Opposition to Citigroup - Associates First Capital Corp. by Inner City Press

Citigroup- & Associates First Capital/Citifinancial

Click here for Inner City Press' front page; click here for ICP's Citi-EAB protest, 3/01

Click here for more general Citigroup Watch; for or with more information, contact us.

ICP has published a (double) book on the topic of predatory lending. The Pittsburgh City Paper of Dec. 11, 2003, says that the "novel Predatory Bender: A Story of Subprime Finance may, in fact, be the first great American lending malfeasance novel," and mentions CitiFinancial. Click here for that review; click here for sample chapters, an interactive map, and ordering information.]

May 27, 2004 update: vindicating many of ICP's assertions, on May 27, 2004, the Federal Reserve announced a cease-and-desist order against CitiFinancial, for predatory lending and for what the Fed refers to as "misleading examiners" -- basically, as documented by ICP in real time throughout the Web site, Citigroup told employees to lie, threatened to sue whistleblowing employees, and tried to hide and shred documents. Click here for the Fed's 5/27/04 press release, click here for a PDF of the Fed's 14 page order; click here for ICP's current CitiWatch report (the May 27, 2004 Update describes how the world's biggest bank is still run by predatory lenders, document shredders, silencers of whistleblowers....For or with more information, contact us.

Inner City Press / Community on the Move, along with other community organizations, has become increasingly concerned by Citigroup's involvement in questionable subprime (high interest rate) lending. From September through November, 2000, ICP filed comments opposing Citigroup's applications to acquire the scandal-plagued subprime lender, Associates First Capital Corporation. As documented in the portions of ICP's comments reproduced below, Citigroup disproportionately denies applications from people of color for normal interest rate loans, while its higher rate lender, CitiFinancial, and the company that it is merging into CitiFinancial, Associates, target these same communities with high interest rate loans. Citigroup's Associates applications, however, were not subject to the Community Reinvestment Act. On November 30, 2000, the Office of the Comptroller of the Currency, the FDIC and the New York Banking Department all simultaneously approved Citigroup's applications to acquire The Associates. Citigroup immediately "consummated" the acquisition. ICP has sought judicial review of the approval granted by the Missouri Department of Insurance, and has inquired into the other agencies' approvals, under the Freedom of Information Act (responses are reviewed below). ICP will be closely scrutinizing Citigroup's practices, both in subprime and community lending (on this page), and more generally (on ICP's ongoing Citigroup Watch page). The issues will also be raised (and reviewed) in connection with Citigroup's proposal to acquire European Ameican Bank, announced on February 12, 2001. Developing...

See also, "Citigroup's Purchase Of EAB Challenged," by Tania Padgett, Newsday, March 13, 2001, Pg. A46; "Group Launches Challenge to Citi-EAB," by Liz Moyer, American Banker, March 13, 2001, Pg. 3; "EAB-Citigroup Merger Plans Questioned," by Tania Padgett, Newsday E-dition, March 12, 2001; "Consumer Group Challenges Citigroup's EAB Acquisition," Reuters, March 12, 2001; "Community Group Challenges Proposed Citigroup-EAB Deal," by Eileen Canning, Bridge News, March 12, 2001; FTC Sues Citigroup Unit, by Rebecca Knight, Financial Times (FT.com), March 6, 2001; Citigroup Is Cleared To Buy Mortgage Firm, International Herald Tribune, December 5, 2000, Pg. 14; After Associates, Groups Vow Not To Let Citigroup Rest, by Jonathan Nicholson, Dow Jones News Wires, December 4, 2000; Citigroup Is Cleared To Buy Loan Firm; Associates First's Lending Practices Drew Fire, by Kathleen Day Washington Post December 1, 2000, Pg. E3; Citigroup Merger OK'd By Regulators, The Plain Dealer (Cleveland), December 1, 2000, Pg. 3C; Citigroup Completes Purchase of Associates After Federal Nod, Deseret News (Salt Lake City), December 1, 2000, Pg. D9; Citigroup Closes Associates Deal, Commercial Appeal (Memphis), December 1, 2000, Pg. C2; Citi-Associates Wins OK from Regulators, by Rob Blackwell and Dean Anason, American Banker, December 1, 2000; Citigroup gets nod on Associates deal, by Jaret Seiberg, The Daily Deal, November 30, 2000; Citigroup - Associates Gets Regulatory OK's, by Marcy Gordon, Associated Press, November 30, 2000; Law Denies CRA Clout to Citi-Associates Foes; Federal Regulators Cannot Consider the Issues, by Rob Blackwell, American Banker, November 27, 2000, Pg. 1; Activists Can't Block Citi's Purchase, by Jaret Seiberg, The Daily Deal, November 27, 2000; Citigroup Associates Deal On Track, Despite Longer Review, by Jonathan Nicholson, Dow Jones Newswire, November 16, 2000; Citigroup Faces Attacks on Loan Record, by Paul Beckett, Wall Street Journal, November 13, 2000, Pg. C19; Viewpoint: Citi - Associates Deal Proves Financial Modernization Oversight Inadequate, by Matthew Lee, American Banker, November 10, 2000, Pg. 12; Consumer Groups Attack Citigroup, Associates Lending, by Mary Kelleher, Reuters, November 10, 2000; Citigroup Unit Reforming Lending Practices to Clear Way For Merger, Critics Dissatisfied; No Hearing, Las Vegas Sun, November 8, 2000; Citigroup Says It Will Address Predatory Loans, Houston Chronicle, November 8, 2000; Citigroup Planning Changes After Merger; Some Practices Will Be Eliminated, by Jim Fuquay, Fort Worth Star-Telegram, November 8, 2000; Citigroup To Improve Consumer Lending Practices, by Mary Kelleher, Reuters, November 7, 2000; Citigroup Planning Change After Merger, by Jim Fuquay Fort Worth Star-Telegram, November 8, 2000; Citigroup To Improve Consumer Lending Practices, by Mary Kelleher, Reuters, November 7, 2000; New York Banking Department Sets Meeting on Citigroup-Associates Acquisition, by Richard Cowden, Bureau of National Affairs Banking Daily, October 26, 2000; Activist Seeks Nevada Hearing, by Richard Velotta, Las Vegas Sun, October 24, 2000; Environmentalists Target Citigroup, Inter Press Service, October 20, 2000; Bank Merger OK'd Despite Group's Protest, Pierre (S.D.) Capital Journal, October 19, 2000; Citigroup Wins South Dakota Regulatory Approval for Associates, Bloomberg News, October 18, 2000; In Matters of Race and Environment, Citigroup Puts Profits Over Ethics, The Daily Princetonian, October 16, 2000; Organization Protests Bank Merger, Pierre (S.D.) Capital Journal, October 11, 2000; Citigroup - Associates Opposed (ICP Granted Discovery Rights), Bureau of National Affairs Banking Daily, October 11, 2000; Citigroup's Purchase of Associates Challenged in State Hearing, Bloomberg, October 10, 2000; Citigroup Purchase Is Facing Challenge, Fort Worth Star-Telegram, October 7, 2000; Agencies Extend Citi-Associates Public Comment Period, Dow Jones Newswires, October 5, 2000; Consumer Group Targets Citigroup Deal, Milwaukee Journal Sentinel, October 5, 2000, Pg. 3D; Consumer Groups Fight A Citigroup Acquisition, Philadelphia Inquirer, October 1, 2000; Consumer Group Still Finds Ways to File Objections to Citigroup-Associates deal, Dallas Morning News, September 26, 2000, Pg. 3D; Reject Citi-Associates Deal, Group Urges, American Banker, September 26, 2000, Pg. 19; Consumer group opposes Citigroup-Associates deal, Reuters, September 25, 2000; and Options to Protest Citigroup-Associates Merger Cut by New Law, Bloomberg, September 25, 2000.

Update of May 19, 2003: Delayed Documents Display Citigroup's Dominance of its Regulators: last week we received from the Office of the Comptroller of the Currency a response, dated May 12, 2003, to our FOIA appeal of February 12, 2001. That's not a typo -- it took the OCC more than two years to respond to a FOIA appeal. The underlying request concerned Citigroup's acquisition of Associates First Capital. Among the documents provided on appeal -- several hundred pages that were improperly withheld back in 2000-01 -- were OCC emails showing the endgame just before the OCC approved Citigroup's application. On Nov. 28, 2000, OCC general counsel Julie Williams sent out a message: "Fire drill. I talked with Jerry about the timing on Citigroup and he wants us to try to get done by sometime on 11/30. So, I need a decent draft of the whole decision to take home on Wednesday evening." The "Jerry," it seems clear, is Jerry Hawke, now as then the Comptroller.

At 1:56 p.m. on November 30, Ms. Williams got an email stating that

"Jerry has not provided me or Greg comments... I have not caught up with Barbara Kent (NY State Banking) yet to find out if they're on for a 2 pm approval. We have traded messages several times. However, I heard from FRB folks (who have a Reg K approval on this deal) that [REDACTED]. Carl Howard [Citigroup lawyer] just called... He says Barbara Kent is meeting on an 'exclusive' basis with the Wall Street Journal right now. She won't be doing a press release today, but he says 'We believe the decision will still occur at 2, as she said it will.' He's not sure when a document will be made public today or tomorrow. He expects to get a letter today, however. It's going to be 1 sentence and she's read it to Carl. I asked Carl to let us know when NY acts.

"The FSA (England) closed its office today without approving this; they are expected to act tomorrow at 10:30 am. They hope to do the closing at 5:30 US time) on Friday. They wouldn't act without the FRB acting. The FRB said staff could approve once they had the non-objection letters from the FDIC and OCC. Ray was called by Prince and Sweet and had me in on the call. They asked us to speak to FSA about our timing but the office had closed when they tried to patch us in. FRB staff also had had a number of conversations with FSA about all of this, but couldn't comfort them."

What does it all mean, you ask? Well, Citigroup "closed" / consummated the deal at 5 p.m. on November 30. From the above OCC email, three hours prior to that (stating that the FSA has closed for the day), it now appears that Citigroup closed the deal without the required FSA approval (or perhaps they reached a regulator at home). The agency's collaboration with Citigroup -- being "managed" by Citigroup's Carl Howard, being "patched in" to the FSA by Citigroup's Chuck Prince and outside lawyer William Sweet -- is troubling. So too are the OCC messages quoting from ICP e-mails the OCC obtained from recipient the OCC calls "confidential sources," and various requests to withhold these communications (resulting, it appears, in the more than two year delay). Like we said, better late than never. Though just barely.... Until next time, for or with more information, contact us.

Update of June 18, 2001: On June 18, ICP submitted comments to the Federal Reserve Board and the Office of the Comptroller of the Currency, including a just-obtained affidavit by long-time CitiFinancial employee Gail Kubiniec, alleging a multitude of predatory practices at CitiFinancial. The affidavit is extensive quoted on ICP's ongoing CitiWatch page, Report of June 13-14, 2001. The comments (similar to those ICP submitted the same day on Citigroup-Banamex) also put into evidence recent reports of Citigroup's money laundering for ex-Argentine president Menem, and, apparently, for the Juarez drug cartel. Citigroup's EAB applications to the Fed and OCC continue to pend; a Citigroup June 8 response to the Fed's June 5 questions requests "confidential treatment" for virtually all information. It's hard to imagine the Fed legitimately approving Citi's EAB application until the troubling issues in the Kubiniec affidavit are inquired into and addressed. Developing... For or with more information, contact us.

Update of April 9, 2001: Citigroup's November 30, 2000, acquisition of Associates First Capital Corp. has, beyond the other harms identified below, led to a situation in which the largest bank in the United States is lobbying against consumer protection initiatives, wherever they are proposed. Last week, in Philadelphia, a pared-down proposal passed, 16-0: subprime lending by banks was excluded from coverage, at Citigroup's request. The Philadelphia Daily News (4/5) reports that "[f]or the last three months, a Citigroup lobbyist has been trying to get city lawmakers to kill the pending bill. The lobbying effort included retaining two close friends of Mayor Street -- public-relations executive Bruce Crawley and attorney Carl Singley -- to press the issue. Lobbyist Nick Maiale, a South Philadelphia ward leader with ties to Council President Anna Verna, was hired as well.... The lobbying effort also includes telling lawmakers about Citigroup's business contributions to the city." Philly Mayor John Street has implied he may veto the bill. And the Daily News of April 7 quotes an "uninvolved" lobbyist that he'd "like to say that democracy triumphed, but what happened was the [Citigroup] lobbyists were no good."

Citigroup had even more success in Chicago, where it hired John Satalic, Mayor Daley's former chief of staff, to lobby the Cook County Board Finance Committee, leading last week to the rejection of two amendments to its pending Predatory Lending Ordinance that would have included single-premium credit life insurance within the definition of predatory practices. Citigroup profits extensively from this product, and has become its most prominent defender. The Chicago Tribune of April 7 reports on Satalic's lobbying, "on behalf of Citigroup," and says that "officials of New York-based Citigroup could not be reached for comment." Not surprising, that Citigroup wouldn't comment...Citigroup has still not answered the Federal Reserve's and NYBD's questions about its subprime lending, in the Citigroup - EAB proceeding...For or with more information, contact us.

Update of April 2, 2001: Inner City Press has received yet another response from the FDIC, to ICP's December 4, 2001, Freedom of Information Act (FOIA) request about the FDIC's approval of Citigroup - Associates. In this response, the FDIC has taken to redacting (blacking-out) even the To and From lines on the e-mails it has provided.

An undated FDIC document headed "Questions and Answers, Citigroup / Association Transaction" recites that "[a]t a meeting on October 2, Citigroup's spokesperson described the transaction emphasizing that it was an acquisition, not a merger, and that Citigroup operating policies would be imposed on Associates' activities. It was admitted that AFS had problems with regulatory compliance, however, it was pointed out that most of AFS's compliance problems occurred outside of its bank subsidiaries."

This presentation ignored that one of Associates' three banks, Associates National Bank (Delaware), had been sued for discrimination by the Department of Justice, and had (and has) a rare Needs to Improve rating under the Community Reinvestment Act.

In an October 5, 2001, e-mail, FDIC staffer Douglas H. Jones informed John M. Lane that "I talked to Bill Sweet [Citi's outside counsel] and told him we decided to extend the comment period by two weeks. He had no comment other than to thank us for the heads up."

Another FDIC e-mail, of October 19, 2001, recites that "I contacted Stacie McGinn of Skadden Arps... She stated that Citigroup has been meeting, and will continue to meet, with community groups (including those that made comment) throughout the country. She will provide a list of the meetings held and scheduled. She was unable to confirm that a meeting with Robert Rubin (Vice Chair of Citigroup) is scheduled, but she will find out and notify us."

As noted, Mr. Rubin (who employment by Citigroup is often cited as providing some assurance of consumer protections) never addressed the Associates issues, last Fall, or now, after the Federal Trade Commission has sued Citigroup for predatory lending...

Other Citigroup representatives did, however, go and schmooze the FDIC, on November 3, at 1 p.m., "in the conference room across from the Chairman's office." (E-mail of November 2, 2001, Mark J. Jacobsen to Stephen Cross and Tim Burniston). Despite being willing to meet, ex parte, with Citigroup, the FDIC and OCC denied all requests for a public hearing last Fall, and the Federal Reserve and OCC have not ruled on requests for a hearing on Citigroup - EAB, even after the FTC has sued Citigroup for predatory lending....

Update of March 26, 2001: For an update on the Citigroup - European American Bank proceeding (comments are due by April 2), click here. Citigroup's SSB continues to underwrite questionable subprime (high interest rate) loans, for other lenders. At week's end, SSB did an underwriting for GreenPoint Financial Corp., of $133 million manufactured housing loan asset backed securities...

Update of March 19, 2001: Our focus, for the coming weeks, is on Citigroup's applications for regulatory approval to acquire European American Bank. We've created a separate page for this proceeding; click here to view ICP's second comment, of March 19, 2001. See also, "Citigroup's Purchase Of EAB Challenged," by Tania Padgett, Newsday, March 13, 2001, Pg. A46; "Group Launches Challenge to Citi-EAB," by Liz Moyer, American Banker, March 13, 2001, Pg. 3; "EAB-Citigroup Merger Plans Questioned," by Tania Padgett, Newsday E-dition, March 12, 2001; "Consumer Group Challenges Citigroup's EAB Acquisition," Reuters, March 12, 2001; "Community Group Challenges Proposed Citigroup-EAB Deal," by Eileen Canning, Bridge News, March 12, 2001. For or with more information, contact us.

Update of March 12, 2001: On March 6, the U.S. Federal Trade Commission sued Citigroup and its subsidiaries (including Associates First Capital Corp., which Citigroup acquired on November 30, 2000) for predatory lending. On March 12, Inner City Press / Community on the Move filed comments opposing Citigroup's applications to acquire European American Bank, with the Federal Reserve Board, the Office of the Comptroller of the Currency, and the New York Banking Department. Click here to view ICP's comments. Until next time, for or with more information, contact us.

Update of March 5, 2001: Citigroup's compliance problems are by no means limited to the Associates First Capital units it bought on November 30, 2000. The Senate Government Affairs Committee last week criticized Citigroup (and Chase) for money laundering. As to Citigroup, the Committee found that a correspondent account held at Citibank by M.A. Bank, a subsidiary of Argentine financial group Mercado Abierto, was used to launder $7.7 million in drug money for Mexico's Juarez cartel between 1997 and 1998. Even though the U.S. government filed seizure warrants seeking to attach those funds in May 1998, Citibank kept the account open until March 2000. In the intervening 22 months, more than $302 million moved through the account...

Similarly, the conflicts created by Citigroup's "conglomerate" structure are becoming more apparent: most recently, in connection with the bidding war for ANB Amro's European American Bank, "won" by Citibank, N.A. on February 12. Citigroup's Salomon Smith Barney had been advising North Fork Bank on NFB's bid for EAB, and only withdrew, citing the (obvious) conflict, late in the process. Citigroup claims that Citibank used "in-house" M&A analysts, and not SSB. Is that credible?

On the consumer front, complaint continue to pour in about Citigroup's "Primerica" unit. A recent example:

Subj: Citigroup
Date: 2/26/01 3:57:31 PM Eastern Standard Time
From: [ ] (deleted at correspondent's request)
To: CitiWatch [at] innercitypress.org

Dear Inner City Press

...We recently refinanced using someone in our church body who passed themselves off as a "personal financial analyst," but was really a salesman for Primerica / Travelers. The interest rate offered was higher than the one we already had and we have a spotless credit record. When we questioned this, the rep told us that "interest rates don't matter," "it's all smoke and mirrors," and "this bank calculates the interest differently." To make a long story short, we have come to realize that this bank does nothing differently but scam people, and if we want to get refinanced yet again, we are subject to a stiff prepayment penalty...

How to reconcile this with Citigroup's claims -- for example, to the Cincinnati Enquirer of February 21, 2001: "We have gone across the country, talking with community groups to help develop the best policy. We disagree that we should not be in the communities, because we have been the one to pave the way to give loans to people who don't qualify for prime rates" -- Leah Johnson, director of public affairs for Citigroup. Those "go[ing] across the country talking with community groups" have included Citigroup "Chief Administrative Officer" Charles Prince, and Citifinancial general counsel Martin Wong (who most recently has declined the settle the case of a Texas woman who hung herself, after being subjected to Associates First Capital's harassing collection practices -- more on this in coming weeks). Noticeably absent from the road show / outreach has been ex-Treasury Secretary Robert Rubin. A March 2 SEC filing by Citigroup disclosed Mr. Rubin's 2000 compensation: $45.3 million. Sandy Weill got $127.8 million in salary, bonus, stock and stock options...

Citibank - European American Bank is about to heat up: "Watch this space."

Update of February 28, 2001: Documents reflecting the agencies' consideration of Citigroup's applications to acquire Associates First Capital Corporation, which ICP requested on December 4, 2000, under the Freedom of Information Act, continue to trickle in. In our Report of Feb. 5 (below), we reviewed the OCC documents; last week, the FDIC's first response.

Now, the FDIC has forwarded 254 more pages, some of them blacked-out with a magic marker. For example, an October 13, 2000, e-mail from FDIC staffer to Mira N. Marshall, to the FDIC's New York office, asks: "Are you keeping a count of how many commenters are requesting a hearing? Kevin [Hodson] thought you were, but just wanted to be certain. The first issue DOS [Division of Supervision] is trying to decide is whether there is any basis to hold a public hearing." This is followed by two lines entirely blacked out. The FDIC's New York office responded: "Yes, we are tracking the issues presented in the comment letters. Another individual in the Regional Office reviewed 26 of the 28 comment letters and summarized the issues... The other 2 comment letters are from Inner City Press and are, by far, the most comprehensive in scope. I am reviewing those 2 comment letters separately to highly the numerous issues raised." From this e-mail, an entire paragraph has been redacted (our ears are burning, even as we prepare to appeal the redaction).

In the spirit of minutiae, the FDIC/DC's interest became on October 4, 2000: Steven Fritts e-mailed Tim Burniston (ex of the OTS) and Bob Mooney: "DOS is inquiring as to what DCA Washington staff person is assigned to the case? Do you have someone in mind?" Mr. Mooney replied on October 6: "I don't think this is my call to make .. Is it?" Mr. Burniston chimed in on October 10: "Bob, you certainly can choose to assign this to a staff member if you like. If you would rather handle it yourself, that is fine also. I just wanted to give you the option." Mr. Mooney then e-mailed Mira Marshall: "Steve F. and Tim are handling the Citigroup Notice of Change in Control concerning Associates. I have not received any written materials on it... Can you make yourself available to Steve Fritts and Tim to work on whatever may arise concerning this transaction? I presume any media contact or contact with DOS would be made only through Steve Fritts." Mr. Fritts then e-mailed Mira Marshall: "I will forward the results of the S. Dakota hearing as soon as I receive them." Bit the FDIC's "memorandum which recaps the outcome of the public hearing in Pierre, South Dakota, on the application of Citigroup to acquire Hurley State Bank" -- is withheld in full... The FDIC's cover letter states that it is withholding 131 pages, and that "some additional records that may be responsive to your request presently are under active review."

For more, click here for ICP's ongoing (and broader scope) Citigroup Watch.

Update of February 20, 2001: Less than three months after "consummating" its acquisition of the subprime lender Associates First Capital, Citigroup has announced another major deal in the United States -- a deal that, unlike The Associates, will be subject to Community Reinvestment Act review. On February 12, Citigroup announced that it intends to apply for regulatory approval to buy European American Bank (EAB), and its 97 branches. Thirty of these branches are in New York City; 67 are in the NYC suburbs of Long Island. The deal would further concentrate the New York market, making Chase and Citi far and away the largest banks, reducing competition and raising prices and fees. Citi would also close a number of branches.

Soon -- anywhere from one to four weeks from now -- Citigroup will submit applications, subject to public comments, to regulators. It is anticipated that Citigroup will file its applications at the Office of the Comptroller of the Currency (OCC) and the New York Banking Department, and perhaps elsewhere.

When Citigroup acquired the subprime lender Associates First Capital in the Fall of 2000, over 100 groups commented to the OCC, opposing the deal. The OCC said that is was constrained, and could not consider Citi's or Associates' records under the Community Reinvestment Act, which requires fair lending in low- and moderate-income neighborhoods. This Citi-EAB transaction IS subject to the CRA. The unresolved Associates issues will be raised, along with branch closures, antitrust, and the so-called "micro-mortgage" issue. When Citicorp and Travelers proposed to merge in 1998, ICP and others documented Citicorp's disproportionate exclusion of communities of color, including in The Bronx. The New York Banking Department (the "NYBD") required a commitment from Citigroup, to increase its lending in majority-minority census tracts in New York State.

Citigroup claims to have increased its lending dramatically in majority-minority census tracts, and to have complied with the 1998 commitment. However, a close review of Citigroup's 1999 HMDA data shows that the vast majority of these purported improvements consist of loans, under $1,000, reported as home improvement loans.

Citibank, N.A., Citigroup's bank in New York City, supervised by the Office of the Comptroller of the Currency, reported making 1,931 HMDA-reportable loans in The Bronx in 1999. But fully 1,751 (or over 90%) of these were home improvement loans.

These 1,751 home improvement loans in The Bronx were generated off 1,805 applications, for a total dollar volume of $4,064,000 -- an average of $2,252 per loan application, much lower than other lenders' average home improvement loan in The Bronx. This is clearly a program of "micro-loans" directed as majority-minority census tracts, in order to purportedly comply with Citigroup's 1999 commitment, in terms of number of loans, but not dollar volume. The $4 million that Citibank lent in The Bronx under this program in 1998, claiming thereon over 1,000 loans, is dwarfed by Citigroup's (and Citibank's) "real" mortgage lending, in Manhattan below 96th Street, for example. Even in The Bronx, note that Citicorp Mortgage, with normal-size loans, made, in 1999, 44 loans to whites, and only six to Latinos, and only five to African Americans.

Citigroup's disparities in other markets are analyzed below on this page.

Citigroup has proffered an "explanation" of the micro-mortgages, claiming that in order to re-enter markets like The Bronx, it began to offer small home improvement loans, to establish "relationships." Also, Citigroup has been making presentations about its Associates "reforms," to religious organizations (including those which have filed shareholders resolutions for consideration at Citigroup's April 2001 shareholders' meeting), foundations, and others. It has been suggested that Citigroup squarely address the Associates issues in its EAB applications; we shall see. We will be running updates.

Regarding the FDIC's "processing" of Citigroup - Associates, ICP has now received two responses from the FDIC to ICP's December 4, 2000, Freedom of Information Act (FOIA) request. The documents released include various FDIC e-mails. These reflect coordination between the OCC and FDIC, regarding both extension of the comment periods; a sudden (and belated) recognition, in mid-November, that Section 307(c) of the Gramm-Leach-Bliley Act required the FDIC and the OCC to request comments from state insurance regulators; Citigroup's unwillingness to tell the FDIC where its / Travelers' insurance companies are "domiciled" -- and, despite this, an accomodative relationship between the FDIC and Citigroup. For example, an e-mail from Mark P. Jacobsen of the FDIC, to other staffers on November 16, 2000, when the FDIC asked Citigroup five questions about subprime lending, states the "you can have Sweet [Citigroup's outside counsel] call me if he has any questions or want to vent as to why we have handled this the way we have." Another e-mail, on November 17, from the FDIC's John M. Lane, recites that "Pam Shea and I returned a call to Carl Howard of Citigroup and he indicated that a response (about 10 pages) to our five questions would be provided around 4 PM today. He has placed a call to Steve Cross and offered to discuss the letter around 5:45 P>M today... We also discussed some additional state insurance commissioners that we intend to notice beyond the two, Connecticut and Texas, that Citigroup had suggested."

The documents also show an awareness of (though, in the end, a dismissal of) Congressional interest in the transaction. An e-mail from Robert C. Fick of the FDIC, to other staffers, on November 30, 2000 (when Citigroup's applications were approved), states: "I heard some comment (unverified) that Congresswoman Waters was intending to ask the FDIC to delay our decision."

The FDIC's interim FOIA determination letter states that 279 pages are being withheld, and that "Our record searches remain in progress. Additional information will be provided to you as soon as it is available." An incongruity: the FDIC has provided summaries of the comments of "61 sources" -- which do not include ICP, which commented, extensively, from September 25, 2000, onwards. Apparently, the FDIC intends to withhold these documents from ICP -- or to heavily redact them. Developing...

Update of February 12, 2001: Word has reached Inner City Press of a $1.3 billion predatory consumer practices lawsuit just filed in the Second Judicial District of Jones County, Mississippi, against First Family, Kentucky Finance, Associates -- and Citigroup. Citigroup moved to settle a class action that had been pending against Associates in Georgia, and settled the Department of Justice's discrimination lawsuit against Associates National Bank. But, clearly, there are more lawsuits coming...

While acquiring Associates First Capital in late 2000, Citigroup told many community groups that it's not really responsible for the lending practices of IMC, a Tampa-based subprime lender invested in, and then purchased, by Citi CEO Sandy Weill's son Marc. Well, on February 5, 2001, CitiFinancial Mortgage issued this press release, from Tampa:

CitiFinancial Mortgage Company ("CFMC"), Servicer for the IMC Home Loan Equity Trusts (the "Trusts"), has provided to Investors the following update with regard to the calculation and reporting of unrecoverable delinquency advances.

The Servicing Agreements governing the various Trusts provide that each month the Servicer shall advance to the Trustee interest on Home Equity Loans that are delinquent (a "Delinquency Advance"). The Agreements also provide that the Servicer is not required to make a Delinquency Advance if the Servicer determines that such Delinquency Advance is not recoverable.

In accordance with the Servicing Agreements, CFMC determines whether a Delinquency Advance for a delinquent loan will be recoverable before making any such advance. Recoverability is determined by performing an equity analysis on the loan. The equity analysis begins with the estimated gross proceeds expected upon liquidation of the real property that secures the delinquent loan. This estimate is a percentage of the appraised value given to the real property at the time of origination of the loan. The percentage is based upon the historical gross liquidation proceeds of real property already liquidated. From this figure is subtracted (i) the principal balance outstanding (and the principal balance outstanding on the first mortgage if the loan in issue is secured by a second lien) and (ii) advances already made for the delinquent loan in issue. If there is any equity in the property, the Delinquency Advance is considered recoverable and the Delinquency Advance is made for the particular loan... [I]n conducting its historical review, CFMC discovered that the services software was advancing all prior months' interest that had previously been determined to be unrecoverable when a single payment was received and applied to a loan that was more than 120 days delinquent. In other words, these prior months' Delinquency Advances were being made regardless of the fact that (i) the loan remained delinquent and (ii) the equity analysis did not show recoverability of the Delinquency Advance. This programming was corrected. Delinquency Advances for 120+ Delinquent Loans that receive a payment will not be advanced until (i) the loan is current or (ii) the Delinquency Advance is determined to be recoverable.

--Emphasis added.

In other words, "oops!".

Update of February 5, 2001: On December 4, 2000, Inner City Press submitted a Freedom of Information Act (FOIA) request to the Office of the Comptroller of the Currency and to the FDIC for documents related to Citigroup - Associates, which, as reflected below, the OCC had approved on November 30, 2000. Under a cover letter dated January 29, 2001, the OCC has responded, providing over 1,000 pages of documents, while withholding others. While we continue to review the documents, and to prepare an appeal, of the (unidentified amount of) withheld documents, the following may be of interest to readers of this Report.

On October 26, 2000, Comptroller John Hawke wrote to Rep. Maxine Waters, explaining how "limited" the OCC's scope of review would be, under the Change in Bank Control Act, and highlighting that

"It is interesting to note that the processing governing the acquisition of Associates Corporation is different today than it was prior to the enactment of the Gramm-Leach-Bliley Act of 1999 ('GLBA'). Under GLBA, Citigroup, as a financial holding company, may acquire companies such as Associates Corporation without the prior approval of the Board of Governors of the Federal Reserve System ('FRB'). Prior to GLBA, Citigroup's acquisition of Associates Corporation would have been reviewed and subject to the approval of the FRB under section 4(c)(8) of the Bank Holding Company Act. Under this provision, the FRB would have reviewed the transaction under a closely related to banking and a public benefits test. Particularly with regard to the public benefits test, the FRB would have considered whether the transaction produced benefits to the public that outweigh possible adverse effects. Adverse effects included undue concentration of resources, decrease or unfair competition, conflicts of interest, and unsound banking practices. After GLBA, for a qualifying financial holding company, no application is required for this acquisition and thus the public benefits test is not applied to the transaction. In addition, there will be no notice and public comment period by the FRB or an opportunity to request a hearing from the FRB."

It appears that Comptroller Hawke was trying to emphasize, to Rep. Waters, how it was the passage of the GLB Act which is to blame for the lack of scrutiny on Citigroup - Associates. Of course, it was Citicorp - Travelers, and Citigroup's subsequent lobbying, that in large part led to the passage of the GLB Act in 1999...

The OCC has also provided, as it must under FOIA, a series of responsive "electronic" record, primarily e-mails that forwarded, within the OCC, comments from some community groups (including, in full disclosure, ICP). These include a message, dated September 15, 2000, attaching statements that ICP "e-mailed to key CRA advocates across the U.S. regarding [a] recent conversation with a 'guy from the OCC' about Citi and Associates." Ignoring (for now) the "Spy - Counterspy" aspect," it's unclear how the OCC would obtain e-mails from purportedly private list servs of "key CRA advocates"...

Perhaps most interesting, at least as a legal matter, is that the OCC only made its (required) request for a "report on the competitive factors involved in th[is] notice" to the Federal Reserve System on November 17, 2000, stating "If your office could respond by December 1, 2000, it would be greatly appreciated." In fact, under the law, the Fed had more than the specified 13 days to respond. Nevertheless, after four p.m. on November 30, the Fed faxed its "no significant anticompetitive effects" letter to the OCC. Just before five p.m. on November 30, the OCC (and FDIC and NYBD) approved the noticed, and, in a filing made at 5:30 p.m. with the Delaware Secretary of State, Citigroup "consummated" the transaction.

Similarly, while the Federal Reserve on November 17 "suspended" the 45 day review period on Citigroup's applications to acquire Associates' banks in Hong Kong and the United Kingdom, the Fed on November 30 suddenly "waived the remainder" of the notification period (letter from the Board's Associate Secretary to Citigroup's counsel, dated November 30, based on a November 30 memo from Joanna de Plas, large portions of which have been redacted).

Interestingly, the Department of Justice's letter to the OCC stating that "we... do not conclude that any would have a significantly adverse effect on competition" was only faxed to the OCC at 8:05 p.m. on November 30, 2000 -- AFTER Citigroup has consummated the deal. And the DOJ's letter states, as to Citigroup - Associates National Bank, that "we concur in authorizing the consummation of the... transactions 15 days after the date of approval."

In a parallel universe, in a Missouri court, Citigroup is arguing that ICP's petition for judicial review, filed December 1, is "moot." Citigroup, in a filing in the Missouri court, accuses ICP of "sleeping on its rights," of having "delay[ed] the filing of [its] appeal... probably intended to cause the maximum disruption of the merger." But Citigroup rushed to "consummate" the transaction, before even the date listed in the OCC's request for (required) comments from the Federal Reserve System -- and before the OCC had received the DOJ's (required) sign-off, which itself provided for a fifteen day waiting period before the deal could be consummated. Contrary to Citigroup's claim ("appellants' own conduct has allowed this set of events to come to pass"), it was the irregularities in the agencies' fast (and coordinated) approvals, and Citigroup's gun-jumping, that have created this situation. Developing...

To ICP, the most intriguing -- and outrageously redacted -- document provided by the Fed is a memo to the Board, dated December 20, 2000, from Fed staffers Alvarez, Threatt, B. Smith and Mann. The memo suggests that the Board rule (how, has been redacted) on ICP's request that Citigroup, now controlling a bank with a less than satisfactory CRA rating, be prohibited "from engaging in additional financial activities." This December 20 memo states that "[a]t the time Citigroup acquired Associates First, the Board determined that the GLB Act and the Board's rules apply the prohibitions to a FHC only if an insured depository institution has recently a less-than-satisfactory CRA rating while it is under the FHC's control. [FN: See the Memorandum to the Board from the Legal Division (Messrs. Alvarez and Fallon and Ms. Threatt), dated November 15, 2000]. The Board's interpretation recognized that a FHC is responsible for the CRA rating of an insured depository institution only if the FHC controlled the institution during the period in which the examination occurred." There follows a two page redaction, and two more pages, withheld in their entirety.

This is a scam: there is no record of the Board's "determination" (which is contrary to the language of the GLB Act) -- there's only a reference to the staff's own November 15, 2000 memorandum. The Fed has changed the law, without even leaving a record of its reasons. The "determination" is made later, to assist Citigroup. Page 3 of this December 20 memorandum is entirely redacted, except footnote 3: "See the Memorandum to the Board from Staff recommending approval of the final [GLB Act] rule, dated December 19, 2000." The last notation? "Deleted pages 4 and 5." We'll be appealing.

Update of January 29, 2001 -- In a letter dated January 23, 2001, the Federal Reserve Board "responds" to ICP's December 20, 2000, Freedom of Information Act request "for all records reflecting Board communications... related to Citigroup Inc and Associates First Capital Corporation or Associates National Bank." The Fed writes (a month after the request) that "we are extending the period for our response until February 6, 2001, in order to consult with another agency or with two or more components of the Board having a substantial interest in the determination of the request." But such extension are NOT supposed to be routine...

Update of January 22, 2001: The Wall Street Journal of Jan. 19 speculates that Citigroup's Sandy Weill, 67, intends to stay on, despite an earlier announcement that a successor would be chosen by early 2002. The Journal's Paul Beckett quotes "[s]ome inside and outside the company... speculat[ing] that in the next two years Mr. Weill may make a legacy-defining play for American Express" - a combination which would form the first U.S.-based financial firm with assets over $1 trillion. When is enough, enough?

Meanwhile, Citigroup claims to have "disengaged" from the U.K.-based animal testing firm Huntingdon Life Sciences Group (HLS). "Please note that all the HLS shares that were held in the name of Vidacos Nominees Limited ("Vidacos") on behalf of clients (not "own account") are no longer held in the name of Vidacos nor any other Citibank company and, therefore, any connection with HLS has ceased," Jennifer Scardino, Citigroup's director of corporate affairs in London, stated. From the speed of Citi's response on this, Citigroup seems to take this issue more seriously than the serious predatory lending issues, raised by over 100 community and consumers groups...

Readers may remember that, just after the FDIC, OCC and New York Banking Department approved Citigroup - Associates on November 30, and Citigroup immediately closed the deal, ICP made requests to the agencies, under the Freedom of Information Act, for all of their communications with each other, and with Citigroup. The timing of the approvals was clearly coordinated, and resulted in precluding meaningful judicial review (although the lawsuit about the Missouri Department of Insurance's approval, after denial of ICP's timely request to depose various Citigroup officials, continues).

Well, ICP has just received the FDIC's FOIA response. The FDIC states that it has identified 476 pages of responsive documents. The FDIC, however, has yet to release these documents. When they do, they will be reported on in this space.

For now, from the mailbag:

Subj: Outstanding articles
Date: 1/18/01 10:25:12 AM Eastern Standard Time
From: [ ]
To: CitiWatch [at] innercitypress.org

I found your site today and I was impressed by all the information you have on Citi and Associates.

I was a Top manager for an Associates Consumer Finance office for 5 years. Everything in your articles is true about the questionable integrity of their lending practices. After 5 years you can no longer look yourself in the mirror and still have a conscience... Thanks again for all you are doing for Mankind.

Update of January 16, 2001: Citigroup, which enjoys much greater access to, and prestige with, government agencies than Associates First Capital did, is now buying its way out, on the cheap, from some of the legal problems it acquired along with the Associates. On January 8, Citigroup settled, for a mere $1.5 million, the pending discrimination case against Associates National Bank. Later in the week, Citi settled a pending class action against The Associates in Georgia.

Update of January 6, 2001: Citigroup has become one of the president-elect's advisory on financial services issues. Citigroup gave $113,000 in contributions to the campaign, and is one of the beneficiaries of the House of Representatives' decision last week to dissolve the Banking Committee into a larger, "Financial Services" Committee, which will cover insurance as well as banking. Ah, Citigroup... From the public record:

Baton Rouge (La.) Advocate, Jan. 3, 2001: Citifinancial Inc. and Citifinancial Consumer Services Inc., et al vs. Cathy Garrett and Clifton E. Olsen Jr..

Spokane (Wa.) Spokesman-Review, December 29, 2000: CitiFinancial Inc. vs. Scott Couturier, money claimed owed.

Knoxville (Tn.) News-Sentinel, December 24, 2000: Citifinancial Inc. to Cathie Cheatham and Dennis Cheatham, in Greywood Crossing subdivision, $ 71,000.

St. Petersburg (Fl.) Times, December 21, 2000: Associates Financial Services Co. Inc. and Ford Consumer Finance Co. Inc. vs. Marjorie A. Baker, Majorie A. Baker, Unknown Spouse of Marjorie A. Baker a/k/a Majorie A. Baker, Global Funding Inc., Tenant 1, Tenant 2, Tenant 3 and Tenant 4 (real property)

Orlando (Fl.) Sentinel, December 21, 2000: Citifinancial Mortgage Co. vs. Ludmils Antonos, mortgage foreclosure.

Update of January 2, 2001: As recounted in last week's report, below, the Federal Reserve Board on Dec. 21 gave Citigroup another favor: twisting the Gramm-Leach-Bliley Act of 1999 so that Associates National Bank's Needs to Improve rating under the Community Reinvestment Act has no effect on Citigroup. Twisting the law is one thing, and secrecy (about twisting the law) is another. Last week, Inner City Press finally received a response from the Fed to its Freedom of Information Act request -- but it's simply a request (unilaterally) for more time: "the Board received your request... for records... reflecting and/or related to any communications between Board personnel and Citigroup... or Associates... related to Citigroup's proposal to acquire Associates First Capital... or any other Citigroup acquisition proposal since September 5, 2000.... we are extending the period for our response until January 5, 200[1], in order to consult with another agency or with two or more components of the Board having a substantial interest in the determination of the request." Yep, hold that information back as long as possible -- probably, until after the Fed publishes its Citigroup-gift GLB Act regulations in the Federal Register...

Now, some global Citigroup news: even in the week between Christmas and New Years, Citigroup was on the move. In India, Citi announced that it's opening two new "banking centers," one in the northern city of Ludhiana, the other in Coimbatore, in south India. These are just prefatory moves: Citi has also told the Reserve Bank of India that it is interested in acquiring a local bank. Current regulations bar outright acquisitions of Indian banks by foreign banks. Citi's thought? If it can violate, and then repeal, the Glass-Steagall Act in the United States, this India law shouldn't present many problems... In Prague on December 28, the newspaper Pravo reported that Citigroup is interested in buying Union Banka AS, the Czech Republic's No. 6 bank, and that Citi's representatives are set to inspect Union Banka's books in January... In news of possible interest to environmentalists (and anyone who has to breathe -- that is, anyone), Australian "natural resources" company BHP Ltd. has appointed Citi's Salomon Smith Barney to advise on its U.S. coal operations, including possible mine acquisitions. BHP's possible targets include U.S. steaming coal mines owned by the Peabody Group, the world's largest coal company, and the No.2 U.S coal company, Arch Coal Inc....

Bloomberg of Dec. 27 contained a lengthy send-up of Robert Rubin, reciting that in May 1999, Rubin urged Congress to repeal the Glass-Steagall Act (and make "legal" the Travelers-Citicorp merger); in mid-1999, Sandy Weill began wooing Rubin to Citigroup, offering a $45 million a year salary, which was finalized in October 1999, just as Congress repealed Glass-Steagall. Bravo! Fed chairman Greenspan apparently responded to Bloomberg's questions about Rubin, in writing; the article also quote Weill, Rubin's old colleagues at Goldman Sachs, and ex-president Jimmy Carter (recounting a fishing trip with Rubin and four others in Argentina in March 2000. Connecting back up to the weekly news items, above, the article reports that "in India [Rubin] met with Central Bank governor Bimal Jalan to discuss Citigroup's desire to buy shares in a state- owned bank and its desire for an easing of restrictions on the number of foreign-owned bank branches there." Well, Citi's gotten two new branches, and is getting closer to repealing the prohibition on bank ownership by foreign companies. Corporate globalization, anyone?

Update of December 26, 2000: In this holiday week, we'll step back from a blow-by-blow of Citigroup's expansionism, to consider a major favor Citi received from the Federal Reserve on December 21. First, however, we must note the micro-shake up in Citigroup's consumer lending hierarchy. Bob Willumstad has taken the place of Robert ("don't-call-me-Bob") Lipp, as head of consumer finance. Citigroup claims that Lipp wants to "focus on his philanthropic interests," which include the New York City Ballet and Williams College. More quietly, Associates First Capital's Ken Hughes has been named head of consumer (read, subprime) finance, in "emerging markets." More in this in reports to come. The New York Post of Dec. 18 detailed how Sandy Weill used Citi "human resources" chief Michael D'Ambrose to "purge" most executives who had been part of John Reed's inner circle -- then Weill fired D'Ambrose. The Post's source concluded: "What does this tell you about Mr. Weill? Who's ever going to trust him?" Good question. One answer, sadly, is... the Federal Reserve:

On December 21, the Fed issued a "final" rule, implementing the (deregulatory) Gramm-Leach-Bliley Act of 1999. Included in the GLB Act, as its one supposedly "pro-Community Reinvestment Act" provision, were two ways in which a less than satisfactory CRA rating could have ramifications on a holding company. Under the scenario relevant here, when a financial holding company (like Citigroup) comes to own a bank with a less than satisfactory CRA rating, it is supposed to lose its GLB powers under 12 U.S.C. Section 1843(k) and (n). As soon as Citigroup acquire Associates First Capital and its bank with a Need to Improve CRA rating, Associates National Bank, ICP wrote to the Fed, formally asking it to implement this provision of law, and prohibit Citigroup from exercising new powers. For three weeks, the Fed did not respond. Then, on December 22, ICP received a letter from the Fed, citing to the revised and final GLB rule, released December 21 in Washington. The Fed's Associate Secretary's letter recited that

"[b]y letter dated November 30, 2000,you petitioned the Board to prohibit Citigroup.. from engaging in additional financial activities after the acquisition by Citigroup of Associates First Capital Corporation... [S]ection 225.84 of Regulation Y sets forth the circumstances under which a FHC that controls an insured depository institution with an unsatisfactory CRA rating will be prohibited from expanding its financial activities under the GLB Act. As reflected in this section, the Board has interpreted the GLB Act to require the Board to prohibit a FHC from expanding its financial activities only when one of the FHC's insured depository institutions has received a poor CRA rating while the institution is under the FHC's control. This interpretation gives full meaning to the words of the GLB Act. It also facilitates an important public purpose of allowing FHCs that have insured subsidiary depository institutions with satisfactory ratings to acquire and enhance the CRA performance of insured depository institutions with unsatisfactory ratings.

Sincerely yours, Robert deV. Frierson, Associate Secretary of the Board"

The Fed's letter has to say that "the Board has interpreted the GLB Act...giv[ing] full meaning to the words of the GLB Act... facilitat[ing] an important public purpose" -- because the Fed's "interpretation" IS NOT WHAT THE GLB ACT SAYS. (Inner City Press' Federal Reserve Reporter this week goes into more detail on this, including quoting the statutory language). The Fed has CHANGED the law, in a way that benefit only one institution: Citigroup, the only FHC to have acquired a bank with a less than satisfactory rating. The Fed's January 2000 interim rule and preamble did not put forward this "interpretation" -- because Citigroup didn't need it then. But who's going to (effectively) protest, now? The Fed's Dec. 21 letter to ICP says that "third parties have no standing" to contest how the Fed enforces the law. How about the Democrats that claimed so much credit for the inclusion of this provision in the GLB Act? Or are they conflicted, since the company the Fed has invented this loophole for is.. Citigroup, major donor? We'll see...For now, ICP's raised this issue to the Federal Reserve Board's Inspector General. Results will be reported in this space. Happy New Year! For or with more information, contact us.

Update of December 18, 2000: Citigroup has swallowed Associates First Capital, and has ramped up its lobbying for the continued legality of (and lack of scrutiny on) its controversial practices. Most recently, Citigroup attempted to lobby the Federal Reserve Board against including single premium credit life insurance in the definition of "points and fees" that brings a loan under the 1994 Home Ownership and Equity Protection Act (HOEPA). The Fed nevertheless included this provision in its regulatory proposal announced on December 13. But the Fed has yet to respond to ICP's request that it "notify" Citigroup that, due to Associates National Bank's Needs to Improve CRA rating, it is precluded from certain future activities and acquisitions, under the Gramm-Leach-Bliley Act of 1999.

Update of December 11, 2000: As previously reported, ICP has submitted Freedom of Information requests to the OCC, FDIC and NYBD, for each agency's communications with Citigroup in the days before the Nov. 30 approvals and instant closing of the deal. Each agency has now acknowledged receipt of the FOI request; the responses will be reported in this space upon receipt. The OCC's notice to commenters of the Nov. 30 approval -- was mailed out on December 5. Entirely precluding judicial review. ICP's lawsuit against the Missouri Department of Insurance's Citi - Associates approval has been docketed in the circuit court for Cole County, Missouri, and assigned docket number 00-CV-325638. Citigroup's attorneys appear to believe that since Citigroup immediately closed the deal (that is, signed the papers) on Nov. 30, the fight is over. Nothing could be further from the truth...See, e.g., Dow Jones Newswire of December 4, 2000. On December 8, ICP took part in mock caroling in front of the Citigroup headquarters on 53rd Street and Lexington Avenue in Manhattan. To the tune of Silent Night, the carolers sang: "Slee-ee-zy loans, Cut to the bone," and so forth. Much fun was had; and, it is said, Citigroup's "chief administrative officer" has begun receiving phone calls from unlikely sources, asking about Citigroup's supposed attention to "reputational risk." "Sleeeazy loans," indeed...

Update of December 4, 2000: In the aftermath of the regulators' November 30 approvals, and Citigroup's November 30 closing of the Citigroup - Associates merger, several concerns have arisen. Many have questioned the timing: on November 29, the General Accounting Office released a report finding the Citibank has been engaged in money laundering, in the cases reviewed by the GAO, as recently as April 2000. The case was referred, on November 29, to the U.S. Department of Justice. Nevertheless, the OCC, FDIC and NYBD approved Citigroup's applications the next day. Also, it seems clear that these agencies gave Citigroup a "heads-up" of when to expect approval, so that Citigroup could close the deal immediately thereafter (there thereby avoid any meaningful judicial review of the OCC's, FDIC's and NYBD's approvals). ICP has just submitted Freedom of Information requests to each agency, for all of their communications with Citigroup during the time frame. The responses and results... will be reported on this Web site.

The OCC's actual approval order, "Corporate Decision #2000-21," goes out of its way to state that the "OCC's role... pertains only to Associates N[ational] B[ank], not [Associates First Capital]." So, after a year of speeches about predatory lending, when faced with an application by the largest bank holding company to acquire the most scandal-plagued subprime lender, the OCC claims that it can't get to the issues that are raised. Of course, the OCC could have: Citigroup's decision to acquire Associates First Capital, given its record, raised (and raises) issues about Citigroup's "competence, experience and integrity," one of the explicit factors under the Change in Bank Control Act. The same applies to the FDIC.

The NYBD's press release announcing its approval at least doesn't have the defensive (and hence, pro-Citigroup) tone of the OCC and FDIC decisions. The NYBD's Director of Consumer Services and Financial Products is quoted: "We are confident the agreement reached will provide increased consumer protections for sub prime borrowers and will help to raise lending standards in the sub prime residential lending market. The Department looks forward to working with Citigroup to resolve any outstanding issues raised and to ensure the proposed pilot programs are swiftly implemented in New York State." The release also states: "Citigroup will work with the Banking Department to resolve issues arising from a 1998 agreement." This, of course, is a reference to the "micro-mortgage" scandal that arose during the proceeding. Citicorp's regulatory counsel, Carl Howard, in a July 22, 1998 letter to the NYBD, had committed that for all of Citicorp's mortgage lenders,

"the percentage of their HMDA-reportable lending in 1998, 1999 and 2000 in the majority minority census tracts in the cities of Buffalo and Rochester, the counties of Erie and Niagara combined and the county of Monroe, respectively, will equal or exceed the percentage of such lending by them in these areas for the first six months of 1998," and that "the percentage of their HMDA-reportable lending in 1998, 1999 and 2000 in the majority minority census tracts in the following areas: 1. Nassau and Suffolk counties combined, 2. Westchester and Rockland counties combined, 3. Queens County, 4. Kings County, 5. Bronx County, 6. New York County and 7. Richmond County, will equal or exceed the adjusted Aggregates' percentage of such lending."

The way Citigroup then tried to comply with this commitment was by making very small "micro-" home improvement loans, mostly below $1,000, and counting each as if it were a real / regular mortgage in a majority minority census tract. By dollar volume of lending, Citigroup still dramatically trails the aggregate. While the NYBD may have erred in not requiring a dollar volume commitment from Citigroup, Citigroup's actions amount to misleading its regulators. An emerging argument: the micro-mortgages made by Citigroup, based on direct mail, may not have been "HMDA-reportable" at all... Developing..

The case seeking judicial review of the Missouri Department of Insurance's approval of Citigroup's application to acquire an Associates insurer, North Field Insurance Company, was received by the circuit court for Cole County, Missouri, on December 1, 2000. These proceedings, too, will be reported in this space. The need for oversight (from below) of Citigroup is greater than ever before.

Update of Friday, December 1, 2000: Late Thursday afternoon, the OCC, FDIC and NYBD all approved Citigroup's applications to acquire Associates First Capital. The NYBD imposed some additional conditions, applicable only in New York State; the OCC and FDIC imposed no conditions at all. The approvals came just as legal papers seeking review of the Missouri Department of Insurance's approval of Citi-Associates were being finalized and filed, by overnight mail (updates to follow). After 5 p.m., Citigroup announced it had closed (or "consummated") the deal. See, e.g., "Citigroup - Associates Gets Regulatory OK's," by Marcy Gordon, Associated Press, November 30, 2000.

This will all be analyzed in more detail in our Update of Monday, December 4. It seems clear that (at least some of) the agencies gave Citigroup a "heads-up" as to when to expect approval, so that Citigroup could move to close the deal without any judicial review. For now, here is a letter ICP has just faxed to the Federal Reserve Board, demanding action on Associates National Bank's "Needs to Improve" rating under the Community Reinvestment Act (which should now prohibit Citigroup from exercising or acquiring powers under the Gramm-Leach-Bliley Act of 1999), and asking the Fed to act on the mounting compliance problems at Citigroup. More on December 4....

Nov. 1 - Dec. 30, 2000

Dear Chairman Greenspan and others at the Federal Reserve:

On behalf of Inner City Press/Community on the Move and its members and affiliates, including the Inner City Public Interest Law Center (collectively, "ICP"), this letter is a formal request for Federal Reserve Board ("FRB") action, under 12 Code of Federal Regulation 225.84(a). Citigroup, Inc. has just reportedly consummated its acquisition of Associates First Capital Corporation and Associates National Bank, an institution which has a "Needs to Improve" rating under the Community Reinvestment Act. Under 12 U.S.C. Sec. 1843(l)(2), Citigroup is now (see infra) prohibited from "[c]ommenc[ing] any additional activity under subsection 4(k) or 4(n) of the Bank Holding Company Act... or [d]irectly or indirectly acquir[ing] control of a company engaged in any activity under subsection 4(k) or 4(n) of the Bank Holding Company Act." 12 CFR 225.84(a)(1)(i) and (ii).

ICP is submitting this formal request in light of the provision of 12 CFR 225.84(a)(2) which states:

(2) Notification. A financial holding company received notice for purposes of this paragraph at the time that the appropriate Federal banking agency for any insured depository institution controlled by the company or the Board provides notice to the institution or company that the institution has received a rating of "need to improve record of meeting community credit needs" or "substantial noncompliance in meeting community credit needs" in the institution's most recent examination under the Community Reinvestment Act.

Emphasis added.

The Board is hereby formally made aware (as it was in ICP's September 25 and October 16, 2000, submission to the Board) that Associates National Bank, which Citigroup has reportedly just acquired, has a Needs to Improve CRA rating. ICP is asking the Board to forthwith "provide[] notice to the institution or company that the institution has received a rating of 'need to improve record of meeting community credit needs,'" under 12 CFR 225.84(a)(2).

Citigroup has announced a number of proposed acquisitions recently; ICP asks for a review of whether they include companies engaging in "any activity under subsection 4(k) or 4(n) of the [BHC] Act." ICP also asks for confirmation that the Board has provided the notification now required under 12 CFR 225.84(a)(2).

As you are undoubtedly aware, the General Accounting Office ("GAO") report issued on November 29, 2000 (GAO-01-120; "Possible Money Laundering Through U.S. Banks") finds that Citibank, until April of this year, handled at least $270 million for "Russian companies" as to which Citibank "did not conduct due diligence...". Id. at 9, also citing GAO/OSI-99-1, "Private Banking: Raul Salinas, Citibank and Alleged Money Laundering"). The Board should act on these recent revelations, as well as the following portion of Mother Jones magazine's December 2000 article, "Tax Cheater's Paradise:"

"Citibank's clients have included the family of Sani Abacha, the former Nigerian general who plundered billions of dollars from his nation's treasury, and dictator Omar Bongo of Gabon, for whom Citibank established a Bahamian shell corporation to stash his looted treasure. Citibank also helped Raul Salinas, brother of former Mexican president Carlos Salinas, by transferring tens of millions of dollars out of Mexico and depositing the money in European banks under the names of untraceable companies registered in the Cayman Islands. Citibank never used Salinas' name in bank communications, referring to him instead as 'Confidential Client 2,' or 'CC-2.'

'CC-1' was the code used to refer to Carlos Hank Rhon, who is currently facing civil charges by the Federal Reserve that he used secret offshore accounts to illegally hide his controlling interest in Laredo National Bank, the third-largest independent bank in Texas. A Mother Jones review of Fed documents reveals that Citibank handled more than $100 million for Hank Rhon, funneling his money through accounts in New York, Mexico, London, Zurich, the Bahamas, and the British Virgin Islands. According to one filing in the case, Citibank not only decided what offshore entities to establish, but designated its own employees as officers, directors, and trustees."

ICP also hereby makes the Board aware of an issue, relevant to the managerial resources of Citigroup, that has arisen: Citigroup's illusory improvements in its lending in communities of color, low- and moderate-income ("LMI") neighborhoods, and to African Americans and Latinos have mispresented Citigroup's record, in The Bronx and other communities in New York State regarding which Citicorp made a formal commitment, to the New York Banking Department (the "NYBD"), in 1998.

When Citicorp and Travelers proposed to merge in 1998, ICP documented Citicorp's disproportionate exclusion of communities of color, including in The Bronx. While the FRB approved Travelers' applications, without conditions on these issues, the NYBD required a commitment from Citigroup, to increase its lending in majority-minority census tracts in New York State.

Citigroup claims to have increased its lending dramatically in majority-minority census tracts, and to have complied with the 1998 commitment. However, a close review of Citigroup's 1999 Home Mortgage Disclosure Act ("HMDA") data shows that the vast majority of these purported improvements consist of loans, under $1,000, reported as home improvement loans.

Citibank, N.A., Citigroup's bank in New York City, reported making 1,931 HMDA-reportable loans in The Bronx in 1999. But fully 1,751 (or over 90%) of these were home improvement loans. These 1,751 home improvement loans in The Bronx were generated off 1,805 applications, for a total dollar volume of $4,064,000 -- an average of $2,252 per loan application, much lower than other lenders' average home improvement loan in The Bronx.

It appears clear that Citigroup initiated this "micro-home improvement loan" program in order to create the misleading impression that it was complying with its 1998 commitment. This becomes apparent, for example, when one considers the racial demographics of Citigroup's marketing (mail solicitations) for these loans. Of race-specific applications for home improvement loans in The Bronx, based on Citibank's marketing, it reported in 1999 410 applications from African Americans, 590 applications from Latinos, and only 66 applications from whites. This is entirely inconsistent with the demographics of The Bronx, and with the marketing and lending patterns in the Bronx of other lenders, including home improvement lenders. This pattern would not have resulted from obtaining credit history information for all of The Bronx's residents and homeowners; this is clearly a program of "micro-loans" directed as majority-minority census tracts, in order to purportedly comply with Citigroup's 1999 commitment, in terms of number of loans, but not dollar volume. The $4 million that Citibank lent in The Bronx under this program in 1998, claiming thereon over 1,000 loans, is dwarfed by Citigroup's (and Citibank's) "real" mortgage lending, in Manhattan below 96th Street, for example (Citigroup's home purchase and refinance lending was analyzed in ICP's September 25, 2000, submission to the FRB, incorporated herein by reference). Even in The Bronx, note that Citicorp Mortgage, with normal-size loans, made, in 1999, 44 loans to whites, and only six to Latinos, and only five to African Americans. Again, it appears clear that Citigroup initiated this "micro-home improvement loan" program in order to create the misleading impression that it was complying with its 1998 commitment -- raising issues about Citigroup that ICP is hereby asking the FRB to inquire into and act on, under the managerial resources standards of the BHC Act and otherwise.

On predatory lending issues, ICP hereby formally raises to the Board the Wall Street Journal's November 22, 2000 report that Citigroup's CEO's son (which directed Citigroup's investment in, and acquisition of, the questionable subprime lender IMC Mortgage) was, during the relevant time frame, on or addicted to cocaine, apparently crack cocaine. See, "Citigroup's Marc Weill Left Firm to Battle Drug Habit," by Charles Gasparino and Joann S. Lublin, Wall St. J., Nov. 22, 2000.

This is particularly relevant in light of the FRB's November 21, 2000, letter to counsel for Chase Manhattan Corporation, including into safeguards in place for investment in, and other business with, subprime lenders. ICP is certainly not without sympathy for what has become known as "substance abuse." However, where apparent nepotism and lack of managerial oversight allow the substance abuser to place the nation's largest financial institution deeper and deeper into predatory lending (for example, through the investment in, and 1999 purchase of, IMC Mortgage), the issue moves beyond the realm of personal sympathy.

Also on subprime lending issues, CitiFinancial (a Citigroup BHC subsidiary under the primary jurisdiction of the Board) on November 7, 2000 announced certain purported reforms of the practices of CitiFinancial. ICP finds these less than meaningful, often misleading, and full of loopholes. In summary, Citigroup currently charges up to nine percent -- nine hundred basis points -- in fees on brokered loans, much higher even than other subprime lenders. Citigroup's "reform"? To reduce it to eight percent.

No explanation is given why "referral up" couldn't be done through CitiFinancial's "Maestro" computer system; the fees remains as high, single premium credit life insurance will continue to be offered. CitiFinancial supplemented these "commitments," in a separate commitment to the NYBD. The FRB, CitiFinancial's primarily regulator, should obtain copies of these commitments, and ensure CitiFinancial's compliance therewith, particularly in light of the weak compliance culture evidence supra...

As to the proposed acquisitions that Citigroup has recently announced, and all Citigroup acquisitions until Associates National Bank receives a Satisfactory or better CRA rating, ICP is hereby formally asking for a review of whether these include companies engaging in "any activity under subsection 4(k) or 4(n) of the [BHC] Act." ICP also asks for confirmation that the Board has provided the notification now required under 12 CFR 225.84(a)(2).

If you have any questions, please immediately telephone the undersigned, at (718) 716-3540.

Respectfully submitted,

Matthew Lee
Executive Director
Inner City Public Interest Law Center
& Inner City Press/Community on the Move

Update of November 27, 2000: Beyond the "micro-mortgage" scandal summarized below in the report of November 22, yet another adverse issue has arisen. The Wall Street Journal of November 22 contained a long article, quoting multiple sources that Marc Weill, whose investment in the controversial subprime lending IMC Mortgage resulted in Citigroup taking ownership of the company -- was on drugs during the relevant time frame. See, "Citigroup's Marc Weill Left Firm to Battle Drug Habit," by Charles Gasparino and Joann S. Lublin, Wall St. J., Nov. 22, 2000.

ICP is certainly not without sympathy for what's become known as "substance abuse," particularly in this holiday season. However, where nepotism and lack of managerial oversight allow the substance abuser to place the nation's largest financial institution deeper and deeper into predatory lending, the issue moves beyond the realm of personal sympathy. The Daily Deal of November 27 quotes a "government official" (at the OCC or FDIC) that a denial of Citigroup's notice might "spur an unjustified run on Citigroup's banks." Now that's what we call spin-control. The American Banker of November 27, 2000, quotes an official of the Office of the Comptroller of the Currency that "the agency is looking only 'at issues involving management, experience, and competence, rather than CRA-type considerations.' The FDIC refused to comment on the deal." "Law Denies CRA Clout to Citi-Associates Foes; Federal Regulators Cannot Consider the Issues," by Rob Blackwell, American Banker, November 27, 2000, Pg. 1, which also quotes ICP's executive director: "What if a bank tries to buy the Medellin drug cartel to sell mutual funds, or to expand its private banking business? The argument that a bank could buy anything because it is just their own integrity and not that of the acquiree that matters -- that's ludicrous." The reference to a drug cartel might have seemed hype -- until the Wall Street Journal's November 22, 2000, above-cited article. ICP has just filed the comment below:

November 24, 2000

Dear Regional Director Stum, Comptroller Hawke, Superintendent McCaul:

On behalf of Inner City Press/Community on the Move and its members and affiliates, including the Inner City Public Interest Law Center (collectively, "ICP"), this is a supplemental comment, specifically on the integrity, competence and other required statutory factors, opposing and requesting hearings on the notices of Citigroup, Inc. (along with its subsidiaries, including the subprime lenders Citifinancial and IMC Mortgage) to acquire control of Associates First Capital Corporation and its subsidiaries ("Associates").

ICP will not here reiterate its grounds for opposing Citigroup's notices to acquire the problematic subprime lender Associates -- ICP's previous comments are incorporated herein by reference. The purpose of this submission is to put into the record, in as timely a fashion as possible, a recent revelation that goes directly to the integrity, competence and other required statutory factors, particularly in connection with Citigroup's recent acquisition of other problematic subprime lenders.

As you know, ICP and others have commented on the record of IMC Mortgage, a subprime lender that Citigroup invested in, and then acquired, and, ICP contends, has not meaningfully improved. It is public record that the individual behind Citigroup's investment in, and subsequent acquisition of, IMC was Citigroup's CEO's son, Marc Weill.

The Wall Street Journal of November 22, 2000 contains a length article quoting multiple sources that, during the relevant time frame, Marc Weill was "on drugs," specifically cocaine, apparently crack cocaine. See, "Citigroup's Marc Weill Left Firm to Battle Drug Habit," by Charles Gasparino and Joann S. Lublin, Wall St. J., Nov. 22, 2000 (the entirety is incorporated herein by reference).

ICP is certainly not without sympathy for what's become known as "substance abuse." However, where apparent nepotism and lack of managerial oversight allow the substance abuser to place the nation's largest financial institution deeper and deeper into predatory lending (for example, through the investment in, and 1999 purchase of, IMC Mortgage), the issue moves beyond the realm of personal sympathy.

ICP is also hereby entering into the record, as a supplement to the material near the end of ICP's September 25 comment directly relevant to the integrity and other required statutory factors, the following, from Mother Jones magazine's December 2000 article, "Tax Cheater's Paradise:" (see above on this page)

The American Banker of November 27, 2000 (an issue "put to bed" on November 22, due to the four-day Thanksgiving holiday) quotes an official of the Office of the Comptroller of the Currency that "the agency is looking only 'at issues involving management, experience, and competence, rather than CRA-type considerations.' The FDIC refused to comment on the deal." "Law Denies CRA Clout to Citi-Associates Foes; Federal Regulators Cannot Consider the Issues," by Rob Blackwell, American Banker, November 27, 2000, Pg. 1.

The matters put into the record by this letter should make it clear that it is not just Associates First Capital Corp.'s, but also Citigroup's, integrity, competence, etc. that is being called into question. This matter, as well as the unaddressed Citigroup "micro-mortgage" scandal and unexplained incorrect answer(s) under oath at the Missouri Department of Insurance's October 18 hearing (see, e.g., ICP's November 22 submission), must be addressed, under the statutory factors, in this proceeding.

The above-quoted American Banker article of November 27, 2000, reports community groups' concerns that, due to provisions of the Gramm-Leach-Bliley Act of 1999, there is no Federal Reserve application, subject to public comment and possible public meeting, in connection with Citigroup's over-all proposal to acquire Associates First Capital Corp. and its subsidiaries. For the record, and to cast light on the type of questions the OCC, FDIC and NYBD should be asking in their proceedings, annexed hereto is a recent Federal Reserve Board additional information request to applicants before it [Chase - Morgan], under the "managerial resources" standard of the Bank Holding Company Act, which is a standard quite similar to the standards the NYBD, and FDIC and OCC must use (under the Change in Bank Control Act, including its broad "integrity" factor). The FRB inquires into not only subprime lending issues (Questions 1, 3 and 4), but also the applicants' reported involvement in the Holocaust (Question 5), slavery in the United States (Question 6), a copper trading scandal (Question 8), etc.. Clearly, the matters raised above (and in ICP's previous comments) need to be inquired into by the agencies, in this proceeding.

On subprime lending issues, Citigroup on November 7 announced certain purported reforms of the practices of CitiFinancial. As previously noted, we find these less than meaningful, often misleading, and full of loopholes. In summary, Citigroup currently charges up to nine percent -- nine hundred basis points -- in fees on brokered loans, much higher even than other subprime lenders. Citigroup's "reform"? To reduce it to eight percent.

Citigroup has submitted a less than useful, rushed response to the question letter that the OCC issued in connection with the extension of its review period. No explanation is given why "referral up" couldn't be done through CitiFinancial's "Maestro" computer system; the fees remains as high, single premium credit life insurance will continue to be offered. Citigroup's commitments -- which it goes out of its way to say are not part of its applications -- are illusory, and only further militate, along with the above, for the federal hearings that the FDIC and OCC should now schedule and hold, even more so in light of the troubling issues raised supra. On the current record, the FDIC, OCC and NYBD should (and, ICP contends, must) deny Citigroup's notices.

If you have any questions, please immediately telephone the undersigned, at (718) 716-3540.

Respectfully submitted,

Matthew Lee
Executive Director
Inner City Public Interest Law Center
& Inner City Press/Community on the Move
Tel: 718-716-3540
Fax: 718-716-3161

If this -- the son of the CEO given vast investment powers, while on drugs, and buying a predatory lender -- does not fall under the "competence, experience, or integrity" factor that the OCC and FDIC (and NYBD) are required to consider, what does? The NYBD has now asked Credit Suisse/DLJ and Chase - Morgan questions about what safeguards they have in place, before doing business with subprime lenders. The questions have not yet to posed to Citigroup -- sadly, the company's substance abuse policy may also have to be raised, including in connection with investments in subprime lenders.

Update of November 22, 2000: Yet another adverse issue has arisen, on Citigroup's applications to acquire Associates First Capital. Many groups have criticized Citigroup's disproportionate exclusion of African Americans and Latinos from its normal interest rate home purchase and refinance loans (ICP's comments are at the bottom of this page). Citigroup responded, on November 7, that its "lending" to African Americans and Latinos increased substantially in 1999. Now it turns out that the majority of the increase is attributable either to Source One (which Citigroup bought in May 1999) -- or to a flurry of small (one and two thousand dollar) "home improvement" loans that Citigroup's banks made in 1999. The Wall Street Journal of November 21 reported that the agencies, particularly the New York Banking Department (to which Citigroup in 1998 committed to improve its lending to people of color) and the FDIC, have become concerned.

It took ICP a few days to finalize it, but below is a letter ICP has submitted to the NYBD, FDIC and OCC, looking at Citigroup's 1999 "micro-mortgages," in The Bronx, and other communities. (The N.C. Fair Housing Center had kindly posted a list of where Citi's made its micro-mortgages). ICP's comment also highlights the inconsistency between CitiFinancial's general counsel's October 18 testimony, on ICP's cross-examination, at the Missouri Department of Insurance hearing, and documents just released by the Federal Reserve, reflecting October 2 and 13, 2000 meetings between Citigroup and the Fed. Developing...

November 22, 2000

Dear FDIC Regional Director Stum, Comptroller Hawke, and Superintendent McCaul:

On behalf of Inner City Press/Community on the Move and its members and affiliates, including the Inner City Public Interest Law Center (collectively, "ICP"), this is a supplemental comment opposing and requesting hearings on the notices of Citigroup, Inc. (along with its subsidiaries, including the subprime lender Citifinancial, "Citi") to acquire control of Associates First Capital Corporation and its subsidiaries ("Associates").

ICP will not here reiterate its grounds for opposing Citigroup's notices to acquire the problematic subprime lender Associates -- ICP's previous comments are incorporated herein by reference. The purpose of this submission is to highlight that Citigroup's illusory improvements in its lending in communities of color, low- and moderate-income ("LMI") neighborhoods, and to African Americans and Latinos have mispresented Citigroup's record, in The Bronx and other communities in New York State.

When Citicorp and Travelers proposed to merge in 1998, ICP documented Citicorp's disproportionate exclusion of communities of color, including in The Bronx. The New York Banking Department (the "NYBD") required a commitment from Citigroup, to increase its lending in majority-minority census tracts in New York State.

Citigroup claims to have increased its lending dramatically in majority-minority census tracts, and to have complied with the 1998 commitment. However, a close review of Citigroup's 1999 Home Mortgage Disclosure Act ("HMDA") data shows that the vast majority of these purported improvements consist of loans, under $1,000, reported as home improvement loans.

But fully 1,751 (or over 90%) of these were home improvement loans. See Exhibit B, annexed hereto.

These 1,751 home improvement loans in The Bronx were generated off 1,805 applications, for a total dollar volume of $4,064,000 (see Exhibit C) -- an average of $2,252 per loan application, much lower than other lenders' average home improvement loan in The Bronx.

It appears clear that Citigroup initiated this "micro-home improvement loan" program in order to create the misleading impression that it was complying with its 1998 commitment. This becomes apparent, for example, when one considers the racial demographics of Citigroup's marketing (mail solicitations) for these loans. Of race-specific applications for home improvement loans in The Bronx, based on Citibank's marketing, it reported in 1999 410 applications from African Americans, 590 applications from Latinos, and only 66 applications from whites. See Exhibit D, annexed hereto. This is entirely inconsistent with the demographics of The Bronx, and with the marketing and lending patterns in the Bronx of other lenders, including home improvement lenders. This pattern would not have resulted from obtaining credit history information for all of The Bronx's residents and homeowners; this is clearly a program of "micro-loans" directed as majority-minority census tracts, in order to purportedly comply with Citigroup's 1999 commitment, in terms of number of loans, but not dollar volume. The $4 million that Citibank lent in The Bronx under this program in 1998, claiming thereon over 1,000 loans, is dwarfed by Citigroup's (and Citibank's) "real" mortgage lending, in Manhattan below 96th Street, for example (Citigroup's home purchase and refinance lending was analyzed in ICP's September 25, 2000, comments, incorporated herein by reference). Even in The Bronx, note that Citicorp Mortgage, with normal-size loans, made, in 1999, 44 loans to whites, and only six to Latinos, and only five to African Americans. See Exhibit E, annexed hereto.

ICP, as a community organization headquartered in The Bronx, which timely commented opposing Citicorp-Travelers in 1998, and Citigroup - Associates in 2000, hereby contends that Citigroup's disingenuous evasion of its 1998 commitment (see supra) injures ICP, other Bronx residents, and other NYS residents (analyses of Buffalo and Rochester are annexed hereto, following Exhibit E), and raises serious questions under the "integrity," managerial resources and other statutory standards that the FDIC, OCC and NYBD must rule on in connection with Citigroup's notices. ICP calls on the FDIC and OCC to forthwith schedule public meetings on Citigroup's notices, and calls on the FDIC, OCC and NYBD to deny Citigroup's notices.

ICP also wishes to update the record on another adverse issue it has raised, most recently in its November 15, 2000 comments. Therein, ICP quoted from the transcript of the October 18, 2000, hearing of the Missouri Department of Insurance ("MDI"), at page 70, specifically:

MR. LEE: One follow-up question, Mr. Wong. To your knowledge, has Citigroup sought a ruling by the Federal Reserve Board on this issue?

MR. WONG: I do not know. I do not have an answer to the question. I do not know the answer to that question.

ICP's comment contrasts CitiFinancial general counsel Martin Wong's response to a Federal Reserve Bank of New York e-mail ICP had received under the Freedom of Information Act ("FOIA"), reflecting a September 5, 2000, telephone meeting between Citigroup regulatory attorney Carl Howard and the Federal Reserve, and stated that the inconsistency (to say the least) raised issues under the integrity, managerial resources and other statutory factors that the FDIC, OCC and NYBD must consider. On November 17, ICP received another FOIA response from the FRB, this time including an e-mail reflecting two further meetings between Citigroup and the FRB, on October 2 and October 13, 2000. See final exhibits annexed hereto. In an October 2, 2000, e-mail, FRB staffer Adrienne Hurt writes to FRB attorney Scott Alvarez and others, "I have been asked to confirm the next meeting with Citigroup." After that, two full lines are redacted. It is clear that a meeting took place, on or about October 2, 2000. Further on in the same e-mail, Ms. Hurt states that "Carl [Howard, of Citigroup] said he plans to discuss how they plan to operate Associates [REDACTION]."

CitiFinancial's general counsel was in Washington, D.C. on October 2, 2000, along with a group of other Citigroup representatives. It strains credulity that Mr. Wong would have been unaware of the October 2 meeting between Citigroup attorneys and the FRB. Mr. Wong is involved, inter alia, in the compliance programs of CitiFinancial, into which Citigroup proposes to merge the already-problematic practices of The Associates. This makes out a significant, legally cognizable adverse issues under the integrity, managerial resources and other statutory factors that the FDIC, OCC and NYBD must rule on, in connection with Citigroup's notices. ICP calls on the FDIC and OCC to forthwith schedule public meetings on Citigroup's notices, and calls on the FDIC, OCC and NYBD to deny Citigroup's notices.

Again, Citigroup on November 7 announced certain purported reforms of the practices of CitiFinancial. We find these less than meaningful, often misleading, and full of loopholes. In summary, Citigroup currently charges up to nine percent -- nine hundred basis points -- in fees on brokered loans, much higher even than other subprime lenders. Citigroup's "reform"? To reduce it to eight percent.

Citigroup intends to continue selling single premium credit life insurance, where this cost is rolled into the loan, and never recouped by the borrower. Citigroup intends to continue imposing pre-payment penalties, so that people it traps into high cost loans cannot get out from under them, by refinancing with another lender. Citigroup intends to continue imposing mandatory arbitration clauses on loans, so that those wronged can't even sue, as a class, or seek punitive damages. Citigroup's November 7 commitment is illusory, and only further militates for the federal hearings that the FDIC and OCC should now schedule and hold, even more so in light of the troubling issues raised supra. On the current record, the FDIC, OCC and NYBD should (and, ICP contends, must) deny Citigroup's notices.

If you have any questions, please immediately telephone the undersigned, at (718) 716-3540.

Respectfully submitted,

Matthew Lee
Executive Director
Inner City Public Interest Law Center
& Inner City Press/Community on the Move
Tel: 718-716-3540
Fax: 718-716-3161

And here's ICP's Freedom of Information Act appeal to the Fed, about its communications with Citigroup:

November 21, 2000

Dear Governor Gramlich or Governor deciding FOIA Appeals:

On behalf of Inner City Press/Community on the Move and its members and affiliates, including the Inner City Community Reinvestment and Federal Reserve Reporters (collectively hereinbelow, "ICP"), this letter is a timely appeal of the Secretary’s November 6, 2000, adverse determinations on ICP’s October 5, 2000, request under the Freedom of Information Act ("FOIA;" 5 U.S.C. � 552).

On October 5, 2000, ICP requested all "records reflecting and/or related to any communications between (1) FRS personnel and (2) Citigroup, Inc. or its affiliates, and/or Associates First Capital or its affiliates, related to Citigroup's proposal... to acquire Associates First Capital and its three insured depository institutions." (This is the summary provided in the Secretary's November 6, 2000, letter).

The Secretary’s November 6, 2000, letter (the "Denial"), stated that responsive documents had been identified, but that certain portions were being redacted under FOIA exemptions 4 and 5, and that "[a]pproximately 81 pages of documents will be withheld from you in their entirety."

ICP received the Denial by regular mail, and immediately telephoned the FRB's FOIA unit, inquiring into when it would receive the documents that were being released. ICP was told that they had been, or were being, sent to it be regular mail. ICP received this documents on November 17, 2000; this appeal is timely.

First, ICP is appealing redactions made to a copy of an e-mail, dated October 4, 2000, from the New York Reserve Bank. Two entire paragraphs are redacted, with a notation in the margin, "Not responsive." This is improper, under FOIA. If a document (here, a piece of paper) is responsive to the request, it can only be redacted based on one of FOIA's enumerated exemptions. An unredacted copy of this responsive document should be provided forthwith to ICP.

ICP is also appealing the other redactions. Inter alia because Associates First Capital is engaged in controversial subprime lending, and owns a bank which has a less than satisfactory Community Reinvestment Act ("CRA") rating, the FRB's discussions with Citigroup about Associates' lending, and the effect of the less than satisfactory CRA rating, under the Gramm-Leach-Bliley Act, are matters of public import, and, in the second case, would not appear to involve the type of "deliberation" that is required to qualify for exemption 5. The effect of the CRA rating is not subject to "deliberation" -- the law is clear. See 12 U.S.C. 1843(l)(2), and 12 CFR 225.84(a).

Adrienne Hurt's October 2, 2000, e-mail to Scott Alvarez and others (subsequently forwarded by Beverly Smith to Pamela Wilson) begins: "I have been asked to confirm the next meeting with Citigroup." After that, two full lines are redacted. It is clear that a meeting took place, on or about October 2, 2000 -- a date named in ICP's October 5, 2000, FOIA request (as to meeting notes, see infra). Further on in the same e-mail, Ms. Hurt states that "Carl [Howard, of Citigroup] said he plans to discuss how they plan to operate Associates [REDACTION]." ICP is contesting both of these redactions, and the "b5" redactions to the FRBNY e-mail of October 4, 2000, two other redactions from which are contested, supra.

It is entirely unclear to ICP what type of information may be included in the approximately 81 pages that are being withheld in their entirety; ICP appeals that withholding as well....

For your information and action (and relevant to this appeal -- the released documents refer to an October 13, 2000, meeting between FRB staff and Citigroup counsel Carl Howard), ICP has asked Citigroup representatives for their position on the legal effect of Associates National Bank's less than satisfactory CRA rating, and whether they have discussed this matter with Federal Reserve personnel. Here is the pertinent portion of the transcript of a formal hearing held October 18, 2000 by the Missouri Department of Insurance ("MDI"), on Citigroup's application to acquire Associates' Northfield Insurance Company. ICP was granted party status (over Citigroup's objections), and had a right to cross-examine (in the portion below, CitiFinancial general counsel Martin Wong):

..MR. LEE: One follow-up question, Mr. Wong. To your knowledge, has Citigroup sought a ruling by the Federal Reserve Board on this issue?

MR. WONG: I do not know. I do not have an answer to the question. I do not know the answer to that question...

In the above-quoted portion of the MDI hearing transcript (which the Board should obtain, from MDI), Mr. Wong claimed that he (and by implication Citigroup) have no knowledge regarding whether the acquisition of a bank with a Needs to Improve CRA rating, as here proposed, would result in a loss of powers -- powers that Citigroup's competitors would not lose.

This raises serious questions about the content of the October [2 and] 13, 2000 (and September 5, 2000) discussions between Citigroup's regulatory counsel Carl Howard, and FRS staff. More troubling is CitiFinancial general counsel Martin Wong's statement that he was and is not aware of Citigroup communications with the FRS on this matter -- in light of the October 2, 2000 (and September 7, 2000) e-mails. The FRB, Citigroup's (and CitiFinancial's) primary supervisor, should act on this.

As previously requested, the FRB should publicly instruct Citigroup on the legal effect of acquiring Associate First Capital and Associates National Bank, with its less than satisfactory CRA rating.

Any and all erroneously withheld information, and the other information and responses specified above, should be sent to [the undersigned].

Very Truly Yours,

Matthew Lee
Executive Director and Editor

Update of November 20, 2000: On November 16, the Office of the Comptroller of the Currency and the FDIC both announced they are extending their review period for Citigroup's notices to acquire Associates First Capital Corp.'s banks, for thirty days. The OCC asked Citigroup four questions, including "[p]lease clarify how Citigroup, through its marketing, its bank and thrift branches, its other office locations, and other procedures, offers prime as well as subprime products to low- and moderate-income and minority communities." The reference, clearly, is to Citigroup's November 7 proposal to finally begin a "referral up" process -- though only on a pilot basis, in four states, and only by "providing information on how they can access prime loans through other parts of the Citigroup organization." Citigroup has yet to explain why its "Maestro" computer underwriting system, which is claims is a major consumer protection safeguard at CitiFinancial, cannot simply be programmed to offer normal interest rate loans to those who qualify for them.

From the OCC letter, one might assume that the OCC is going to demand a more meaningful "referral up" program, among other things. But a number of market watchers (that is, arbitrageurs) who have contacted ICP report that OCC and FDIC staff are emphasizing to them that the agencies "cannot" impose conditions on the deal, and that their review is limited to safety-and-soundness and antitrust. Apparently, the agencies engaged in some preemptive spin control, preparing their arguments to opponents of the deal, that there was very little they could do. It's disingenuous spin-control, though. The agencies are required to consider the (broad) "integrity" factor. The agencies have responded that they can "only" look at Citigroup's integrity. As made clear on ICP's ongoing Citigroup page, and in ICP's September 25 comments to the OCC and FDIC, there are a number of Citigroup-specific issues that must be considered under this "integrity" factor. But what the agencies also try to blur is that Citigroup's proposal to acquire The Associates, the most controversial subprime lender in the United States, itself raises issues that must be addressed under the integrity factor.

It's surprising that these arbitrageurs can so easily reach OCC and FDIC personnel -- when community groups call these agencies, they are told it's inappropriate, or are "referred down" to community relations staffers who are playing no role in the merger review.

A cynic might say that the OCC's and FDIC's extension of their review times is an attempt, like the extension of the comment period from October 4 to October 18, to claim that the agencies did all they could. Certain state regulators are apparently preparing to impose conditions that go beyond those outlined in Citigroup's November 7 letter to the regulators. Reportedly, Citigroup's "domestic consumer finance" application in Georgia will only be approved if Citigroup commits to safeguards beyond those in the November 7 letter (an individual heard this directly from the agency, whose representative misapprehended the call as being from Citigroup itself). What the New York Banking Department will do, or require, is not yet known. The OCC and FDIC will not want to be seen as requiring LESS than state regulators. Which is another thing militating for the OCC and FDIC granting the (now 160-strong) hearing request(s).

Citigroup's submission to state regulators have become more and more vitriolic. In a November 16 letter to the Delaware Department of Insurance, Citigroup's lawyers at Skadden Arps intone that the November 9 testimony of the director of the Delaware Community Reinvestment Action Council "was essentially a collection of sound-bites [sic] taken verbatim from ICP's web site http://www.innercitypress.org/citi.html." Citigroup's submission annexed selected pages from a print-out of this web site, and argues that "[d]isingenuously... the executive director of ICP... chose not to participate" in the Delaware hearing... His failure to do so unmasks Protesters' 'ineffective participation' argument as a cynical ploy to manufacture a procedural claim." What's fascinating here is that where ICP has sought to "participate" -- for example, before the Missouri, Indiana and Wisconsin insurance regulators, and the South Dakota Division of Banks -- Citigroup and Skadden Arps have, in each instance, sought to exclude ICP's participation. One hearing that ICP neither attended, nor sought to attend (beyond the testimony of the director of DCRAC, who is also a member of ICP), Citigroup and Skadden characterize as a "disingenuous" or "cynical" non-appearance. Which is it? And, more to the point, what the heck is wrong with Citigroup?

After the NYBD's November 10 public meeting on the deal, the Wall Street Journal of November 13 reported ICP's testimony that, in the Buffalo, New York Metropolitan Statistical Area in 1999, Citicorp Mortgage, one of Citigroup's normal interest rate lenders, made 61 mortgage refinance loans to whites, and only two to African Americans. Citigroup's insured depository institution, Citibank (New York State), in Buffalo in 1999 made 109 refinance loans to whites, and only four to African Americans. The article then quoted a "spokeswoman for Citigroup" that "all of Citigroup's prime-lending units issued a total of 30 mortgage refinance loans to African Americans in Buffalo that year, compared with 352 for whites borrowers."

ICP verified the HMDA reports of Citicorp Mortgage and Citibank (New York State), and confirmed that together, they made six refinance loans to African Americans in the Buffalo MSA in 1999, and 170 refinance loans to whites in the Buffalo MSA in 1999. Beyond those two entities, Citibank, N.A. reports no applications for refinance loans from African Americans in the Buffalo MSA in 1999 (and one from a white applicant); Citibank F.S.B. reports no refinance data for Buffalo, nor does Citibank of Nevada. On November 13-14, ICP asked a Citigroup representative: what are the other "Citigroup prime-lenders" from which Citigroup's spokeswoman's claim to the Wall Street Journal derive? ICP received the answer on November 14: Source One.

Citigroup acquired Source One in the middle to end of 1999, Citigroup has been telling community groups that it is not responsible for the 1999 (or even 2000) loans of IMC, another company Citigroup acquired in 1999. And, for comparison's sake, Chase Manhattan has responded to an analysis of its "Chase Mortgage Company--West" unit's 1999 lending record by noting that this HMDA reporter was Mellon Mortgage Company, that Chase acquired in 1999 (as Citigroup acquired Source One). Chase says it "subsequently filed Mellon Mortgage Company's HMDA data under the name Chase Mortgage Company--West... Chase does not include Chase--West's HMDA data in its analysis of its own 1999 performance because Chase West's HMDA data reflects mortgage records prior to Chase's purchase." Chase's November 14, 2000, letter to the Federal Reserve Board. One must ask: how could the regulators accept both of these contradictory positions?

The Fed has before it two notices by Citigroup, to acquire Associates' banks in Hong Kong and the United Kingdom. The Fed is also the primary supervisor of Citigroup's subprime lender, CitiFinancial, into which Associates' U.S. operations would be folded. The Fed would also be responsible for enforcing the Gramm-Leach-Bliley Act provision, that if Citigroup acquires Associates National Bank, and its Needs to Improve rating under the Community Reinvestment Act, Citigroup must be prohibited from exercising certain of the new GLB powers.

That said, the Fed has refused to consider any of the comments submitted to it. FRB Associate Secretary Frierson has written that "Regulation K does not provide for a public comment process," and noted that the comments have simply been forwarded along to other regulators, including the South Dakota Division of Banks. On October 19, Mr. Frierson released redacted copies of two New York Fed e-mails, reflecting a meeting between Citigroup's regulatory lawyer Carl Howard and Fed staff (who, afterwards, though it was an acquisition of "Computer Associates," a Long Island technology firm). The rest of the e-mails are blanked out, and Governor Gramlich, in a November 9 letter, upholds the redactions.

In response to a second FOIA request, FRB Associate Secretary Frierson issues a November 6 letter, saying documents are being released. But the letter, and the documents, are regular mailed, and only arrive on November 17. Included are six more e-mails, this time from the Federal Reserve Board in Washington.

On October 2, 2000, FRB staffer Adrienne Hurt writes to the Fed's Scott Alvarez, Beverly Smith and Jim Michaels, that "I have been asked to confirm our next meeting with Citigroup [REDACTION]. An atty from Legal attended as well. Dolores asked me to confirm a second meeting that Citi requested. We are scheduled to meet with Citigroup on October 13 at 10.... I told Carl Howard to contact you directly. Carl said he plans to discuss how they plan to operate Associates [REDACTION]." As reflected below on this page, CitiFinancial's general counsel claimed, on October 18, that Citigroup had not met with the Federal Reserve about the deal...

What was that about "integrity," again?

Update of November 13, 2000: The New York Banking Department held its public meeting on Citigroup's applications to acquire Associates First Capital Corp.'s New York business, on November 10. Representatives of the federal Office of the Comptroller of the Currency and FDIC, both of which are considering Citigroup applications to acquire Associates' credit card banks, attended the public meeting. They heard witness after witness critique Citigroup's purported "reforms" of its and Associates' lending practices, and call on their agencies to hold nationwide hearings. As they returned to Washington at day's end, it was unclear that their agencies would do. Community representatives have begun complaint that since Comptroller John Hawke used to work for Robert Rubin, now in Citigroup's "Office of the Chairman," he should recuse himself from decision-making, and schedule a hearing (at least), to clear the taint.

Citigroup had three witnesses at the NYBD hearing. Chief Administrative Officer Charles O. Prince III (that's how he signed up) emphasized that NO reforms are "required," for Citigroup's applications be to approved. Marge Magner, who previously ran CitiFinancial, and has returned to that post, claimed that CitiFinancial's motto is "do the right thing, all the time, every time." Citigroup's head of "global community relations," Pam Flaherty, said that while many groups have claimed that Citigroup discriminates, it simply isn't true. As the next witness (ICP's representative) began to contest each of these points, Chuck Prince and Ms. Magner left the room. Pam Flaherty and Citigroup's Janet Thompson remained, scribbling furiously as witnesses attacked Citigroup, and smiling broadly during pro-Citigroup testimony (for example, the Brooklyn Public Library said it has received much financial support from Citigroup). Significantly, Citigroup did not get a single group to testify that the purported reforms it announced on November 7 were sufficient. But of course, Citigroup's position (enunciated by its self-described "defender of reputation" Chuck Prince) is that no reforms are "required." Developing...

Update of November 10, 2000: Today, the New York Banking Department is holding a public meeting on Citigroup's applications to acquire a half-dozen subsidiaries of Associates First Capital Corporation.That the NYBD, with jurisdiction only over New York State, would hold a hearing, while the federal Office of the Comptroller of the Currency and FDIC, which have nationwide jurisdiction, have still not scheduled hearings, has raised questions about the seriousness of the OCC's and FDIC's oft-expressed commitment to rooting out predatory subprime lending practices.

On November 9, the NYBD put out a list of 51 individuals and groups who had signed up to testify. First on the list are Citigroup's three witnesses: Chief Administrative Officer Charles O. Prince, EVP Marjorie Magner, and SVP Pamela Flaherty. Then... it's ICP, at 9:29 a.m. (prepared testimony is below). Groups from New York City, Rochester, Long Island, Durham, North Carolina, Chicago, Wilmington, Delaware, New Jersey, and San Francisco are slated to speak. Some witnesses will apparently testify in favor of Citigroup: several community development corporations, two YMCAs. A witness has signed up to speak for the Brooklyn Public Library. A witness has signed up to speak for the Local Initiatives Support Corporation (LISC) -- on whose board of directors Citigroup's Robert Rubin sits. At press time, LISC officials in Washington indicated that LISC will NOT testify. We shall see.

There will also be witnesses and attendees raising issues about others of Citigroup's standardless businesses, sometime around one p.m.... In an earlier version of our Update of November 6, we'd included an advance copy of a "forthcoming op-ed piece." It's now been published, in the American Banker of Nov