told the Financial Times (Feb. 11): “We underestimated the emotional weight of history bearing down on us.” He may have meant, the “weight of emotional history”...

February 7, 2000

      Real deals, maybe deals, and, as always, the fall out.

Real deals: Wells Fargo on Feb. 2 confirmed its merger agreement with First Commerce Bancshares, the second-largest bank in Nebraska, for $480 million. Two days later, Wells announced a plan to buy 1st Choice Corp of Denver, Colorado. The applications Wells must file continue to back up: the Federal Reserve has yet to provide public notice of Wells’ required application to acquire National Bank of Alaska...

Meanwhile, suddenly acquisitive Schwab Corp. (which has yet to apply to the Fed to acquire U.S. Trust, see reports below) on Feb. 2 announced it’ll buy Internet brokerage CyberCorp, for $488 million. And Bank of Montreal made much on Feb. 3 of its planned purchase of a tiny Florida institution, Village Banc of Naples. Bank of Montreal, which also owns Chicago’s Harris Bank, reported that Village Banc’s customers have average deposits of Canadian $44,000. Harris - BoM Florida president John Stewart said, “We will provide a high level of investment, trust and banking services to the local community and to Canadian and Chicagoland customers wintering or relocating to Florida.” Behind the “snow-bird” rationale, some see an attempt to expand Bank of Montreal’s Internet banking in the United States.

. Merrill Lynch gave a strange Feb. 1 exclusive to the New York Times, that it plans to start trying to attract FDIC-insured deposits, beginning in June, at the latest. Merrill has long been rumored to be considering acquiring Chase Manhattan or another bank. While some skeptics see Merrill’s announcement as an attempt to gain leverage in negotiations, taken at face value, Merrill’s proposal is another affront to the CRA. Merrill current has two insured depository institutions: a Utah industrial loan company, and a “trust-only” savings bank in New Jersey (which Merrill managed to charter, without losing the non-bank “grandfathered” status of its Utah bank, by whispering to the Office of Thrift Supervision in the mid-90s that it would like to acquire the next failing savings bank the OTS saw -- Metro Savings in Orlando, as it turned out...).

The FDIC regulates Merrill’s Utah bank, and, if the past is any guide, would allow Merrill to rack up nationwide deposits in that bank, without expanding its CRA assessment area beyond Utah. Merrill also owns a mortgage company, but the FDIC refuses to examine if it is reaching low and moderate income borrowers, since it is only an “affiliate” of the bank. Using such shell games, most U.S. banks could declare themselves “limited purpose” banks for CRA purposes, and further evade the law.

Bloomberg News’ Feb. 1 follow-up on the Times’ exclusive reported that “[i]n June, Merrill plans to start transferring clients’ cash not invested in securities into insured accounts at the two other banks it owns -- in Utah and New Jersey -- instead of into taxable money-market funds.” If Merrill uses the New Jersey “trust-only” savings bank, it will have to file a new business plan for the savings bank with the OTS. The OTS should solicit public comment on Merrill’s substantially changed business plan for the thrift... Developing...

Merrill’s long-time target, Chase Manhattan, is subject to a messy lawsuit by the NYS Insurance Department, which has had to take over two Lawrence Insurance Group companies. The suits that Chase (and Fleet) helped the Lawrence units evade the ban on direct loans to affiliates... Chase has applied to merge the old Texas Commerce (now Chase Bank of Texas, N.A.) into its lead bank; the Fed’s soliciting comments until March 5.

Merrill’s main competitor, Citigroup, made a couple of indicative moves last week. Citi applied to the NYS Banking Department to close it branch in Monroe County in upstate New York; meanwhile, Citi’s Salomon Smith Barney announced that the French treasury has granted it a license to become a primary dealer in French government bonds, beginning in March. Citi / Solly’s now a primary dealer in eight of the eleven Euro countries... The Boston Globe of Feb. 4 reported a $50,000 fine against former Solly broker David A. Smith, for a scheme to pitch artificially inflated stocks. Solly’s paid $2 million to reimburse the family of nursing home magnate Abraham Gosman for related losses... In the three-headed Office of the Chairman, Bob Rubin has brought in his former chief of staff at Treasury, Michael B.G. Froman. See? There’s a top level, AND a mid-level, revolving door...

    Finally, the swirling rumors. Barron’s opines that subprime finance company Associates First Capital Corp. is undervalued, and that if its shares continue to languish, it could become a takeover target for General Electric, AIG, or always-hungry-for-subprime Citigroup. A rumor that moved the market on Feb. 4: Marshall & Ilsley as the apple-in-the-eye of Northwestern Mutual Life Insurance Co.. M&I’s shares jumped 14 percent on Friday on this rumor. Since Northwestern is a mutual insurer, it would have to pay cash -- and, under Gramm-Leach-Bliley, apply to the Federal Reserve to become a financial holding company. If so -- we’ll be there...

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January 31, 2000

    And the M&A beat goes on: on Jan. 27, Nebraska-based First Commerce Bancshares announced it’s in talks to be acquired by Wells Fargo for about $480 million. As with its recent (and still pending) Alaska purchase, Wells seems to like the target to speak first. On the insurance beat, Houston-based American General is said to be close to acquiring Boston-based Cypress Holding Co., with $3 billion in assets under management. And when will we see the first bank-insurance combination sparked by the Gramm-Leach-Bliley Act? Soon...

     Not that recent merger have been working out too well. On Jan. 28, Bank One confirmed that it will close its Indianapolis telemarketing center, as Bank One continues to try to figure out how to do home equity lending (which, for Banc One Financial Services, includes high interest rate, “subprime” lending -- see below). On Jan. 27, Credit Suisse First Boston cut its estimated 1999 net profit for HSBC by fully ten percent, in light of the Republic-related restructuring charge, and exposure to Daewoo. Another over-acquisitive bank, Pennsylvania’s Sovereign, on Jan. 26 reported that fourth quarter profits fell 33%, due to its purchase of 279 Fleet-divestiture branches. Sovereign’s living on credit: it borrowed $1.2 billion to make the purchase, and interest payments cost Sovereign two center per share in the fourth quarter. In Davos, Switzerland on Jan. 27, Deutsche Bank’s chief strategist for Asia, Ken Courtis, quit to join Goldman Sachs -- right in the middle of his speech about Japan’s economy. Also last week, Deutsche Bank seized control of the management board at Poland’s BIG Bank Gdanski SA, and, on Jan. 28, Deutsche Bank announced an “e-commerce” alliance with phone company Mannesmann AG to offer online banking services.

    In U.S. online banking, E*TRADE, so recently into banking through Telebank, laid out more than $5 million for advertisements during Jan. 30’s Super Bowl. Meanwhile, SOFTBANK, which owns nearly 25% of E*TRADE - Telebank (without being deemed to be a “controlling party”), on Jan. 27 announced a joint venture with Lehman Brothers. Let’s get this straight: Lehman owns a nationwide savings bank in the U.S., as does E*TRADE (through Telebank). SOFTBANK can own 25% of E*TRADE, and have formal joint ventures with its putative competitor, Lehman -- and there are no antitrust issues? Developing...

January 24, 2000

    Deal of the week: Citigroup on Jan. 18 announced it will acquire the investment banking unit of Britain’s Schroders Plc, for $2.2 billion dollars. Watch for Citigroup to be among the first to apply for, and get, certification by the Federal Reserve as a “financial holding company,” and watch for more of these acquisitions, as the deregulation frenzy sets in.

    The Citi never sleeps -- the Polish newspaper Rzeczpospolita on Jan. 22 reported that Citigroup is on the verge of acquiring a 30% stake in Poland’s leading commercial bank, Handlowy SA....

    In more micro M&A, Baltimore-based Mercantile Bankshares announced Jan. 21 it seeks to acquire Union National Bancorp for $65.4 million (we did say “micro”)...

    M&A slip-up of the month: a pastry chef working at the law firm of Cravath, Swaine & Moore, where the AOL - Time Warner merger was being negotiated, passed along what he heard to his uncle, who posted it in a Yahoo! chat room the Sunday before the deal was announced, under the name MINISTER7X72001. Loose lips sink ships... or, in the Y2K variant, cause a run-up in stock price....

    More seriously, on the regulatory beat, the U.S. Office of Thrift Supervision on Jan. 19 approved an application by a brokerage, Southwest Securities Group of Dallas, to acquire First Savings Bank of Arlington. The near-unbroken string of approvals by all four U.S. bank agencies was disturbed, if only slightly, by the OTS’ Jan. 12 denial, under the “probability of usefulness and success” standard, of an application by a new thrift, the Commercial Savings Bank of Western Maryland, to amend its charter and business plan. Meanwhile, State Farm Insurance brags that its savings bank, begun amid controversy in May 1999, will start offering Internet banking to its own agents by January 23, and to consumers nationwide “this spring.” It sure seems to be a “substantially revised business plan” -- but apparently State Farm’s sheer size ensured that is passes the “probability of usefulness and success” test -- without any public notice or comment....

January 18, 2000

    The Federal Reserve Board is rushing to put out regulations allowing banks, insurance and securities firms to merge. Fed general counsel Virgil Mattingly told the SIA on Jan. 11 that the Fed’s rules may be released as early as this week. Already, the newly deregulated transactions have begun: first up was Charles Schwab Corp.’s Jan. 13 announcement that it will apply to acquire U.S. Trust Corp., for $2.9 billion. U.S. Trust’s spokesman blithely predicts regulatory approvals by late May or early June (despite, it might be added, U.S. Trust’s still questionable CRA compliance).

    On the Deutsche Bank watch, ICP’s earlier report that ex-Comptroller Eugene Ludwig would leave on Dec. 31 turned out to be correct, right down to the day. At an SIA event on Jan. 11, after singing the praises of the financial deregulation bill, Ludwig informed reporters that he’d left DB, without fanfare, on Dec. 31, and is now organizing an investment fund, Cornerstone Financial Partners...

January 10, 1999

     Financial services companies paid over $100 million in 1999 in campaign contributions and lobby expenses related to the passage of the Gramm-Leach-Bliley bill, according to computer analyses by the Associated Press and the Campaign Study Group. That analysis is based on contributions to Congress, and not current or future presidents. Political scuttlebutt of the week, courtesy of The Washingtonian magazine, has Clinton angling for a job at Lazard Freres & Co. for 2001, and Lazard Deputy Chairman Steve Rattner hoping to parlay his fundraising for the Democrats into the Treasury Secretary post, if Al Gore were to win the presidency.

     Meanwhile in New York, HSBC is planning to being imposing ATM surcharge fees at all ex-Republic automatic teller machines, beginning Feb. 1. HSBC flak Linda Stryker explains, “We didn’t want to have to pass that on to our customers or inconvenience them.” But how would retaining Republic’s much-advertised no surcharge policy “inconvenience” HSBC’s customers? Local politicos lamented that now Jamaica Savings Bank is the largest bank that still does not impose ATM surcharges -- without noting that Jamaica is trying to be acquired by North Fork Bank, which would immediately begin imposing surcharges....

* * *

    Midtown Manhattan on January 13th will play host to one of the more surreal events of the young millennium's Bank Beat: Citigroup’s Sandy Weill proclaiming his commitment to the Community Reinvestment Act. It will take place at the Sheraton Towers on 52nd Street. The “registration fee” required is five hundred dollars, not including a “gala fundraiser” later than night on the floor of the New York Stock Exchange (that’ll set you back another $500).

    Not only will Mr. Weill proclaim his conglomerate’s commitment to CRA -- he will also claim that the financial deregulation bill, signed by President Clinton on November 12, 1999, effectively expanded CRA onto insurance companies like Travelers. Neither assertion will be true.

     Consider Citigroup’s record of mortgage lending, in the New York City Metropolitan Statistical Area: in 1998 for conventional home purchase Citigroup (combining Citibank, N.A. and Citicorp Mortgage) denied the applications of African Americans 2.97 times more frequently than the applications of whites. This compares unfavorably to the industry aggregate in the NYC MSA: a 2.15 denial rate disparity in 1998. Citigroup’s defense cannot be that it does more outreach to communities of color than other lenders. While for the industry as a whole in this MSA in 1998, 12.2 percent of conventional home purchase loans went to African Americans, for Citigroup, the figure was only 6.6 percent. Citigroup’s disparities for Latinos are also glaring: a denial rate disparity of 2.3 (compared to the industry’s figure of 1.75); 5.9 percent of conventional home purchase loans to Latinos, versus the industry’s 9.0 percent. How exactly do Mr. Weill and Citigroup “support” the CRA?

     In a December 17 op-ed, Weill proclaimed: “I support community reinvestment and am delighted that the Financial Services Modernization Act, which President Clinton recently signed into law, will give a shot in the arm to investment of capital into our communities.” Question: what is the “shot in the arm” to which Weill is referring? It sure couldn’t be the slow-down in CRA examination for 80% of the banks in the country. Could it be the reporting requirements impose on community development groups? Virtually no community-based organizations view the Gramm-Leach-Bliley Act as being positive for CRA. Citigroup wanted and needed the law, because it made moot the Federal Reserve’s requirement that it divest its insurance operations in two to five years. Citigroup clearly got a “shot in the arm” from the new law -- but what about communities?

     As supporters of the new law, the Clinton administration (and Citigroup’s Weill) point to the Reverend Jesse Jackson. On Dec. 15, Rev. Jackson held a press conference in the AT&T building in lower Manhattan. The main purpose was to promote the upcoming “Wall Street Project” conference, slated for Jan. 12-14 in New York. But, standing next to Citigroup’s Weill, Rev. Jackson claimed again that the Gramm-Leach-Bliley Act is good for communities. Two press accounts catch the flavor:

Newsday of Dec. 16 reported: “In an allusion to recent criticism of the Wall Street Project’s strategy of working with corporate America, Jackson said the approach is not ‘trickle down’ economics, but ‘growing up.’”

The American Banker newspaper of Dec. 16 reported: “Despite much criticism of the law by community reinvestment activists around the country, [Jackson] said the legislation did in fact expand CRA protections, specifically to ensure that insurance companies comply.”

     The last statement simply is not true. The only even plausibly related provision of the law is that only holding companies whose banks are rated “Satisfactory” or better under CRA can acquire insurance companies. It is inaccurate to claim that the law that Clinton signed “specifically ensure[s] that insurance companies comply” with CRA. This is a classic “New Democrat” strategy: sign (or support) a law that sells out a supposedly core principle, then simply claim that that’s not what the law says. And with an unwary press, the strategy appears to work. The Associated Press of Dec. 15 reported that “Jackson said he wants to harness the legal requirements of the federal [CRA], which requires banks and insurance companies to lend money... in low-income neighborhoods. Strengthened community reinvestment requirements are part of the recently passed financial overhaul bill.”

    If communities could “harness” the Clinton administration’s and its controllers’ (e.g. Citigroup) and supporters’ spin, that would be one thing. But the bill that Clinton signed does not advance CRA, much less apply it to insurance companies...

    Citigroup’s weak fair lending record is too striking to miss. In the run-up to the Jan. 12-14 conference, another, more local Reverend was heard seeking allies to “do a CRA negotiation” with Citigroup. This split, earlier noted in the NYT Magazine of Dec. 12, 1999, continues to grow. The sponsors of the Jan. 12-14 $500-registration-fee conference, however, have a head start. Also appearing on the program, presumably as examples of right-minded corporations, are representatives of Chase Manhattan, BankAmerica, J.P. Morgan, State Street Bank, Credit Suisse First Boston, Prudential, GTE, Raytheon, Reebok, SBC, AT&T and Bell Atlantic. For five hundred dollars, you can hear them congratulating themselves, and being congratulated. This will be updated next week, Jan. 18....

    The convergence at this week’s conference of Treasury Secretary Larry Summers, Clinton economic advisor Gene Sperling, Sandy Weill and Clinton himself reflects the politics of financial deregulation. As detailed in ICP CRA Reports from mid-October to mid-November, 1999 (archive links at the bottom of this page), the Clinton Administration found some of its only community support for its signing of the Gramm-Leach-Bliley Act from the hardly grassroots Local Initiatives Support Corporation, whose chairman is Bob Rubin, now of Citigroup, and from the Rev. Jackson (whose phraseology closely mirrors Clinton’s “new markets” rhyming). A substantial majority of community groups that actually enforce and implement CRA in poor neighborhood see the Gramm-Leach bill as a rollback of CRA, and not an “expansion.” These groups, however, can hardly pay the $500 registration fee from the mid-Manhattan love fest of Jan. 12-14.

    Also in New York, at the deadline for this Report, Citigroup global compliance chief Harold O. Levy was nominated for the post of interim Board of Education Chancellor. Levy played something of a hatchet-man’s role in 1998 while Travelers sought approvals to acquire Citicorp, but his resume of public appointments is said to be viewed as a feather in Citigroup’s otherwise fairly empty cap. And the Beat goes on....

    Finally, still on the theme of Citigroup’s “global compliance” (and as a footnote to the Jan. 12-14 love fest alluded to above), the U.S. Supreme Court on Jan. 7 agreed to hear the appeal of 118,000 employees of Ameritech (now part of SBC, a representative of which is appearing at the conference), that Citigroup’s Solomon Brothers made $21 million selling them securities that turned out to be almost worthless. According to documents in the case, Citigroup’s Solly screwed workers of Ameritech/SBC -- but somehow both Citigroup and SBC are being held up as shining examples of the “new” corporate responsibility. New indeed...

* * *

January 3, 2000

     While the century date change appears to have passed with few glitches, Wells Fargo in late December did send out Certificate of Deposit renewal notices telling customers their certificates would expire in “January 1900.” A New Years Eve bank robbery and hostage taking at a Bank of America (that would be, ex-Boatmens Bancshares) branch in suburban Kansas City ended on New Years Day without injuries. Floundering KeyCorp used the holiday week to sell off $1.3 billion in card card receivables to subprime finance company The Associates. Class action lawyers are swarming around Bank One, claiming it hid just how badly the First USA acquisition was going. First Union got smacked with a $215,000 fine by an SEC administrative law judge just before Christmas, for having hidden payments to a lobbyist to win municipal bond sales contracts in Broward County, Florida.

    On the M&A front, the Office of Thrift Supervision did not act on the E*TRADE - Telebank application prior to December 31. The applicants were only bound to close the deal if approval was received by that date -- toward the end of the year, E*TRADE and Telebank tried to put pressure on the OTS, by proxy, press release and otherwise. The pressure may still work...

     Funniest story of the holidays had to be Bank of America’s “Adopt an ATM” program, under which the bank “encouraged” employees to choose an ATM and “wipe it down with window cleaner and a soft cloth,” during their free time. California Labor Commissioner Marcy Saunders shot down the program, saying that “notwithstanding the purported ‘voluntary’ nature of employee participation, your employees must be compensated for all time spent in connection with, and any work connected with, the ‘Adopt an ATM’ program... The labor code is very clear on what rules employers have to abide by.” B of A spokesman Peter Magnani responded defiantly that “we look forward to showing the labor commissioner what we are actually doing... on behalf of our associates and customers.” There’s the current buzzword -- bank employees are “associates.” Note that KeyCorp, for example, has said it will lay off 3,000 people to try to stem the decline in its stock price. The employees are associates -- “partners,” even -- right up until you fire them...

    In further holiday round-up: FleetBoston’s Robertson Stephens Inc. was fined $125,000 by the NYSE after a finding that RS “lacked an adequate, separate system of supervisory follow-up and review to guarantee that order tickets were properly completed before trade execution” and that “due to misconduct by a former managing director, [RS] created and kept false order tickets and failed to retain order tickets reflecting trades made by the managing director.” Hey, that’s some great pre-purchase due diligence...

    Philippine sugar miller VMC got Bankers Trust removed from its management committee, since Deutsche Bank’s status of a major creditor of VMC created a conflict of interest. Those merger synergies keep mounting....

  Until next time, for or with more information, contact us.

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  Click here to see ICP's current Bank Beat

     Click here to view ICP's Bank Beat Archive #1 (April - June, 1999).

    Click here to view ICP's Bank Beat Archives # 2(July, 1999)

     Click here to view ICP's Bank Beat Archive #3 (Aug.-Sept., 1999)

Click here to view ICP's Bank Beat Archive #4 (Oct.-Dec. 31, 1999)

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