Citigroup's Proposal to Buy New York's EAB

Click here for Inner City Press' front page

              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 (which specifically refers to the Citi - EAB proceeding, and examination which followed); 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.

          ...On March 12, 2001, Inner City Press / Community on the Move (ICP) filed a series of 40-page challenges to Citigroup's applications to acquire European American Bank (EAB), with the Federal Reserve System, the Office of the Comptroller of the Currency (OCC), and the New York Banking Department (NYBD).  A portion, combining ICP's Fed and OCC comments, is set forth at the bottom of this page.  See also, "Citibank to Close 24 Branches if Its Acquisition of E.A.B. Is Approved," by Joseph P. Fried, New York Times, May 24, 2001, Pg. B8;  "Report: Citigroup Will Close 24 Branches If Acquisition OK-ed," by Tania Padgett, Newsday, May 22, 2001, Pg. A47;  "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.

    ICP, along with others, has been been troubled by Citigroup's practices; the concerns were magnified when, in the Fall of 2000, Citigroup acquired the scandal-plagued subprime lender, Associates First Capital Corporation. On that acquisition, the regulators claimed they could not consider issues of predatory lender, because the applications were not subject to the Community Reinvestment Act (CRA). Citigroup's applications to acquire EAB are subject to CRA; and, on March 6, 2001, the U.S. Federal Trade Commission sued Citigroup and its subsidiaries, CitiFinancial and Associates, for predatory lending.

    Below are summaries of ICP's comment to the regulators on Citigroup - EAB, in reverse chronological order.  On May 29, 2001, ICP began a Citigroup - Banamex Watch (click here to view). This will be updated; for or with more information, contact us.

Update of July 23, 2001: On July 17, immediately following the "waiting period" provided in the Federal Reserve's July 2 approval order, Citigroup closed on its deal to acquire EAB. Next steps? Branch closings, lay offs, etc.. ICP's inquiry into the CitiFinancial and other issues reported below continues, on ICP's CitiWatch page (click here to view). For or with more information, contact us.

Update of July 16, 2001: On July 12, the New York Banking Board approved Citigroup's application to acquire European American Bank. The NYBB's monthly meetings usually give rise to no news stories at all (one explanation is that the NYBB refuses to provide any agendas for its meetings, so there's no way to know what will be voted on). But in this instance, Newsday's intrepid banking reporter Tania Padgett attended, and reported on questions asked by NYBB member Jeffrey Moerdler (who questioned the wisdom of the NYBD allowing Citigroup to count home improvement loans, at sizes below $10,000, as part of Citigroup's required NYS lending pledge), and quoted NYBB member Santa Albicocco that "we [Nassau County] have had some trouble with Citibank in the past... And if that can happen to us and we are big, what will happen to the little guy?" What indeed? As reported in more detail in this week's ICP CitiWatch Report, Citigroup has sent a team down to South Carolina, in response to the affidavit of ex-CitiFinancial employee Steven Toomey, which ICP filed with the NYBD and Federal Reserve last week. To date, Citigroup has cautiously declined to deny Mr. Toomey's sworn allegations. The NYBD is not so cautious: at the June 12 meeting, NYBD staff blithely claimed to have "investigated" the affidavit of ex-NYS CitiFinancial employee Gail Kubiniec, which the Federal Trade Commission is relying on in its ongoing predatory lending lawsuit against Citigroup: the NYBD claims that it "found no support" for Ms. Kubiniec's sworn statements. What this mean is unclear: is the NYBD claiming that CitiFinancial does not hold "Loan Blitz Nights," to call current customers and seek to flip their loans, with all the attendant fees? ICP has submitted a Freedom of Information Law request, and the results will be provided, on this site.

    In response to ICP's May 23 FOIL request, the NYBD on July 11 (the day before the NYBB meeting) provided ICP with a copy of the Department's June 13 letter to Citigroup. Some pertinent quotes from the NYBD letter:

    As part of the joint Citigroup/Travelers application in 1998, Citigroup pledged to "be fair and transparent in dealing with our customers and their communities, so we earn their trust and support"... [T]he submission of critical data that is buried amongst hundreds of transactions indicates that Citigroup did not fully understand what we deem to be the essence of a relationship with a regulator -- to wit, frank and full communication. It is curious that in every discussion conducted in July 1998, no mention was made of the size of the loans or the use of $500 "live" checks -- not even when we specifically asked Citigroup to explain the increase in upstate lending...Quite honestly, we expected more from Citigroup and we believe that Citigroup knows that the extremely small home improvement loans at issue, whether or not HMDA-reportable, do not fit with the image that it purports to be trying to project... It is our hope that the parties to future discussions between Citigroup and the Department are more sensitive to the need for greater frankness and clarity...

   Ah, Citigroup and its regulators: sometimes harsh language, followed by unanimous approvals. Can consumers and communities rely on these regulators to hold Citigroup accountable? The Report below, and ICP's ongoing CitiWatch Report may provide an answer...

Update of July 9, 2001:  On July 8, another ex-CitiFinancial employee sworn out an affidavit, which ICP has now submitted into the record before the New York Banking Board on Citigroup's applications to acquire European American Bank. The Banking Board is scheduled to meeting on July 12. The text of the affidavit is set forth in this week's ICP CitiWatch Report. We'll see what the NYBD does...

Update of July 2, 2001: Late on the afternoon of July 2, the Federal Reserve Board announced that it had approved Citigroup's long-pending application to acquire European American Bank. At first (and subsequent) blush, it was inappropriate for the Fed to grant approval while, for example, the sworn allegations of systemic predatory lending at CitiFinancial, by long-time CitiFinancial Gail Kubiniec, remain unresolved. Another unresolved systemic issue is raised by the New York Banking Department's finding, on June 22 (and Citigroup's June 25 acknowledgement) that the mortgage lending data Citigroup filed with its regulators on March 1, 2001 is "erroneous." The NYBD has sought to address -- and require Citigroup to correct -- the New York State data. But the Fed is Citigroup's (and CitiFinancial's) nationwide regulator. It was inappropriate to grant approval with this and other issues outstanding. Citigroup still requires NYBD approval, to acquire EAB. The NYBD is slated to consider Citigroup's EAB application on July 12, and ICP will be commenting further to the NYBD before that date.

    After close of business on July 2, the Fed uploaded its 43 page approval order to its Web site. In the ruling, the Fed engages in multiple sleights-of-hand, so that it does not have to apply its prior precedents, and current law, to Citigroup. For example:

    Citigroup owns a bank with a rare Needs to Improve Community Reinvestment Act (CRA) rating. Under the Gramm-Leach-Bliley Act of 1999, this is supposed to preclude Citigroup from expanding into or engaging in certain lines of business. But the Fed cites to a 1990 order in which it approved an application by SunTrust, which had a subsidiary with a Needs to Improve CRA rating. Then, the Fed cites to the regulation it issued in late 2000, which attempted to change the meaning of the GLB Act. Extraordinary favors, from the Fed to Citigroup...

    ICP had cited a Fed precedent from 1993, where the Fed refused to approval a expansion application by Shawmut, while Shawmut was being sued for discriminatory lending by the Department of Justice. In 2001, Citigroup is being sued by the Federal Trade Commission, for predatory lending nationwide. But the Fed dodges its own precedent, noting that Citigroup is being sued for the activities of a company it recently bought. This is not entirely correct: in mid-May 2001, the FTC filed an affidavit by a long-time employee of CitiFinancial, alleging predatory practices at that company (and not Associates). CitiFinancial was controlled by Travelers since before 1995; and has been controlled by Citigroup since 1998. The Fed's order doesn't mention the Kubiniec affidavit, or the allegations against CitiFinancial. Again: extraordinary favors, from the Fed to Citigroup...

    The Fed latches on to two Citigroup announcements, both in the last week (and reported here), on which the public had no opportunity to comment to the Fed. In footnote 22, the Fed mentions Citigroup's June 26 agreement with the NYBD, to address Citigroup's previous evasion of its 1998 lending pledge to the NYBD. In footnote 47, the Fed mentions Citigroup's commitment -- announced June 28, a mere two business days before the Fed's approval -- that CitiFinancial will cease offering single premium credit insurance by the end of 2001. That announcement didn't address the sworn allegations of long-time CitiFinancial employee Gail Kubiniec, though...

   There's one positive development, buried in the Order at page 30: the Fed will conduct a "thorough examination" of CitiFinancial (or, more precisely, of CitiFinancial's operations of, and changes to, The Associates), and, the Fed will require Citigroup to file quarterly updates on subprime lending-related litigation against it, for the next two years. This examination process, however, will be presumptively confidential, and in effect moves these troubling issues out of the applications process, to a behind-closed-doors process that Citigroup can dominate.

    The Order acknowledges mortgage lending disparities at Citigroup (Order at 32), and says that allegations of HMDA and ECOA violations have been referred to HUD (again, the Fed is passing the buck: the Fed is CitiFinancial's primary supervisor). The Fed dismisses environmental and human rights issues as not impacting Citigroup's banks' safety and soundness, and claims that Citigroup has addressed its history of money laundering. Each of these is disputable - and will be disputed, in connection with Citigroup's still-pending Banamex application (the comment period on which extends until at least July 9, 2001).

The Fed's Citi-EAB Order is available, in PDF format, by clicking here.   This will be updated...

Update of July 1-2, 2001: There were two Citigroup announcements last week (reviewed, in "real time," on ICP's CitiWatch Report of June 28). Citigroup claimed that its June 25 lending commitment to the New York Banking Department was "in connection with its application to acquire EAB;" the NYBD said otherwise. The Federal Reserve Board late last week placed Citigroup's application to acquire EAB on its agenda for action on July 2, despite, among other things, the New York Banking Department's June 22 finding that the Home Mortgage Disclosure Act data that Citigroup filed on March 1, 2001, is "erroneous." The Fed has a duty to act on this issue, nationwide -- but apparently the urge to approve another Citigroup's expansion application, regardless of Citigroup's record and recent revelations, was too strong...ICP's July 2 comments to the N.Y. Banking Board, which will apparently vote on Citi - EAB on July 12, are summarized below:

                                                                                                          July 1, 2001
New York State Banking Department and Board
Attn: Superintendent Elizabeth McCaul
Two Rector Street
New York, NY 10006

Dear Sup't Elizabeth McCaul and Board Sec't Christine Tomczak:

    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 in opposition to Citibank, N.A. and its affiliates ("Citigroup") and its proposals to acquire control of European American Bank and its subsidiaries ("EAB") and the New York agency of Grupo Financiero Banamex Accival / Banco Nacional de Mexico ("Banamex").

    On June 26, the Department announced an agreement with Citigroup, regarding inter alia Citigroup's compliance with its 1998 commitment to the Department and Associates' 1999 and 2000 HMDA inaccuracies. On June 28, Department CRA staff faxed ICP a copy of the commitment letter. The undersigned that day telephoned Department CRA staff, inquiring whether information about Associates 1999 and 2000 HMDA inaccuracies had been forwarded to Citigroup's regulators in states beyond New York, whether loans by the subprime unit of CitiMortgage would count toward the renewed lending commitment, etc.. ICP was, and is, also struck that the commitment letter does not address the sworn allegations of ex-NYS CitiFinancial employee Gail Kubiniec, of systemic predatory practices within CitiFinancial, including in New York State. ICP trusts -- and hereby formally requests -- that inquiries are conducted, and that appropriate actions will be taken, before the Banking Board even considers approving Citigroup's applications.

    The reason for the formality of this request is uncertainty concerning how the Department views (or is presenting) Citigroup's June 25 commitment. Newsday of June 29 reported that "a banking department spokesperson said the enforcement action 'was independent of the EAB merger.'" But the N.Y. Daily News of June 27 reported that "Citigroup, now seeking regulatory approval to buy European American Bank, said in a statement: 'In connection with resolving this matter and our application to acquire EAB, we have extended our lending projections and are committed to meet or exceed the lending of our peers in targeted communities'" (emphasis added) -- implying that Citigroup views its June 25 commitment as militating for approval of its EAB applications. But ex-NYS CitiFinancial employee Gail Kubiniec's sworn allegations of systemic predatory lending at CitiFinancial, including in NYS, have not be addressed or acted upon.

   The Department should also note that Citigroup dismissively characterized its June 25 agreement: the Wall Street Journal of June 27 reported that "Citigroup downplayed the announcement, noting that the commitment letter is the 'lowest level of possible enforcement,' the bank said in a prepared statement." (On the other hand, Bloomberg of June 26 quoted the NYBD's spokesperson that "before, we had a good-faith agreement, but this is an enforcement action"). Citigroup appears to believe that it can violate, in spirit (or as ICP contends, in letter) agreements with its regulators, as it violated its 1998 agreement with the NYBD, and then simply re-up the commitment the next time it wants an approval, while being allowed to downplay the significance of the previous violation. This does not bode well for Citigroup's compliance with the other commitments it has made, including its June 28 announcement (which, for the record, does not address the sworn allegations of systemic predatory lending, in products other than insurance, by long-time NYS CitiFinancial employee Gail Kubiniec).

   Beyond Ms. Kubiniec's affidavit, already of record, yet another CitiFinancial employee has contacted ICP in the past week, describing how Citi imposed certain changes in Associates' "rate matrix" in January 2001, then, after production volume decreased, allegedly reverted to Associates' practices in March 2001, including transactions where borrowers' monthly payments are nearly, and sometimes exceed, monthly income...

    ICP urges the NYBD to pose, and require Citigroup to fully respond to, the questions raised by Ms. Kubiniec's affidavit, and the other material that ICP has entered into the record on these applications. These inquiries should be completed before the NYBD and Banking Board even consider approving Citigroup's applications, for EAB or the Banco Nacional de Mexico agency. On July 1, ICP learned that the Federal Reserve Board has placed Citigroup's application to acquire EAB on its agenda for action on July 2. ICP believes this is inappropriate (including given the FRB's failure to act on Citigroup's Associates' HMDA data errors beyond New York State). While the NYBB has a meeting scheduled for July 12, 2001, ICP continues to await the NYBD's response to ICP's outstanding FOIL request(s), and will be submitting further comments. On the current record, these applications could not legitimately be approved.  If you have any questions, please telephone me at (718) 716-3540. Thank you for your attention.

Very Truly Yours,


Matthew Lee, Esq.
Executive Director

Update of June 25, 2001: While the Federal Reserve Board's comment period on Citi - EAB closed on April 2, the Fed has yet to rule -- more and more troubling issues concerning CitiFinancial continue to surface. The New York Banking Department did not vote on Citi - EAB at its June 13 meeting; the next meeting is July 12. ICP submitted a comment to the NYBD on June 23, substantially similar to ICP's comment of that date to the Fed, on Citi - Banamex (click here to view). The comment responds to the white-wash self-investigation Citigroup has conducted in light of ex-CitiFinancial employee Gail Kubiniec's affidavit (see below). Meanwhile, Citigroup has already started sending lay-off notices to EAB employees... Developing. 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. 

Update of June 4, 2001: Last week we reported on a document that had been mailed to us by the New York Banking Department, reflecting "14,980 foreclosures in the pipeline" at Citigroup. We were unable, by last week's deadline, to put that number in context. On May 30, we were informed that Citigroup's chart had been mailed to us by mistake: no request, however, was made for its return (we'd already submitted it to the Fed, the OCC, and elsewhere). And so now, here's some context: according to the National Mortgage News of May 21, in Baltimore in 2000 there were 5,197 foreclosure actions filed (up from 1,900 in 1996). So, Citigroup / Associates equals three Baltimores. Some context...

    Citigroup, moving with a speed that amazes even us, filed a Form S-4 with the Securities and Exchange Commission on June 1, stating that they have already applied to the Federal Reserve Board to acquire Banamex, a deal announced on May 17. Yes, they can be foreclosing on 15,000 families, and meanwhile prepare regulatory applications for a $12.5 billion cross-border deal in two weeks. We've tried to meet the challenge: on June 3-4, we filed comments opposing, and requesting hearings on, the deal, with the Fed, state and international regulators. Click here to view.

    Last week, the American Banker newspaper ran an overview, replete with anonymous quotes from lawyers who appear before the Fed. The article concluded: "Several banking lawyers who requested anonymity said the predatory lending issue has become so hot politically that the Fed may also be trying to insulate itself from criticism that it is not doing enough to fight the problem...'I think they are doing both: covering their backsides politically and making sure there is nothing untoward going on at Citigroup,' one of these lawyers said."

     We'd LIKE to believe that the Fed is concerned that the new chairman of the Senate Banking Committee will haul them in, to account for the Fed's failure to even conduct on-site examinations of questionable subprime lenders held as subsidiaries of financial holding companies. But, as noted last week, the Fed seems unconcerned with displaying (or, alternately, making transparent) what inquiries they make into subprime lending. In the recent Royal Bank of Canada - Centura transaction, the Fed asked a few questions -- but did not even name Centura's subprime affiliates in its final Order. Some have begun to note the windfall to Citigroup, that these (largely unanswered) Associates-related questions are being asked in connection with Citigroup's $1.9 billion acquisition of EAB, and will probably NOT be asked by the Fed in connection with Citigroup's larger, $12.5 billion Banamex proposal... For or with more information, contact us.

Update of May 29, 2001: Citigroup continues to seek to withhold basic information about its operations, including its implementation of the consumer protection commitments it made while seeking regulatory approval to acquire Associates First Capital. The New York Banking Department has informed ICP that it disagrees with Citigroup's requests for confidential treatment, but is affording Citigroup an "opportunity to appeal." In the interim, ICP has submitted the supplemental comment below to the Federal Reserve Board, including in light of the Fed's ex parte communications with Citigroup regarding its more recent proposal, to acquire the second largest bank in Mexico, Banacci (a similar letter has been submitted to the OCC / Treasury Department as well):

                                                                                                            May 28, 2001

Dear Secretary Johnson, Governors:

    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 in opposition to Citigroup, Inc. and its affiliates ("Citigroup") and its applications to acquire control of European American Bank and its subsidiaries ("EAB").

    First, this submission must be presented to the Governors, including in light of recent Board staff representations that the Governors will exercise their discretion regarding whether post-April 2 comments on the Citigroup - EAB proposal. See, most recently, the FRB Applications Section Manager's letter to ICP of May 24, 2001, citing 12 C.F.R. 262.3(e). The putative closing of the FRB's comment period on April 2 has become increasingly inappropriate, including because Citigroup delayed until May 15 to disclose the 24 branches that would be closed if the proposal is approved, and in light of the ex parte communications between Citigroup and the FRB just before May 17, 2001, discussed below.

     On May 17, 2001, Citigroup announced yet another proposed acquisition, this time of Banacci / Banamex, the second-largest banking institution in Mexico. The two senior officials of Citigroup both stated that the FRB and its Chairman already viewed this new proposal as positive. See, e.g., Agence France Presse of May 17, 2001 ("Sanford Weill, chairman and chief executive of New York-based Citigroup... said he discussed the merger with... Federal Reserve Chairman Alan Greenspan. 'They had a very favorable reaction,' Weill said at a news conference in Mexico City"). See also, Newsday of May 18, 2001 ("Robert Rubin, former treasury secretary under the Clinton administration who joined Citigroup as a board member in 1999, said... the combination has been received favorably by the Bush administration and Federal Reserve Chairman Alan Greenspan").

      ICP hereby formally contends, including with regard to the pending Citigroup - EAB proposal, that the referenced communications were inappropriate. Commenters to the FRB in opposition to Citigroup's pending proposal, including ICP, were not informed of or invited to participate in the referenced communications between the FRB and Citigroup; nor have they been provided with a summary of such communications, since they occurred. ICP raised this matter to the FRB in a letter dated and faxed on May 23, 2001, inter alia "explicitly requesting a summary of the kind that the FRS released of its communications with Citicorp and Travelers in 1998, as quickly as possible, in no event with a greater delay than was the case in 1998." Such a summary has yet to be released. As ICP has previously noted, to the FRB and publicly, in connection with the Citicorp - Travelers merger in 1998 (see, e.g., American Banker of May 29, 1998, at 2, "Citi Merger Protester Critical of Fed Counsel's Role"), we believe that it is inappropriate for FRS staff to hold ex parte discussions with corporations which will soon submit applications, subject to public comment, for regulatory approval -- or, as is the case here, with corporations that have pending (and protested) applications before the Board. Even more so than was the case in the Citicorp - Travelers proceeding in 1998 (in which the FRB quickly released a summary of its ex parte communications, and subsequently used this summary as a defense, in litigation in the U.S. District Court for the Southern District of New York), the ex parte communications were inappropriate, and must at a minimum now be disclosed to Protestants, who must be allowed to comment thereon. ICP continues to await the summary of ex parte communications it requested on May 23, 2001.

     In the interim, we are submitting for consideration by the Governors several documents reflecting Citigroup's progress (or lack thereof) in implementing the consumer protection "commitments" it made last Fall, in connection with acquiring Associates First Capital Corporation ("Associates"), and Citigroup's continuing efforts to withhold from the public information material to this proceeding. Specifically, attached hereto are:

--A letter from the New York Banking Department ("NYBD") to ICP, dated May 25, 2001, stating that "[t]he Department does not agree with each of Citigroup's requests for continued confidential treatment of those materials... Although the Department believes that certain portions of the materials for which Citigroup requests continued confidential treatment do not constitute trade secrets protected from disclosure... since Citigroup is entitled to appeal our May 25, 2001 decision with respect thereto, we are unable to provide you with those materials at this time. Following the resolution of Citigroup's claims that the materials at issue constitute trade secrets entitled to confidential treatment under FOIL, the Department shall provide ICP with any additional documents that it may lawfully release."

--A letter from the NYBD to Citigroup's counsel, dated May 25, 2001, repeating in essence the above and adding that "the Department believes that there is substantial public interest in the status of Citigroup's effort to meet the lending initiatives previously made public... you may appeal this decision within seven business days of receipt of this letter."

--A six-page chart, dated May 11, 2001, entitled "CitiFinancial Real Estate Lending Initiatives, Status of Implementation," which reveals the following:

"Referral-Up Program... Remainder of states['] implementation T[o] B[e] D[etermined]...;"

"Graduation Loan Program... Full program implementation date TBD;"

"Sales Practices Compliance Programs... TBD...";

"Broker Sourced Loans: Perform due diligence and background checks... Will be completed 5/30/01";

"Foreclosure Review... 14,980 total foreclosures in pipeline; 3,965 met criteria and have all been reviewed; 331 foreclosures suspended -- pending resolution"; etc..

     It is material to this Citigroup - EAB proceeding, in which Citigroup has made various representations about its implementation of its Associates-related commitments, that the above-referenced changes have not yet been implemented, and do not even have a solid date for implementation (i.e., "TBD"). The volume of pending foreclosures -- "14,980 total foreclosures in pipeline; 3,965 met criteria and have all been reviewed; 331 foreclosures suspended -- pending resolution" -- is extraordinary, and should give pause to the FRB even considering approving additional expansion by Citigroup (i.e., EAB or Banamex). This chart was among the documents that the NYBD did provide to ICP behind its May 25, 2001, cover letter -- its contents make the release of the additional information that the NYBD has determined should be released, but has given Citigroup seven days to appeal, all the more important. The FRB should request and obtain this information (it is responsive to a FOIL request ICP filed December 4, 2000, with the NYBD, and has apparently not been submitted to the FRB by Citigroup); and, ICP anticipated, in light of the above-quoted NYBD determinations, receiving the information shortly, and will comment there on to the FRB.

     The comment period, for all of these reasons, should be extended; ICP reiterates its request for a hearing on Citigroup's proposal, including in light of the new information highlighted above. On the current record, Citigroup's applications could not legitimately be approved.

If you have any questions, please telephone me at (718) 716-3540. Thank you for your attention.

Very Truly Yours,


Matthew Lee, Esq.
Executive Director

Update of May 21, 2001: Late last week, ICP received a copy of Citigroup's list of the 24 branches it would close if it obtains regulatory approvals to acquire EAB. The list, and ICP's just-submitted comment thereon, to the Fed, OCC and NYBD, is summarized below:

                                                                                                          May 21, 2001

Dear Supt. McCaul, Sect. Johnson, Comptr. Hawke, others:

    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 reiterating the pending requests for hearings on the applications of Citigroup, Inc. (along with its subsidiaries, including Citibank, N.A. and the subprime lenders CitiFinancial and Associates) to acquire control of European American Bank and its subsidiaries ("EAB").

    On May 19, 2001, ICP received from the Federal Reserve Board ("FRB") a copy of the list of the 24 branches that Citigroup would close if its proposals to acquire EAB are approved and consummated. It is initially noteworthy that in connection with acquiring EAB and its 92 branches, Citigroup would close 24 branches, fully 25% of number of branches being acquired. The agencies are required to consider the proposal's prospective effect on the convenience and needs of communities: closing 25% of the number of branches acquired is inconsistent with this statutory standard.

    Citigroup's two-page, partially redacted rationalization of the branch closings (hereinbelow, the "Memo") uses a one-mile test for branch closing (and not the three-block or other test that other institutions have used); it is predicated on consumers using automobiles to access other, purportedly nearly branches. As you know, automobile ownership and usage is less common among the low- and moderate-income demographic with which the CRA is most concerned.

    Citigroup's list of prospective branch closures neglects to disclose the distance between each branch and the "nearest branch," the census tract or even zip code of the branches -- information that other applicants have provided, or have been required to provide. It is also unclear to ICP why the Memo discusses only two prospective closures in Manhattan, while the list included two branches identified as "NYC," and one as "Inwood." Perhaps inclusion of census tract or zip code numbers would clarify this. Below ICP has for the record re-ordered the list of branches that would be closed, grouping by borough (in NYC), along the Long Island List:

1010 Morris Park Avenue, Bronx (Citibank)

211 Montague Street, Brooklyn (EAB)

1805 Avenue U, Brooklyn (EAB)

1441 Richmond Ave, Staten Island (EAB)

475 Park Avenue South, NYC (EAB)

120 Broadway, NYC (EAB)

603 Burnside Ave, Inwood (EAB) (Moderate income tract)

85-19 Queens Boulevard, Elmhurst (EAB)

31-21 Thomson Avenue, Long Island City (EAB)

1300 East Forks Road, Bay Shore (Citibank) (mod. income)

247-20 Jericho Turnpike, Bellrose (EAB)

960 Port Washington Blvd. LI (Citibank)

248 East Sunrise Hwy, Freeport (EAB)

3577 Long Beach Road, Oceanside (EAB)

5508 Sunrise Highway, Massapequa (EAB)

161 Centereach Mall, Centereach (EAB)

60 Loehmann Plaza, Lake Grove (EAB)

1108 Route 112, Port Jefferson (EAB)

129 E. Park Ave., Long Beach (EAB)

95 Cuttermill Road, Great Neck (EAB)

204 Old Country Road, Mineola (Citibank)

2401 Jericho Tpk, Garden City (EAB)

600 Old Country Road, Garden City (EAB)

266 Main Street, Farmingdale, (EAB)

    What are the distances between these branches and the "nearest branch"? The agencies would be remiss to not request and consider this information, and to closely consider each of these prospective branch closings.

   Nor has Citigroup explained the inconsistency between its claims, in acquiring Associates, that this acquisition would provide relief and accountability to Associates customers, and the position it has adopted in response to the Federal Trade Commission's March 6, 2001, predatory lending lawsuit, that Citigroup is not responsible for the Associates, and is not even a successor to the Associates.

      Citigroup is still seeking to withhold the names of the subprime lenders for which it provides warehouse lending and underwriting, despite the fact that some of these relationships are "otherwise publicly available," and despite the claims that Citigroup has made about the safeguards it has in place in forming relationships with (and enabling) subprime lenders. The only way for the agencies -- and the public -- to access to substance of Citigroup's purported safeguards is to review the records of the subprime lenders that passed Citigroup's test. To withhold this list of the subprime lenders with which Citigroup does business is illegitimate, and denies commenters (including ICP) their right to meaningfully comment on Citigroup's record and its EAB proposal.

   On May 17, 2001, while this branch closing in-market proposed acquisition was and is still pending, Citigroup announced its intent to acquire Banacci / Banamex, for $12.5 billion... Citigroup's cavalier, damn-the-torpedoes business strategy of serial acquisitions calls into question Citigroup's focus on the various safeguards it has announced, but has yet to implement...

   This Citigroup - EAB proposal, which would result in the closure of 25% of the number of branches being acquired, by a company increasingly engaged in problematic (and FTC-sued) subprime lending, could not legitimately be approved on the current record. The agencies should release to the public and to commenters the information for which Citigroup has inappropriately requested confidential treatment, should hold hearings, and, on the current record, should deny the Citigroup - EAB proposals.  If you have any questions, please telephone me at (718) 716-3540.

Very Truly Yours,


Matthew Lee, Esq.
Executive Director

      For or with more information, contact us.

* * *

Update of May 14, 2001: Citigroup's applications to acquire EAB continue pending at the Federal Reserve, the NYBD and the OCC. ICP last week received documents from the Fed and NYBD, showing the continuing review. On May 9, the Fed asked Citigroup a series of 12 questions, to be answered by May 17, 2001. The Fed's questions essentially ask for updates on Citigroup's claim to have imposed its "compliance programs" on the operations (and 800 offices) it acquired along with The Associates, last Fall. Notably, the Fed has not yet asked Citigroup to explain the position it has taken in federal court in Atlanta: that Citigroup is not responsible for The Associates. Unless the Fed has entirely capitulated to the largest institution it "supervises," we expect another round of Fed questions, including this one.

    The Fed also finally answered one of ICP's Freedom of Information Act (FOIA) requests, and provided, among other things, a copy of a March 6, 2001, e-mail from the Federal Reserve Bank of New York's chief of supervision, William Rutledge, to various FRBNY big-shots, including Bill McDonough. Mr. Rutledge writes: "Carl Howard of Citi just called to tell me that the FTC has filed a civil complaint against Citi -- alleging unfair and deceptive practices in lending (predatory lending) and credit insurance. Carl's understanding is that the complaint focuses exclusively on practices up to the date of Citi's acquisition (11/30/00)...". After that, the Fed redacts an entire paragraph.

   In another Fed e-mail, the Fed opines that various comments on Citi - EAB "were prompted by ICP's web site;" all discussion of whether or not to hold a public meeting on the now-sued Citigroup has been withheld.

   It's from the NY Banking Department's long-delayed May 9 response to ICP's December 4, 2000 FOIA request that the tenor of "relations" between Citigroup and its regulators becomes clear. In a September 14, 2000, e-mail, an NYBD staffer recites that "we had brief teleconference with Stacie McGinn of Skadden Arps and Jeff Wittiker (?) of Citigroup... Stacie was looking for an oral commitment I would be receptive to waiving the submission of fingerprints, personal histories and other data on the directors and the relevant layers of management at Citigroup. She said she had been led to believe that Citigroup could expect a certain degree of flexibility in the application process from the Banking Department." Then, the NYBD begins redacting (blacking-out) the e-mail...

    There were other NYBD discussions with CitiFinancial's general counsel Martin Wong and his assistant, Linda Davies (each heavily redacted); one NYBD staffer reports that Citigroup's other outside counsel, Bill Sweet "was very gracious... He did request that we tell him on the telephone what we wanted to discuss beforehand so that they would be prepared. This is an effort on their behalf not to waste time...". The response to this is entirely blacked-out. Just prior to the NYBD's November 30, 2000, approval, there's an e-mail reporting that "I just spoke to Sweet and Wong. They are making a concession on the single premium (90 day moratorium) and [REDACTION]... this may be as far as we can push." There was an April 19, 2001, meeting between CitiFinancial and the NYBD, from which less than a half-page of notes are provided. As noted above, Citigroup and its various lawyers "expect a certain degree of flexibility" from their regulators...

    ICP will be submitting a further comment, once it receives the list of subprime lenders that Citigroup enables, from the NYBD. The beat goes on...For or with more information, contact us.

Update of May 7, 2001: The Citigroup / EAB (and Citigroup / predatory lending) sagas continue. On May 1, the New York Banking Department finally provided ICP with portions of Citigroup's April 12 responses to the NYBD's March 21 questions. But Citigroup and the NYBD are withholding even the names of the subprime lenders that Citigroup with which does business, including underwriting business. The NYBD's letter to ICP granted until May 4 to submit further comments: below is ICP's comment, which shows why the withholding of information is illegitimate, and why the comment period must be further extended. ICP submitted this, as while as a comment on Citigroup's April 16 response to the FTC's predatory lending lawsuit (Citigroup claims it has no liability for Associates' practices) to the Federal Reserve and OCC as well... 

                                                                                                          May 4, 2001


New York State Banking Department and Board
Attn: Superintendent Elizabeth McCaul
Two Rector Street
New York, NY 10006

RE: TIMELY SUPPLEMENTAL COMMENT  IN OPPOSITION TO CITIGROUP'S APPLICATIONS TO ACQUIRE CONTROL OF EUROPEAN AMERICAN BANK-- "CONFIDENTIAL" EXHIBITS MUST BE PROVIDED, COMMENT PERIOD MUST BE EXTENDED, NO RULING BEFORE JUNE OPEN MEETING

Dear Sup't McCaul, others:

     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 timely supplemental comment opposing Citigroup's applications to acquire control of European American Bank and its subsidiaries ("EAB"). ICP has reviewed the information that the Department sent to ICP on April 30, and, as set forth below, material information has been impermissibly withheld, concerning Citigroup's activities with subprime lenders. The information must be provided (ICP has submitted an appeal under N.Y. Public Officers Law Section 89(4) of the Department's withholdings), the comment period must be extended, and, on the current record, Citigroup applications could not legitimately be approved.

    First, ICP wishes to timely comment on information the Citigroup submitted on April 26, 2001, to the Federal Reserve Board ("FRB") and to the New York Banking Department ("NYBD"). Citigroup's submission included a copy of its April 16, 2001, response to the Federal Trade Commission's (the "FTC's") predatory lending lawsuit against Citigroup and its affiliates. Most troublingly, Citigroup's first argument is that "Citigroup Is Not Liable For the Acts of The Associates" (Section I.A), and that "CitiFinancial Is Not a Successor to The Associates and Is Not Liable for Its Acts" (Section I.B). When Citigroup acquired The Associates last Fall, it argued -- including to the NYBD -- that its acquisition would be beneficial to consumers, including Associates' customers. But now, Citigroup argues that it "is not liable for the acts of The Associates," and even that CitiFinancial, into which The Associates was purportedly merged, "is not a successor to The Associates and is not liable for its acts." This corporate dodge is beyond distasteful: it calls into question representations that Citigroup made to the NYBD last Fall. ICP expects the NYBD to inquire into the position(s) that Citigroup is taking in the FTC's predatory lending lawsuit against Citigroup and its affiliates, including but not limited to how these positions impact New York consumers.

    Also, Citigroup's April 26 Response to the FRB's April 18 questions (a copy of which Citigroup has presumably provided to the NYBD) casts a different light on public reports that CitiFinancial has "suspended" certain brokers who did business with The Associates. This Response, at 17, states that the "reasons" for the suspensions included "failure to bring in regular quality business," and states that "CitiFinancial will consider reinstatement." Citigroup alludes to "no truly bad actors [being] allowed to resume doing business" with Citigroup, but Citigroup has sought confidential treatment for its "Broken Compliance Manual." ICP requests that the NYBD obtain and provide ICP with a copy of this exhibit -- it appears that Citigroup cc-ed the NYBD inexplicably "w/o confidential" -- and that the NYBD inquire with Citigroup as to the specifics of which, if any, brokers in New York State were suspended, the bases for the suspensions, and any subsequent reinstatements. Furthermore, ICP must be provided with the Citigroup - Associates / NYBD documents it requested on December 4, 2000.

   The comment period must be extended. ICP is appealing the withholding of purportedly "Confidential" Exhibits B, C and A to Citigroup's counsel's submission to the Department, dated April 12, 2001 (the "Subm."). Exhibit B is a list of subprime (high interest rate) mortgage lenders with which Citigroup, FCS and SSB have had warehouse lending relationships in the past two years. Subm. at 7 and 9. Exhibit C is a chart of the subprime lenders "for which Citigroup or any of its subsidiaries have underwritten transactions during the past two calendar years." Subm. at 11.

As more fully explained below, the withheld information goes directly to fair lending issues that ICP has raised to the Department, in opposition to Citigroup's applications, in comment letters since March 12, 2001. ICP's comments urged the Department to ask Citigroup the same questions that, after ICP's comments, the Department asked (1) Credit Suisse and Donaldson, Lufkin & Jenrette ("DLJ"), in a letter dated October 19, 2000, and, subsequent to that, (2) Chase and Morgan, in late 2000. It should be noted that Credit Suisse and DLJ, in their responses to the Department's October 19, 2000, question letter, did not seek to withhold the types of information that Citigroup now seeks to withhold in its entirety. In particular, Credit Suisse, in its October 25, 2000, letter to the Department, made public a list of the subprime lenders with which it has had a warehousing relationship in the past two years. That Credit Suisse, one of Citigroup's competitors, has recently released exactly this type of information, is significant to this appeal. It undermines Citigroup's and the Department's claim that Citigroup would suffer competitive harm from the release of the information (Credit Suisse, for example, has not claimed any harm suffered from releasing the information); it undermines any claim that Citigroup does not have similar information about their competitors.

After ICP's March 12, 2001, comment, the Department asked Citigroup a series of questions, in a March 21, 2001, letter. ICP requested a copy of Citigroup's response, under FOIL, and an extension of the comment period, in order to comment on Citigroup's Response. Citigroup responded on April 12, 2001; the Department only ruled on ICP's FOIL request on April 30, 2001, and extending the comment period to May 4, 2001. But key portions of Citigroup's response -- the subprime lenders Citigroup has done warehouse lending to, and underwriting for -- have been withheld.

Citigroup's April 12, 2001, letter did not provide any justification for withholding "Confidential" Exhibits B and C. The Department apparently gave Citigroup another chance; Citigroup's April 25, 2001, letter finally claims that releasing this information would "likely result in substantial competitive injury." But see supra. Citigroup, even given this second chance, does not address the fact that underwriting and warehouse lending relations are routinely made public in SEC and other filings, and that certain of Citigroup's main competitors have released precisely this information.

Dispositively, many of the relationships with subprime lenders for which Citigroup has requested, and the NYBD has granted, confidential treatment are "otherwise publicly available," including in public SEC filings. ICP's March 12 comment documented certain of Citigroup's underwriting and warehousing relationships, stating, for example, that Salomon Smith Barney was the underwriter for the subprime mortgage backed securities issuances Centex Home Equity 1999-4 and 2000-A and Ameriquest Mortgage Securities 2000-1, and that Salomon Brothers Realty Corp. provided warehouse lines of credit to subprime lenders New Century Mortgage Corporation ($775 million), and Long Beach Mortgage -- a subprime lender that was sued by the Department of Justice of race discrimination and pricing disparity grounds. These relationships have been disclosed in SEC filings. See, for the record, e.g.:

CENTEX HOME EQUITY LOAN TRUST 1999 4, FORM-TYPE: PROSP, DOCUMENT-DATE: December 14, 1999, FILING-DATE: February 3, 2000

...Salomon Smith Barney  Inc................ $47,600,000 $14,000,000 $27,300,000 $21,000,000 $13,895,000 $13,755,000 $108,500,000

* * *

AMERIQUEST MORTGAGE SECURITIES INC, FORM-TYPE: PROSP, DOCUMENT-DATE: June 23, 2000, FILING-DATE: June 23, 2000

....Salomon Smith Barney Inc. (the "Underwriter") will offer the Class A Certificates, the Class M-1 Certificates, the Class M-2 Certificates and the Class M-3 Certificates (collectively, the "Offered Certificates") from time to time to the public in negotiated transactions or otherwise at varying prices to be determined at the time of sale. The proceeds to the Depositor from the sale of the Offered Certificates, before deducting expenses, will be approximately 99.625% of the initial principal balance of the Offered Certificates.

* * *

LONG BEACH FINANCIAL CORP  FORM-TYPE: 10-Q  DOCUMENT-DATE: June 30, 1999  FILING-DATE: August 13, 1999

*10.25 Purchase and Sale Agreement between Salomon Brothers Realty Corp. and Long Beach Mortgage Company.

* * *

NEW CENTURY FINANCIAL CORP   FORM-TYPE: 10-K  DOCUMENT-DATE: December 31, 2000   FILING-DATE: April 2, 2001

...SECURITIZATIONS. During the first three quarters of 2000, the Company completed three securitization transactions, two through Salomon Smith Barney, Inc. ...The Company also relies on aggregation financing facilities totaling $900 million with Salomon Brothers Realty Corp. and Morgan Stanley Dean Witter Mortgage Capital Inc. to finance the loans pending their sale or securitization.

In addition, Salomon permits financing of real property owned ("REO") by the Company upon foreclosure on delinquent loans. This facility allows the Company additional flexibility in disposing of those properties for the highest possible price.

* * *

[From Ocwen's most recent SEC Form 10-Q:] ISSUERS:  Salomon Brothers Mortgage Securities VII

    Given all of the above, Citigroup's April 12 and 26, 2001, requests for confidential treatment were without merit, and the NYBD's delay, and subsequent withhold, have prejudiced ICP's right to meaningfully participate in this public proceeding, and to comment on the non-exempt information that Citigroup has submitted. The documents must be released, and the comment period must be extended. This will not prejudice Citigroup, as the Banking Board's next meeting is June 14, 2001 (according to the NYBD's web site on May 3, 2001) -- ICP contends that Citigroup's application could only be legitimately acted on at a full, open and scheduled meeting of the Banking Board, which will not take place for six weeks. Furthermore, ICP must be provided with the Citigroup - Associates / NYBD documents it requested on December 4, 2000.

* * *

    Again, the Department was aware of CSFB's, DLJ's, Morgan's and Chase's release of this type of information -- in the case of Chase and Morgan, these institutions' initial attempt to withhold the information was later reversed, based on an ICP FOIL appeal nearly identical to this one. The Department, by delaying since April 12, and then accepting Citigroup's counter-factual April 25 "justification" for withholding this information, has prejudiced ICP's right to review and comment on this information during the comment period, before the Department and Board rule on Citigroup's applications. ICP is also contesting the withholding of information Citigroup has submitted about which branches it would close, if allowed to acquire EAB. This information goes directly the prospective CRA and public interest effects of Citigroup's application; the information must be released. The improperly withheld information must be released forthwith, the comment period must be extended, and, on the current record, Citigroup's applications could not legitimately be approved.

If you have any questions, please telephone me at (718) 716-3540. Thank you for your attention.

Very Truly Yours,


Matthew Lee, Esq.
Executive Director

Update of April 30, 2001: By letter dated April 20, Citigroup has submitted a curt and evasive response to the issues raised in opposition to its proposed acquisition of European American Bank (EAB). Citigroup, which has claimed it will be a "leader" in improving the subprime lending field, begins by reciting contested issues to which it does not even claim to be responding, including "the CRA rating of Associates National Bank (Delaware), HMDA reporting compliance by Citigroup entities, potential branch closings (discussed in the application), securitization activities of Citigroup affiliates and Citigroup compliance with the money laundering laws."

    With those issues unilaterally off the table, the rhetorical strategy of Citigroup's Response is to claim that most of the other issues were fully considered and addressed in connection with Citigroup's notices to acquire Associates, last Fall. Citigroup conveniently ignores that the Community Reinvestment Act was not considered in connection with those notices, as the OCC and FDIC both explained to the public. The Federal Reserve Board, in fact, claimed that there was no public comment period on the Citigroup's applications to acquire Associates' banks in the U.K. and Hong Kong that it approved last Fall.

      In purporting to rebut the allegations that Citigroup's high interest rate lenders, including the allegedly "fully integrated" Associates units, disproportionately target protected classes, Citigroup's Response presents tables that do not even include Associates lending. The table do, however, prove the degree to which Citibank's claimed lending improvements are based on home improvement loans, many of them for $2,000 or less. One table, on page 9 of the Response, claims 3,623 Citibank loans in "majority-minority" census tracts in the New York City MSA in 2000 -- but the next table, on page 10, shows that only 1,606 of those loans, less than half, were home purchase or refinance loans. More than half, then, were the "micro-mortgages" with which Citigroup tried to simultaneously comply with and evade a commitment it made to the New York Banking Department in 1998, to improve its lending to people of color.

     Citigroup's purported Response does not addressed or mention the New York Attorney General's recent finding that Citibank does not have sufficient branches and ATMs in low- and moderate-income neighborhoods to fulfill its EBT contract, nor the details of Citibank's plan to comply, nor another issued that ICP timely raised: that CitiFinancial, even pre-Associates, kept "Refinance Balance Only" figures for each office, to encourage loan flipping.

     Citigroup's Response claims that Associates issues were addressed "in response to Items 11 and 17 of the Federal Reserve Board Questions." But Citigroup is still seeking to withheld large portions of those responses, and even the Fed has noted that those responses were incomplete. On April 18, the Fed wrote to Citigroup's lawyers, asking among other things:

[In] the April 6 Response, you discussed the policies and procedures at CitiFinancial's consumer finance branches and CitiMortgage's Expanded Lending Channel ('ELC') to refer applicants that potentially qualify for traditional or 'prime' home mortgage or consumer loans to Citigroup's prime lending products and programs ('referral-up program'). Discuss in detail the following -- the criteria that would identify an applicant for a loan at CitiFinancial for referral to CitiMortgage for a prime loan product; the referral-up program at Travelers FSB, including for potential borrowers solicited or referred by the Primerica Financial Services ('PFS') representatives, and at any other subprime lending affiliates, as previously requested; how compliance with the referral-up programs at CitiFinancial, CitiMortgage (ESL) Travelers FSB, and each other subprime lending affiliate is and/or will be monitored, as previously requested; the scheduled timing of CitiFinancial's pilot referral-up program in the four states designated and implementation of the permanent referral-up program in all states; and the incentive compensation that employees, brokers, and other agents of each of Citigroup's subprime lending affiliates (including the PFS representatives) will receive for referring a subprime loan applicant to an affiliate that will offer the applicant a prime loan product...

Explain in detail how each of the consumer finance real estate lending initiatives discussed in... the April 6 Response now apply and/or will apply to the operations of Travelers FSB and the loan customers solicited or referred by the PFS representatives and any other subprime lending affiliates... Explain how each of these initiatives... will apply to... subprime loans that Citigroup affiliates acquire or otherwise obtain from unaffiliated third parties...

Provide a copy of the following documents... the new broker code of professional ethics (or conduct), the special foreclosure unit's polices and procedures, and the defendants' motion to dismiss the lawsuit brought by the Federal Trade Commission ('FTC'). In addition, provide copies of any other court filings of Citigroup of its affiliates in relation to the FTC's lawsuit, as previously requested...

The Application states that the total number of HMDA-reportable loans extended by Citibank, N.A., declined from 1998 to 2000 because of, among other things, a shift in emphasis from home improvement to home purchase lending. Explain the reason for this shift in lending emphasis...

                                                      --emphases added.

    The last question above relates to Citigroup's burst of $1,000 home improvement loans, based upon which Citigroup claimed to have increased its lending in "majority-minority" census tracts. Citigroup's responses were due by April 26, 2001. The Fed has yet to release the improperly withheld portions of Citigroup's April 6 Response.

     The New York Times of April 25, 2001, reported on a memorandum from Robert Willumstad, head of Citigroup's consumer business group, to CitiFinancial employees, claiming that Citi has "stopped doing business with about 20 percent of the loan brokers at its Associates Home Equity Services unit, or about 1,000." The Times reported that "Mr. Willumstad also said CitiFinancial's pilot program in Illinois and Maryland to limit brokers' fees and certain other upfront fees to 3 percent of the loan value appeared to be failing badly. Only one loan closed in either Maryland or Illinois during March, as brokers are clearly taking business to competitors, he said. The pilot project was intended to incorporate specific recommendations from consumer advocates, he said."

     Citigroup's executives' tack is to tell CitiFinancial's (and Associates') employees that the "recommendations from consumer advocates" are failing, and it's time to go back to the old (and oh-so-profitable) way of doing business. This approached was telegraphed in CEO Sandy Weill's interview with the Times on April 16 about Citi's earnings, where, on predatory lending, he said, "Some people you can never make happy," adding, "I personally have a pretty good record of being a socially responsible person." What would that be: paying to renovate Carnegie Hall, so he can stand alone on the stage and evade questions at Citi's shareholders' meeting? (See April 23 Report, below).

      To put the April 25 story in context, consider the Bank One also announced it's stopping doing business with home equity mortgage brokers (Bloomberg, April 27) -- and it was pitched entirely as a business decision, nothing to do with consumer protection: "Bank One Corp., the fifth- largest U.S. bank, has pulled back from doing business with home equity loan brokers because too many of the loans they funnel to the bank have gone bad. Chief Executive Jamie Dimon told investors last week the bank has 'closed down or modified dramatically' its dealings with the brokers... 'You're seeing banks pull back from the brokered loan business because they want to better control the quality of their loans,' said Nancy Bush, an analyst at Ryan, Beck & Co.." Just to put it in context...

     ICP has submitted replies to the agencies, and is pursuing the withheld documents.

* * *

                                                                                                       April 23, 2001
Board of Governors of the Federal Reserve System
Attn: Jennifer J. Johnson, Secretary, & Governors
20th Street and Constitution Avenue, N.W.
Washington, DC 20551

RE: FIFTH COMMENT  BY INNER CITY PRESS / COMMUNITY ON THE MOVE AND THE INNER CITY PUBLIC INTEREST LAW CENTER IN OPPOSITION TO THE APPLICATIONS OF CITIGROUP, INC. AND CITIBANK, N.A. TO ACQUIRE CONTROL OF EUROPEAN AMERICAN BANK

Dear Secretary Johnson, Governors:

    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 fifth comment, in extraordinary circumstances, opposing and requesting hearings on the applications of Citigroup, Inc. (along with its subsidiaries, including Citibank, N.A. and the subprime lenders CitiFinancial and Associates) to acquire control of European American Bank and its subsidiaries ("EAB").

     Late last week, ICP received a copy of an FRB memo reciting an ex parte discussion between FRB staff and counsel to Citigroup. The memo, dated April 16, 2001, states inter alia that

staff... contacted Stacie McGinn, counsel representing Citigroup, and requested Citigroup clarify some of its responses, dated April 6, 2001, to Board staff's request for additional information, dated March 21, 2001 ('AI Request')... Board staff requested the following information...

"Clarify the existing relationship between CitiFinancial and Associates First Capital Corporation and its affiliates ('Associates')... include[ing] a discussion of (i) the corporate and managerial relationship between CitiFinancial [sic], (ii) any consolidation of Associates into CitiFinancial for accounting purposes, and (iii) any planned or anticipated changes in these relationships...

"Provide additional information regarding possible branch closures or consolidations to supplement Confidential Exhibit J to the April 6 Response."

     Citigroup is still trying to withhold -- and the FRB is still withholding -- even Citigroup's presentation of 1998 and 1999 lending data; the FRB has yet to respond to ICP's Freedom of Information Act ("FOIA") request for the (improperly) withheld portions of the April 6 Response. ICP anticipates that Citigroup will try to withhold its answer to the FRB's above-quoted questions about the current relationship(s) between CitiFinancial and Associates. But note that the Louisville Courier-Journal of April 19, 2001, quotes Citigroup spokeswoman Leah Johnson that "Associates has been absorbed into CitiFinancial" and that "all former Associates branches operate to CitiFinancial standards." So there would be no basis for seeking to withhold the response: Citigroup cannot be allow to make public representations about its relationship with Associates, and then withhold its formal representations to the FRB.

     Also, ICP has yet to receive a copy of Citigroup's response to the FTC's predatory lending lawsuit, which Citigroup's previous response stated would be filed on or before April 16, 2001. Such a response must be made public, and should be provided to ICP and to the other commenters.

      In the interim, ICP has received a communication regarding practices at CitiFinancial, in which it is alleged that

a former citifinancial branch manager... was fired for failing to engage in predatory lending practices. Prior to being fired, he was told that is RBO (Refinance Balance Only) volume had decreased from the previous year. He was encouraged to increase the RBO's. An RBO is what is sometimes called "flipping." The company actually keeps records of the number of RBO's at each office. He knows of one case where a personal loan made in August was flipped twice in three months...

--Emphasis added.

     While ICP is conducting an inquiry into the above-quoted communication, the FRS should inquire with Citigroup whether, inter alia, CitiFinancial "keeps records of the number of RBO's at each office," into the referenced "August" (that is, pre-Associates) doubled-flipped loan, and any loans like it.

     Citigroup has still not filed any response to ICP's 40-page March 12, 2001, comment and hearing request. Forty days have passed; the hide-the-ball approach of Citigroup, which had the resources to acquire Associates last Fall, to announce a $1.6 billion deal for EAB, on February 12, and to submit applications for regulatory approval less than a month thereafter, is striking. Citigroup's silence is particularly inappropriate in light of the FTC's March 6, 2001, predatory lending lawsuit against Citigroup.

     On April 17, 2001, an ICP representative posed three questions to Citigroup's CEO. One involved the settlement Citigroup reached earlier this month with the NYS Attorney General, regarding Citigroup's lack of automatic teller machines in low-income sections of New York, where Citigroup has the contract to distribute public assistance and other government benefits. The ICP representative asked Citigroup's CEO whether Citigroup now intends to install new ATMs in these low-income neighborhoods, or simply contract with other institutions to waive their fees. Citigroup's CEO's response was not clear to ICP; for the record, Thomson Financial's publication "CardLine," of April 13, 2001, reported that

Attorney General Eliot L. Spitzer found that Citigroup had few ATMs in neighborhoods with high concentrations of beneficiaries, according to a Wednesday announcement by Spitzer. The agreement gives Citigroup the option of deploying new ATMs that impose no surcharges on EBT cardholders or contract with local ATM deployers to provide surcharge-free ATM access.

   The FRB should inquire into this.

     The ICP representative asked Citigroup's CEO why, despite his claim that Citigroup is a "leader" in consumer protection, Citigroup has expended significant funds lobbying against anti-predatory lending legislation, most recently in Philadelphia and Chicago. No response was proffered.

    The ICP representative asked Citigroup's CEO why, if Citigroup claims to be a leader, it is seeking to withhold even the list of subprime lenders with which it and SSB do business, in this proceeding. Citigroup's CEO indicated that he was unaware of his company's requests for confidential treatment for this information. The FRB should inquire into this, and should act on ICP's pending FOIA requests for the improperly withheld information.

    The FRB should hold a public hearing, the comment period should be extended, and, on the current record, Citigroup's applications could not legitimately be approved.

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

Respectfully submitted,


Matthew Lee, Esq.
Executive Director

cc:   Office of the Comptroller of the Currency,   New York State Banking Department

Update of April 16, 2001: Last week, ICP finally received a copy of Citigroup's response to the Federal Reserve's March 21 questions about Citigroup's involvements in subprime lending. But Citigroup has sought "confidential treatment" for the most material portions of its response. ICP has submitted a Freedom of Information Act request / appeal, summarized below. ICP continues to await Citigroup's response to the New York Banking Department's questions to Citigroup; see our broader Citigroup Watch Report for an account of demonstrations against Citigroup last week.

                                                                                                       April 11, 2001
Board of Governors of the Federal Reserve System
Attn: Jennifer J. Johnson, Secretary & FOIA Officer
20th Street and Constitution Avenue, N.W.
Washington, DC 20551

Re: Formal Request, under FOIA and otherwise, for all withheld portions of Citigroup's response to the FRB's questions of March 21, 2001, in connection with Citigroup's applications to acquire EAB, and for all post-April 1, 2001 related documents

Dear Secretary Johnson and others in the FRS:

     On behalf of Inner City Press/Community on the Move and its members and affiliates, including the Inner City Public Interest Law Center, and in my personal capacity (collectively hereinbelow, "ICP"), this is a formal request, including under the Freedom of Information Act ("FOIA") for (1) all portions the response of Citigroup, Inc. to the Federal Reserve System's ("FRS'") questions dated March 21, 2001 for which Citigroup has requested confidential treatment, and (2) for all post-April 1, 2001, records in the possession of the FRS relating to Citigroup's applications to acquire EAB, or Citigroup's or its affiliates' consumer compliance.

      ICP submitted a similar FOIA request on April 2, 2001, to which the FRS has yet to respond. ICP had anticipated that Citigroup would have responded to the FRS' March 21 questions, by April 2. However, in a memo dated April 5, FRS staff attorney Andrew Miller writes that on March 30, Citigroup's counsel "requested that Board staff permit Citigroup to respond to the additional information request one week after the April 2, 2001 date for responding... staff... granted the request."

       On April 10, ICP received from Citigroup a portion of its response, dated April 6, 2001 (the "Resp."). This Response alludes to a number of exhibits that have been withheld from ICP. ICP is hereby requesting all of these withheld exhibits.

     For example, Citigroup's Resp. at 3, responding to an FRS question about lending data for 1999 and 2000, states "See Confidential Exhibit I...". ICP contests this withholding: 1999 mortgage data are public, and 2000 data have already been filed with the FFIEC, and Citigroup's application makes various claims about the 2000 data. This Exhibit, and the other withheld Exhibits, should be released.

     Similarly, Citigroup's response to FRS Question 11(a), regarding subprime lending volumes in 1998, 1999, 2000 and 2001, states that "information regarding annual volumes is included at Confidential Exhibit K." Resp. at 11. But 1998 and 1999 mortgage data are public, and 2000 data have already been filed with the FFIEC, and Citigroup's application makes various claims about the 2000 data. This Exhibit, and the other withheld Exhibits, should be released.

      "Confidential" Exhibit L appears to be Citigroup's "Fair Lending Policy." Resp. at 16. This too should be released. For example, in the recent U.S. Bancorp - Firstar proceeding, ICP was provided with the Fair Lending Policy of New Century Mortgage, in which U.S. Bancorp held at stake of approximately 25%. In that proceeding, ICP was provided with New Century's training materials, which Citigroup is seeking to withhold at "Confidential" Exhibits M and O, Resp. at 16-17. ICP has also, following a FOIA request, been provided with Countrywide Home Loan's and Full Spectrum's Fair Lending Policy. This undermines the Resp.'s arguments for confidential treatment: both that release would cause competitive harm, and would "impair the Board's ability to obtain necessary information."

    Similarly, Citigroup's Resp. at 21 refers to an unlettered "Confidential Volume," which apparently includes the names of subprime lenders with which SSB entered into warehousing relationships; "Confidential" Exhibit P apparently includes similar information for FCS. ICP has been provided with this type of information with regards to Credit Suisse, DLJ, and, partially, J.P. Morgan Chase & Co.. One reason that this information has been released in the past is that much of its is otherwise publicly available: subprime lenders who file with the SEC routinely disclose their warehousing relationships, as material contracts. The Confidential Volume should be released.

     Exhibit J contain information of a type that has been released in other FRS proceedings (for example, in connection with Union Planter's to acquire Leader Federal in Memphis). This Exhibit should be released.

     Most outrageously, Citigroup, as "Confidential" Exhibit R, is seeking to withhold the names of actions, including pending actions, filed against its subprime lending subsidiaries. This was a clearly meritless request for confidential treatment: the existence of litigation is public ("otherwise publicly available"), as are virtually all case files. This Exhibit must be released.

     Citigroup's Response indicated that addition information (responses) will be submitted; in context, ICP's request(s) cover those submissions as well. The referenced April 16, 2001 motion to dismiss the Federal Trade Commission's predatory lending case against Citigroup should be made part of the record, and provided to ICP and others.

      Much of the Response is, in fact, non-responsive: see, as only one example, n.3, claiming that an Associates program will mortgages "typically... originated... as subprime mortgages" is somehow not responsive to Question 11. The FRS should require full and candid responses to its March 21 questions. ICP will be submitting further comment, and notes that the comment period should formally be extended, in light of Citigroup's delay in responding to the March 21 questions, its failure to respond to ICP's March 12 and others' comments, its erroneous requests for confidential treatment, etc..

      The erroneously withheld Exhibits, and the other responsive documents, should be provided and identified, as quickly as possible; the comment period must be extended.

Very Truly Yours,


Matthew Lee, Esq.
Executive Director

Update of April 9, 2001: Citigroup has yet to respond to the Federal Reserve's and New York Banking Department's March 21 questions about Citigroup's subprime lending activities. In the interim, ICP filed a supplemental comment with the NYBD, noting, among other things, that "the Department has still not responded to ICP's December 4, 2000, Freedom of Information Law request regarding the Department's review of Citigroup's applications to acquire The Associates. In the April 2001 edition of U.S. Banker, it is reported that

[i]n a compromise decision, New York approved the merger but required that Citigroup cease selling single premium credit life insurance for 90 days... Under the deal, half Citi's offices in New York will be allowed to sell only on a monthly premium basis, with the other half offering either a single or a monthly premium approach. Some critics question if Citi's pilot program will be a fair test of whether its customers would prefer single-premium to monthly premium plans. Will Citi really explain the differences fully to them?

     The Department's public statements when it approved Citigroup - Associates, and since, have not made clear the specifics of the consumer protections the Department required, as a condition of approval... An interim supplemental (and substantive) comment, beyond the analysis ICP has submitted since March 12, 2001: ICP has received a communication regarding practices at CitiFinancial, in which it is alleged that

a former CitiFinancial branch manager... was fired for failing to engage in predatory lending practices. Prior to being fired, he was told that is RBO (Refinance Balance Only) volume had decreased from the previous year. He was encouraged to increase the RBO's. An RBO is what is sometimes called "flipping." The company actually keeps records of the number of RBO's at each office. He knows of one case where a personal loan made in August was flipped twice in three months...

    While ICP is conducting an inquiry into the above-quoted communication, the NYBD should inquire with Citigroup whether, inter alia, CitiFinancial "keeps records of the number of RBO's at each office," into the referenced "August" (that is, pre-Associates) doubled-flipped loan, and any loans like it. Citigroup has still not filed any response to ICP's 40-page March 12, 2001, comment and hearing request. Three-and-a-half weeks have passed. To ICP's knowledge, Citigroup has still not responded to the NYBD's (and FRB's) March 21 questions. The hide-the-ball approach of Citigroup, which had the resources to acquire Associates last Fall, to announce a $1.6 billion deal for EAB, on February 12, and to submit applications for regulatory approval less than a month thereafter, is striking, and, particularly in this context, the comment period extension should be granted

                                                                                                           April 2, 2001

Federal Reserve Bank of New York
Attn: Ms. Betsy Buttrill White, Senior Vice President
33 Liberty Street
New York, NY 10045-0001

RE: FOURTH TIMELY COMMENT AND HEARING REQUEST BY INNER CITY PRESS / COMMUNITY ON THE MOVE AND THE INNER CITY PUBLIC INTEREST LAW CENTER IN OPPOSITION TO THE APPLICATIONS OF CITIGROUP, INC. AND CITIBANK, N.A. TO ACQUIRE CONTROL OF EUROPEAN AMERICAN BANK

Dear Ms. Buttrill White, others:

    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 fourth timely comment opposing and requesting hearings on the applications of Citigroup, Inc. (along with its subsidiaries, including Citibank, N.A. and the subprime lenders CitiFinancial and Associates) to acquire control of European American Bank and its subsidiaries ("EAB").

    Citigroup has still not filed any response to ICP's 40-page March 12, 2001, comment and hearing request (hereinbelow, the "Initial Comment"). Three weeks have passed; the hide-the-ball approach of Citigroup, which had the resources to acquire Associates last Fall, to announce a $1.6 billion deal for EAB, on February 12, and to submit applications for regulatory approval less than a month thereafter, is striking. On March 21, the Federal Reserve asked Citigroup a series of questions, but did not set any deadline for Citigroup's response. Since ICP desires a copy of this response as quickly as possible, ICP has today submitted a request to the FRS, including under the Freedom of Information Act ("FOIA"), for any and all post-March 3, 2001, records in the possession of the FRS relating to Citigroup's applications to acquire EAB, or Citigroup's or its affiliates' consumer compliance, including but not limited to a complete copy of Citigroup's response to the FRS's March 21, 2001, questions. It is now 12 days after that FRS request. Generally, the FRS gives applicants 8 business days, at most, to respond to questions. Since the FRS question letter did not specify a date for response, ICP (and the public) have no way to know when Citigroup has responded or will respond. ICP's FOIA request today should not be considered premature; Citigroup's response should be provided to ICP as quickly as possible after the FRS receives it, and the comment period should be extended.

   In its Initial Comment, ICP analyzed those portions of Citigroup's 2000 Loan Application Register ("LAR") that Citigroup provided to ICP on March 10, 2000. In its March 19 comments, ICP analyzed CitiFinancial's and Associates' 2000 lending in the South Bronx and Upper Manhattan. In its March 26 comments, ICP analyzed Citibank's, CitiFinancial's and Associates' 2000 lending in Bushwick, Brooklyn. And in this submission, ICP analyzes Citibank's, CitiFinancial's and Associates' 2000 lending in another low-income Brooklyn neighborhood: East New York.

    ICP's review of the 2000 lending of "Citibank Affiliates" (as Citi has provided it to ICP, apparently Citibank, N.A. and CitiMortgage, cumulated) in East New York finds that, as in the South Bronx and Bushwick, a high percentage of Citibank's 2000 loans are $1,000 micro-home improvement loans (which ICP alleges were intended to evade Citi's 1998 lending commitment, see Initial Comment). Consider, for example, East New York Census Tract ("CT") 1162, where, in 2000, Citibank Affiliates report ten applications. Four of these were applications for $1,000 home improvement loans; all four were originated. NONE of the six other applications from this CT resulted in an originated loan. An African American applicant, with an income of $50,000, was denied a $129,000 refinance loan. Two other applications are reported as "withdrawn;" another as "incomplete."

    Similarly, East New York CT 1058, Citibank reports processing 29 applications in 2000. TWENTY FIVE of these were for $1,000 home improvement loans. NONE of the four other applications resulted in an originated loan. There were two denials (including a "race not reported" applicant, with an income of $32,000, denied for a $20,000 home improvement loan), one "withdrawn" and one "incomplete."

   In these two East New York census tracts, as in much of low-income New York, the only type of mortgage loan Citibank was willing to make in 2000 was a $1,000 home improvement loan. All other types of applications were denied, often on alleged "debt-to-income" grounds.

    Notably, Citigroup's higher interest rate lender, CitiFinancial, was willing, in East New York Census Tract 1078, to make a $43,000 refinance loan to a borrow with reported income of $26,000 (compare to Citibank's "debt-to-income" denial in CT 1058, above). In fact, the subprime lender CitiFinancial reported only one denial in all of East New York in 2000, in a case where it reported the applicant's income as only $6,000 a year (CT 1124). Associates reported 32 LAR items in East New York in 2000: the majority reported as "race not reported." These include supposed "home purchase" loan applications of $4,000 (CT 1118), $3,000 (CT 1146), $5,000 (CT 1174) and $4,000 (CT 1188). As previously noted, Associates HMDA data is simply not credible, and should be closely inquired into by the agencies.

   On March 25, 2001, ICP received from the FRB by telecopier more than 60 pages of the FRB Application for which Citigroup had inappropriately requested confidential treatment. (Additionally, an e-mail was provided reflecting pre-application communications by Citigroup to the FRB; ICP should be provided with all records reflecting Citigroup's communications with the agencies regarding the FTC's March 6, 2001, predatory lending lawsuit against Citigroup). The FRB's March 23, 2001 cover letter states that 70 further pages are being withheld in full. ICP has today appealed these withholdings.

   As noted above, ICP continues to await a copy of Citigroup's responses to the FRB's questions of March 21, 2001. Please also note that the New York Banking Department, on March 21, also directed questions to Citigroup, including about its affiliates' underwriting of subprime loans (which the FRB did not ask Citigroup about, though issues in this regard were raised in ICP's Initial Comment. ICP desires to comment to the FRB on Citigroup's response to the NYBD, as well as the FRB, questions). On March 29, a FRB Legal Division staffer left ICP a message that its request for an extension of the comment period had been denied, on a delegated basis. ICP renews its request for an extension, in light of the unanswered HMDA incongruities identified above and in ICP's previous comments, in light of Citigroup's failure, in the three weeks since ICP's initial comment, to submit any response, and in light of Citigroup's failure to response to the FRB's March 21 questions (or, at least, to provide any copy of such response to ICP) during the comment period. Citigroup's silence is particularly inappropriate in light of the FTC's March 6, 2001, predatory lending lawsuit against Citigroup. The FRB should hold a public hearing, the comment period should be extended, and, on the current record, Citigroup's applications could not legitimately be approved.

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

Respectfully submitted,


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

cc:   Board of Governors of the Federal Reserve System, Office of the Comptroller of the Currency,   New York State Banking Department

                                                                                                            March 26, 2001

Federal Reserve Bank of New York
Attn: Ms. Betsy Buttrill White, Senior Vice President
33 Liberty Street
New York, NY 10045-0001

Office of the Comptroller of the Currency
Attn: Mr. Richard Erb, Licensing Manager
250 E Street, SW
Washington, DC 20219

RE: THIRD TIMELY COMMENT AND HEARING REQUEST BY INNER CITY PRESS / COMMUNITY ON THE MOVE AND THE INNER CITY PUBLIC INTEREST LAW CENTER IN OPPOSITION TO THE APPLICATIONS OF CITIGROUP, INC. AND CITIBANK, N.A. TO ACQUIRE CONTROL OF EUROPEAN AMERICAN BANK

Dear Ms. Buttrill White, Mr. Erb, others:

   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 third timely comment opposing and requesting hearings on the applications of Citigroup, Inc. (along with its subsidiaries, including Citibank, N.A. and the subprime lenders CitiFinancial and Associates) to acquire control of European American Bank and its subsidiaries ("EAB").

    Citigroup has still not filed any response to ICP's 40-page March 12, 2001, comment and hearing request (hereinbelow, the "Initial Comment"). Two weeks have passed; the hide-the-ball approach of Citigroup, which had the resources to acquire Associates last Fall, to announce a $1.6 billion deal for EAB, on February 12, and to submit applications for regulatory approval less than a month thereafter, is striking. On March 21, the Federal Reserve asked Citigroup a series of questions (which were cc-ed to the OCC and NYBD), but did not set any deadline for Citigroup's response. The comment periods should be extended.

    In its Initial Comment, ICP analyzed those portions of Citigroup's 2000 Loan Application Register ("LAR") that Citigroup provided to ICP on March 10, 2000. In its March 19 comments, ICP analyzed CitiFinancial's and Associates' 2000 lending in the South Bronx and Upper Manhattan. With this submission, ICP submits a detailed analysis of Citibank's, CitiFinancial's and Associates' 2000 lending in a particular low-income neighborhood in Brooklyn: Bushwick.

    But first, ICP wishes to enter into the record on Citigroup's EAB applications the following two complaints about Citigroup / Associates, which are among those that ICP has received this week by e-mail. The first regards collection practices -- not only by Associates, but also by CitiFinancial:

Subj: Help . . .Complaint re Citigroup
Date: 3/19/01 6:15:29 PM Eastern Standard Time
From: [Redacted to protect complainant's privacy]
To: CitiWatch [at] innercitypress.org

I hope I am directing this to the right person. . .it sounds like I am.

I just filed a complaint on the FTC's website regarding "FTC v. Citigroup Inc., Citifinancial Credit Company, Associates First Capital Corporation, and Associates Corporation of North America (Northern District of Georgia, Atlanta Division)" and I'd like to know how I can get involved in the class action suit.

I have been with CCCS for the last 3 years and 3 of my 5 debts in the program are from a Citigroup asset (Citibank, Citifinancial and The Associates), but I have been dealing with harassing calls CONSTANTLY for the last 4-5 years in spite of the fact that we have an agreement on file that deals with payment conditions, rates, etc. Although my credit counselor works with them continuously and I haven't missed or been late on a payment in years, I continue to receive at least 2-3 calls A DAY from Citifinancial asking when I plan to pay off my debt. They also ignore our agreement by changing the APR to some "default" rate (usually from around 8-13% to 24-28%), but when we call to inquire, they agree to fix it. Ironically, they never seem to receive the paperwork they "require" from us in order to process the change.

HELP!!

      The second complaint involves foreclosure, and calls into question Citigroup's claims to be slowing and reviewing foreclosures, in the wake of acquiring Associates (the complaint is also from a community in which Associates, and now Citigroup, have a CRA duty):

Subj: my loan with The Associates help! from Utah consumer
Date: 3/20/01 5:09:47 PM Eastern Standard Time
From: [Redacted to protect complainant's privacy]
To: CitiWatch [at] innercitypress.org

I was alerted through a KUTV consumer news program that the Associates is under investigation for abusive lending practices. I am currently being foreclosed on and although I know that it is my responsibility to pay my debts, this problem is bigger than I can fight and I have been given several refinances during the past 3-4 years that were subprime, using all my equity, never paying any on my principle, and always at very high interest. I have been completely taken over due to my financial distress and ignorance.

This has had devastating affects on myself and my family. In my search for answers I became aware that there were alternatives and financial solutions that I was never offered nor told of to help with our circumstances. The home we are about to lose has been our family's for 22 years. I have tried everything to get myself back in a better credit situation and instead have nearly lost my life, my marriage, my family, my health. Please if you can help or direct me to some legal assistance, I would greatly appreciate your time. Thank you

    ICP is hereby forwarding these complaints to the agencies, not only that the be treated (and acted on) as consumer complaints, but also so that the issues they raise, including upon the called-for inquiry, be reviewed in connection with Citigroup's applications to acquire EAB.

    Also, from the public record in the last week: the Saint Paul Pioneer Press of March 21, 2001, Wednesday, reports, after recounting more compliance problems at Citigroup / Associates, that "[i]n Minnesota, the State Department of Commerce has said it's investigating the conduct of three companies that sell credit insurance. Minnesota Commerce Commissioner Jim Bernstein said his department has received 'dozens and dozens' of complaints about credit insurance -- such as 'packing,' consumers being told the insurance was required for a loan and denied claims--in the past year. He wouldn't identify the companies being investigated."

    While Question 18 of the FRB's March 21 letter to Citigroup arguably would cover state and other pending investigations, in light of what ICP has found to be Citigroup's evasive answers in the past (detailed in ICP's Initial Comment), the agencies should also require Citigroup to disclose all pending investigations of which it is aware, and the agencies should inquire into each of these.

    Now, Bushwick: ICP's review of the 2000 lending of "Citibank Affiliates" (as Citi has provided it to ICP, apparently Citibank, N.A. and CitiMortgage, cumulated) in Bushwick finds that, as in the South Bronx, a high percentage of 2000 loans are $1,000 micro-home improvement loans (which ICP alleges were intended to evade Citi's 1998 lending commitment, see Initial Comment). Consider, for example, Brooklyn Census Tract ("CT") 395 (which is, according to the 2000 census, 80% "non-white," 60% Hispanic). In CT 395 in 2000, Citibank Affiliates report nine applications. Five of these were applications for $1,000 home improvement loans, four originated, one denied. Three of the four non-$1,000 loans were not originated: a Latino applicant for a $100,000 refinance loan, with a $34,000 income, was denied; a Latino applicant for a $100,000 refinance loan, with an income of $48,000, purportedly withdrew the application; an application ("Race Not Available") for a $70,000 refinance was deemed "incomplete." The only non-$1,000 application that was approved was for a $10,000 home improvement loan; this applicant, for some reason, was listed as "Race Does Not Apply," HMDA code 8.

    Citibank Affiliates made five loans in this "majority-minority" census tract in 2000: four for $1,000, one for $10,000. No application for a loan over $10,000 was approved. CitiFinancial, the higher-rate lender, originated a $144,000 refinance loan in this census tract in 2000, to a "Race Not Reported" borrower with an income of $40,000. With normal rate credit, Citibank denied every application over $10,000 from this census tract in 2000; Citigroup's CitiFinancial, however, will lend, at higher rates.

    It is significant to consider the debt-to-income basis for denial used by Citibank Affiliates, with normal-rate credit. In Bushwick CT 425, an applicant with income of $38,000 was denied a $7,000 home improvement loan; the only ground listed is "debt-to-income." In Bushwick CT 417, an African American applicant with an income of $46,000 was denied a $50,000 refinance loan by Citibank Affiliates; the only ground give is "debt-to-income." In Bushwick CT 443, a Latino applicant with an income of $32,000 is denied a $20,000 refinance loan by Citibank Affiliates; the only reason given is "debt-to-income." Above, we've seen the high-rate lender CitiFinancial making a $144,000 loan, also in Bushwick, to an applicant with an income of $40,000. Associates, in Bushwick CT 397, made a $60,000 refinance loan to an African American applicant with income of $45,000 -- almost certainly at higher than normal rates. These inconsistency, particularly between prime- and high-rate affiliates, must be inquired into.

    Inconsistencies in HMDA reporting are apparent, in Associates' Bushwick lending in 2000. A "Race Not Reported" applicant for a $15,000 home purchase loan in Bushwick CT 409 is listed as having an income of $571,000; in Brooklyn CT 147, an identical loan is twice reported: a $91,000 home purchase loan to an applicant and co-applicant both reported as Native American or Alaskan Native. CitiFinancial reported more than half of its Bushwick applications in 2000 as "Race Not Available." The agencies must inquire into these companies compliance with HMDA and applicable regulations, and take appropriate actions thereon.

    On March 25, 2001, ICP received from the FRB by telecopier more than 60 pages of the FRB Application for which Citigroup had inappropriately requested confidential treatment. (Additionally, an e-mail was provided reflecting pre-application communications by Citigroup to the FRB; ICP should be provided with all records reflecting Citigroup's communications with the agencies regarding the FTC's March 6, 2001, predatory lending lawsuit against Citigroup). The FRB's March 23, 2001 cover letter states that 70 further pages are being withheld in full. ICP will be appealing, these withholdings, and non-responses.

    As noted above, ICP will be awaiting a complete copy of Citigroup's responses to the FRB's questions of March 21, 2001. There are other questions, that the NYBD and OCC should be asking (see ICP's Initial Comment, and previous two comments). The three agencies should hold a public hearing, the comment period should be extended, and, on the current record, Citigroup's applications could not legitimately be approved.

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

Respectfully submitted,


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

cc:   Board of Governors of the Federal Reserve System

       New York State Banking Department

                                                                                                            March 19, 2001


Federal Reserve Bank of New York
Attn: Ms. Betsy Buttrill White, Senior Vice President
33 Liberty Street
New York, NY 10045-0001


Office of the Comptroller of the Currency
Attn: Mr. Richard Erb, Licensing Manager
250 E Street, SW
Washington, DC 20219

RE: SECOND TIMELY COMMENT AND HEARING REQUEST BY INNER CITY PRESS / COMMUNITY ON THE MOVE AND THE INNER CITY PUBLIC INTEREST LAW CENTER IN OPPOSITION TO THE APPLICATIONS OF CITIGROUP, INC. AND CITIBANK, N.A. TO ACQUIRE CONTROL OF EUROPEAN AMERICAN BANK

Dear Ms. Buttrill White, Mr. Erb, others:

    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 timely supplemental comment opposing and requesting hearings on the applications of Citigroup, Inc. (along with its subsidiaries, including Citibank, N.A. and the subprime lenders CitiFinancial and Associates) to acquire control of European American Bank and its subsidiaries ("EAB").

     Citigroup has yet to file any response to ICP's 40-page March 12, 2001, comment and hearing request (hereinbelow, the "Initial Comment"). In its Initial Comment, ICP analyzed those portions of Citigroup's 2000 Loan Application Register ("LAR") that Citigroup provided to ICP on March 10, 2000. Since then, Citigroup has provided ICP with print outs of Associates' and CitiFinancial's, and Citigroup's banks' LARs in the Long Island and NYC Metropolitan Statistical Areas ("MSAs") for 2000. (Citigroup has stated that it will provide ICP with Associates' and CitiFinancial's nationwide 2000 LARs "as soon as the appropriate government agencies inform [Citigroup] that they have received and accepted [the] LARs." Since CitiFinancial (and now Associates) are under the jurisdiction of the FRB, ICP urges the FRB to expedite the above-referenced "notice," and to extend the comment period).

     The cumulated Associates First Capital Corporation 2000 LAR that Citigroup provided to ICP on March 14 contains several incongruities into which the agencies should inquire. This Associates LAR reports 201 items from Bronx County in 2000. Fifty-five, or 27.4%, of these Associates transactions were in the South Bronx. Citigroup's Associates reports "home purchase" loan applications of $8,000 (Census Tract ["CT"] 37); $3,000 (CT 127); of $2,000 (CT 133); $5,000 (CT 177, a loan Associates reports as being from an American Indian or Alaskan Native, HMDA code 1, and see below); $3,000 (CT 197, another reported American Indian denied); $5,000 (CT 227.01); and $6,000 (CT 371). Loans of these sizes being reported as "home purchase" loans is inconsistent with the data of other lenders, and with the real estate market in The Bronx. Furthermore, while Associates reports many applicants as "Race Not Available," for those application for which race is reported, Associates reports nine applications from African Americans in the South Bronx, and four from "American Indians or Alaska Natives." This is inconsistent with the demographics of The Bronx, and with other lenders' data. For an application in South Bronx CT 69, Associates lists the applicant's income as $720,000 a year -- and the application as being for a $5,000 refinance loans, denied by Associates. The reported income level is incongruous, especially when compared to the size of the loan requested, and Associates' action on the application.

    In Upper Manhattan, the 2000 Associates LAR provided by Citigroup is similarly suspect. In Manhattan CT 186 (in Central Harlem), an African American applicant was denied a $3,000 "home purchase" loan, despite having an income of $37,000. In CT 289 (in Inwood), an African American applicant was denied a $1,000 "multi-family" mortgage loan. As with Associates' Bronx LAR, the size of the loan is incompatible with its reported purpose. Also in Inwood, in CT 277, there's another $3,000 purported "home purchase" loan denied; in Washington Heights, CT 223.98, another $3,000 purported "home purchase" loan is denied. The agencies should inquire closely into the accuracy of the 2000 Associates mortgage lending data that Citigroup filed on March 1, 2000, both in New York and in other markets.

    For CitiFinancial, all but one of the applications it reports processing from Upper Manhattan in 2000 is reported as "Race Not Available," HMDA code 7. The one race-reported application is from an American Indian or Alaskan Native in Washington Heights CT 271. In the South Bronx, also, all but one of the applications CitiFinancial reports processing in 2000 is reported as "Race Not Available," HMDA code 7. This one South Bronx race-reported application, from an African American in South Bronx CT 205 with an income of $34,000, for a $77,000 refinance loan, is strangely similar to a reported purchase loan by CitiFinancial in CT 205: the same loan size and purpose, the same race of applicant, but the reported income $1,000 lower: $33,000. It seems clear that this is the same loan; the discrepancy between the information reported for the origination, and for the purchase, raises questions about the accuracy of CitiFinancial's 2000 HMDA data, that the agencies should inquire into, in New York and elsewhere.

    While CitiFinancial reports "Race Not Reported" for most of its loans (see supra), Citibank and its bank affiliates and CitiMortgage report race even for purchased loans (for which Associates reports "Not Applicable," HMDA code 8). As noted in the Initial Comment, Citibank appears eager to report the race of its borrowers, both in order to present its CRA record in the best light, and to claim compliance with the 1998 lending commitment it made in connection with its merger with Travelers. ICP has inquired (even) more closely into Citigroup's banks' and CitiMortgage's data (which has been presented cumulated to ICP by Citigroup). According to Citigroup's presentation, fully 65% of Citibank's / CitiMortgage's loan applications in the South Bronx in 2000 were for $1,000 home improvement loans (which ICP has previously referred to as "micro-mortgages"). Citigroup's presentation of its lending record in the Application must be discounted, for the high percentage (two-thirds) of the loans that are these miniscule $1,000 loans.

    In the Initial Comment, ICP analyzed disparities and incongruities in these micro-mortgages. In this submission, ICP analyzes the non-micro mortgages.

     Of Citibank's / CitiMortgage's 150 LAR items in the South Bronx that are NOT $1,000 home improvement loans, Citibank's main claim to CRA credit consists of 25 home purchase loans made in a single census tract of the South Bronx, CT 69 in Melrose. It appears clear that this is a middle income, NYC Housing Partnership development, on which Citibank was designated the preferred "end-lender." There appears to have been pre-screening (in violation of the Equal Credit Opportunity Act, ICP contends): of the 29 similarly-sized home purchase applications from CT 29, 25 were approved, only one was denied, four were reported as "incomplete." This is to be contrasted with Citibank's high denial rate for home purchase and refinance loans in all other South Bronx census tracts (that is, on actual retail, non-prescreened loan applications).

    For example, in South Bronx CT 71 (Melrose, adjacent to the above-analyzed CT 69), an African American applicant was denied for a $10,000 refinance loans, reportedly on debt-to-income grounds, despite having an income of $37,000. In CT 75, a Latino application with an income of $39,000 is denied a $40,000 refinance loan, again purportedly on debt-to-income grounds. In CT 169, an African American applicant is denied a $24,000 refinance loan, on "debt-to-income" grounds. In CT 205, in the Highbridge neighborhood, a Latino applicant is denied a $10,000 home improvement loans, assertedly on "debt-to-income" grounds. In CT 231, in the Tremont neighborhood, an African American applicant with an income of $45,000 is denied a $50,000 refinance loan, on "debt-to-income" grounds. In CT 233.02, also in Tremont, a Latino applicant is denied a $3,000 home improvement loan on debt-to-income grounds. In CT 371, in Belmont, an African American with an income of $32,000 is denied a $5,000 home improvement loan, supposedly on debt-to-income grounds.

     In South Bronx CT 393, in the Belmont neighborhood, an African American with income listed as $44,000 is denied a $40,000 home improvement loan. The reason given is "unverifiable information," HMDA code 6. But in CT 379, a white applicant is approved for a $34,000 home improvement loan, with this applicant's income lists, by Citigroup, as "NA." So a non-minority applicant with NO reported income gets a $34,000 home improvement loan; an African American with a $44,000 reported income is denied, for "unverifiable information." But it appears that the non-minority applicant was not even ASKED to provided "verified" information: this applicant's income is listed as "NA."

    The agencies should inquire closely into Citigroup's 2000 lending record, and all of the data that Citigroup filed on March 1, 2001, including for Associates.

* * *

    ICP received last week a belated response from the FRB to ICP's Freedom of Information Act ("FOIA") request of December 13, 2000. Included in the FRB's response was a noted complaint against Citicorp Mortgage, which the FRB referred to the Federal Trade Commission (the "FTC"), and which further calls into question Citigroup's claims that it has sufficient consumer safeguards in place, and meaningfully improves the compliance records of the companies that it acquires (like IMC, Source One, and now The Associates). The FRB's summary states:

Citicorp Mortgage: Consumer was three mortgage payments behind and had initiated bankruptcy proceedings. Consumer claims that bank tricked her into disclosing this information so they could initiate foreclosure proceedings. Court approved bankruptcy petition, but bank is now charging consumer for fees associated with foreclosure, and refuses to provide payoff information to consumer... [FRB action:] Referred to FTC.

    ICP's Initial Comment incorporated into the record by reference the FTC's March 6, 2001, lawsuit against Associates and Citigroup for predatory lending. That FTC lawsuit, which has been reported all over the country (just as Citigroup's / Associates' practices affect consumers all over the country), would seem to clearly trigger the hearing(s) that ICP has requested. Note, for example, that the Madison (Wisc.) Capital-Times' article about the FTC suit, "FTC SUES ASSOCIATES FIRST CAPITAL; PROBED LENDER HAS POOR RECORD HERE," March 9, 2001, reported that "Associates does significant business in Wisconsin through a variety of subsidiaries, including credit insurance and home equity lending. It has 37 offices statewide, including two in Madison. Records filed with the state Department of Financial Institutions show 87 complaints filed by Wisconsin consumers against Associates since 1998. That is a high number of complaints compared to other financial services firms doing business in the state, said one regulator. 'They're one of the worst' said the regulator who asked not to be named. Associates Financial Life also collected $1.31 million in premiums in 1999, making it the 16th largest credit insurer in the state."

    If newspaper reporters obtain such statements ("they're the worst of the worst," see supra) from regulators most familiar with Citigroup's Associates and its practices, clearly the FRB, OCC and NYBD can and should take appropriate steps to develop the record before them on Citigroup's CRA-subject applications to acquire EAB, including by holding the requested hearing(s). In support of its timely hearing request, ICP enters the following, also, into the record: Business Week's report on the FTC suit, "IS CITI BLEEDING ITS WEAKEST BORROWERS?," March 19, 2001, questions whether Citigroup has asked even on the commitments it made in November 2000, and whether the predatory practices identified by the FTC are continuing to take place at CitiFinancial and Primerica:

Four months ago, the bank promised to make a series of improvements, including better education of brokers and two programs that would give some borrowers lower-rate loans. Until recently, though, the bank had done little more for 500,000 existing Associates customers than send them a number to call if they have problems... ''To our knowledge, they haven't offered anyone their money back, and that's what our case is about,'' says Joel C. Winston, acting associate director for financial practices at the FTC.

Another key question is whether some of the same sales practices that bother the FTC are used by CitiFinancial and Primerica Financial Services, the bank's 100,000-strong commission-only sales force...

     The San Antonio (Texas) Express-News of March 16, 2001, analyzing an increase in mortgage foreclosures, reported that "The Associates is one of the largest subprime lenders in the nation. The FTC accused the company of systematic and widespread abusive lending practices. The commission is asking the court to compensate borrowers allegedly injured by the company. The Associates initiated at least seven of Bexar County's foreclosures for the 21 days ending March 6, four of them home equity loans."

     The American Banker of March 13, 2001, at 11, reports that among "policies that raise the interest rate on customers who pay a bill late... [t]he highest such penalty rate, 29.99%, was charged by... Associates National Bank, a subsidiary of Citigroup Inc....".

      Citigroup's response to all this? As noted above, Citigroup has yet to respond to ICP's 40-page March 12, 2001, Initial Comment. In "Citigroup's Purchase Of EAB Challenged," by Tania Padgett, Newsday, March 13, 2001, Pg. A46, "Citigroup's [spokesperson Leah] Johnson declined to comment on the company's lending record." Citigroup's response is elsewhere: the Philadelphia Inquirer of March 13, 2001, provides a snapshot of a representative Citigroup action since it acquired The Associates:

Citigroup, the world's largest bank, is waging a high-powered public relations campaign it hopes will defuse the criticism of its role as a financier of high-cost mortgages to the poor. The New York-based bank localized its PR effort on Thursday in response to City Council Bill 715, which seeks to curb "predatory mortgage lending" practices that activists blame for tripling Philadelphia foreclosures since 1995.  Citi has hired the public relations firm run by Mayor Street's personal adviser, former banker A. Bruce Crawley, to "clarify the issues and [Citigroup's] position as the industry leader" in lending to "subprime," or high-risk, borrowers, Crawley's firm announced.... Citigroup also emphasizes Philadelphia's tight financial relationship with Citi's Salomon Smith Barney unit, which sold Philadelphia's bonds in the tough market of the early 1990s, and continues to underwrite city debt and manage its cash investments.

    Citigroup is lobbying against consumer protection legislation in New York, Georgia, Illinois, and other states. While this may be beyond the purview of the FRB, OCC and NYBD, the lack of review of Citigroup's acquisition of The Associates in November 2000, the material entered into the record before the agencies on these applications, and the FTC's March 6, 2001, predatory lending lawsuit against Citigroup, all militate strongly for the public hearing(s) that ICP has timely requested, and hereby re-requests. On the current record, these applications must be denied.

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

Respectfully submitted,


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

cc:   Board of Governors of the Federal Reserve System

       New York State Banking Department

                                                                                                            March 12, 2001


Federal Reserve Bank of New York
Attn: Ms. Betsy Buttrill White, Senior Vice President
33 Liberty Street
New York, NY 10045-0001


Office of the Comptroller of the Currency
Attn: Mr. Richard Erb, Licensing Manager
250 E Street, SW
Washington, DC 20219

RE: PETITION TO DENY AND HEARING REQUEST BY INNER CITY PRESS / COMMUNITY ON THE MOVE AND THE INNER CITY PUBLIC INTEREST LAW CENTER IN OPPOSITION TO THE APPLICATIONS OF CITIGROUP, INC. AND CITIBANK, N.A. TO ACQUIRE CONTROL OF EUROPEAN AMERICAN BANK

Dear Ms. Buttrill White, Mr. Erb, others:

      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 timely comment opposing and requesting hearings on the applications of Citibank, N.A. and Citigroup, Inc. (along with its subsidiaries, including the subprime lenders CitiFinancial and Associates First Capital Corp., "Citigroup" or "Citi") to acquire control of European American Bank and its subsidiaries ("EAB").

      These applications are subject to the Community Reinvestment Act, 12 U.S.C. 2901 et seq. ("CRA"). Several CRA-relevant issues, which are left unaddressed by Citigroup's applications, must be inquired into -- including at the public hearings that ICP is requesting -- and acted on. Significantly, on March 6, 2001, the Federal Trade Commission (the "FTC") sued Citigroup, CitiFinancial and their subprime lending subsidiary, Associates First Capital Corporation ("Associates"). The FTC has alleged systematic predatory practices in Citigroup's subprime lending, including deception of consumers, "packing" of credit insurance, and "flipping" of high-cost loans. See Federal Trade Commission v. Citigroup, Inc., et al., Civil No. 010 CV 0606 (U.S. District Court for the Northern District of Georgia, Atlanta Division, filed March 6, 2001; available on <www.ftc.gov> and incorporated herein by reference). The Federal Reserve Board ("FRB") and the Office of the Comptroller of the Currency ("OCC") should not even consider these applications until the troubling facts alleged by the FTC have been resolved. Furthermore, the FRB and OCC should schedule and hold public hearing to collect testimony on Citigroup's practices: those alleged by the FTC, and others.

      Surprisingly (but perhaps understandably), the applications hardly mention Citigroup's subprime lending activities. Under the rubric of "Convenience and Needs," FRB App. at 17, Citigroup states that its "business units (e.g. the Consumer Bank, CitiMortgage, Salomon Smith Barney) actively participate in developing and implementing the CRA programs." Not mentioned is the Citigroup subsidiary with most impact on low- and moderate-income neighborhoods and communities of color: CitiFinancial. In a single footnote, the application mentions that "on November 30, 2000, Citigroup acquired Associates First Capital Corporation, which had total consolidated assets of $93.0 billion as of September 30, 2000." App. at 2, n.3. Associates' (adverse) effects on low- and moderate-income neighborhoods and communities of color are nowhere else addressed in the applications, other than an oblique statement, at 23, that Associates National Bank (Delaware) has a less than satisfactory CRA rating.

      Less than two percent of the banks in the United States have less than satisfactory CRA ratings. The Board has historically denied applications by holding companies which have subsidiary banks with less than satisfactory CRA ratings. See, e.g., Totalbank Corporation of Florida, Order Denying the Acquisition of a Bank, 81 Federal Reserve Bulletin 876 (September, 1995); First Interstate BancSystem of Montana, Inc., Order Denying Merger of Bank Holding Companies 77 Federal Reserve Bulletin 1007 (December, 1991). ICP urges such a CRA-based denial, in this case.

       While discriminatory and/or predatory lending are clearly CRA-relevant, they also provides a separate ground for denial, even under the Board's own precedents. For example, the Federal Reserve Board denied a Shawmut Bank application in New Hampshire, while a Department of Justice investigation of Shawmut's lending was pending. Shawmut National Corporation, Order Disapproving Acquisition of a Bank and Formation of a Bank Holding Company, 80 Federal Reserve Bulletin 47 (January, 1994). Here, the allegations against Citigroup's Associates are longer standing. ICP, for example, began documenting Associates' practices to the regulators in early 1997: see, e.g., "Activist Group Targets Ford Unit, Calling Its Card Rates Excessive," American Banker, January 27, 1997, at 1; "Ford Unit on Defensive Once Again Over Its Payments to Loan Brokers," American Banker, January 29, 1997, at 1; "OTS Suspends Associates' Application," National Mortgage News, February 16, 1998; "Law Denies CRA Clout to Citi-Associates Foes; Federal Regulators Cannot Consider the Issues," American Banker, November 27, 2000, Pg. 1

      Now, in March 2001, the FTC has formally charged Citigroup's Associates with systematic predatory lending. Under the FRB's Shawmut precedent (see above), prior to any final FRB or OCC action on the applications, the predatory lending issues documented by the FTC and others must be fully investigated and addressed. In the interim, the FRB and OCC should schedule and hold public hearings.

      In reviewing, and ultimately deciding not to object to, Citi's Change in Bank Control Act notice to acquire Associates National Bank ("ANB") last Fall, the OCC stated that it was constrained from considering the allegations, including ICP's, of predatory practices at Associates First Capital Corporation. The OCC's "Corporate Decision #2000-21" states that the "OCC's role... pertains only to Associates N[ational] B[ank], not [Associates First Capital]."

    Clearly, this Citibank - EAB application, which is subject to the CRA, presents the OCC with the opportunity -- and, ICP contends, particularly in light of the FTC's March 6, 2001, lawsuit, the responsibility -- to now closely review Citi's subprime lending practices, including at the public hearings that ICP is hereby requesting.

     In March 2000, the FRB's Chairman expressed the Board’s worries about predatory lending, stating: "Of concern are abusive lending practices that target specific neighborhoods or vulnerable segments of the population and can result in unaffordable payments, equity stripping, and foreclosure. The Federal Reserve is working on several fronts to address these issues...". "Remarks of Chairman Alan Greenspan," March 22, 2000. See also, Reuters newswire of March 22, 2000: "Greenspan Says Fed to Target Abusive Lending;" American Banker of March 23, 2000, "Greenspan Wades In On Predatory Lending, Joining Other Regulators."

     Since then, in scheduling and attending Fed hearings on the Home Ownership and Equity Protection Act on 1994, Governor Gramlich has reiterated the Fed’s concern with predatory lending, while claiming that there is little that the Fed can do, by itself, about the problem. See, e.g., "Fed Says Can't Curb Subprime Lending Abuses Alone," Reuters, August 4, 2000: "'Our authority in the overall scheme of things is a bit limited,’ Gramlich said before a panel discussion on predatory subprime lending. ‘We certainly can't do it all.'"

      ...It is significant that the FRB has never examined CitiFinancial. That BHC-subsidiary subprime lenders like Associates / CitiFinancial "operate[] with some freedom from the holding company and its regulator" (see above) is a matter of the FRB's choice. The FRB can, and should, examine Associates / CitiFinancial. The General Accounting Office, the Department of Housing and Urban Development, the Treasury Department, and numerous organizations, including ICP, have strongly recommended that the FRB conduct fair lending and consumer compliance examinations of subprime lending subsidiaries of bank holding companies. This, however, is still not the FRB's practice. ICP publicly raised this issue to the FRB's fair lending specialist, in a panel discussion at the Federal Reserve Bank of New York on January 17, 2001, and was told that the Board may be reconsidering this policy. The FTC's March 6, 2001, lawsuit and announcement should trigger an detailed, on-site examination of CitiFinancial, to be completed before the Board even considers this application.

     The Federal Reserve Board explicitly chose NOT to consider any of these issues, timely raised to the Board by ICP, in connection with Citigroup's applications in the Fall of 2000 to acquire Associates and its banks in the United Kingdom and Hong Kong. Subsequently, after ICP asked the Board to notify Citigroup, pursuant to 12 U.S.C. 1843(l)(2) and the then-current version of 12 CFR 225.84(a), of its loss of Gramm-Leach-Bliley ("GLB") Act powers in light of Associates National Bank's Needs to Improve CRA rating, the Board issued a final regulation, "interpreting" (and ignoring) the clear language of 12 U.S.C. 1843(l)(2), and changing, without public notice, 12 CFR 225.84(a) -- a reinterpretation that benefited only one company: Citigroup. (And see Section VI, below). In this context, ICP timely enters the information below into the record before the Board on these applications, and requests that the Board hold public hearings, and deny the applications.

* * *

    Section II of this Comment, below, reviews Citigroup's lending record in New York, where Citigroup overlaps with EAB, and where Citigroup would close of a number of branches. See, e.g., Bloomberg News of February 12, 2001: "Citigroup said it plans to close some branches after completing the acquisition in mid-2001." The Application disingenuously states that Citigroup "has made no final decision regarding branch offices to be closed (if any) as a result of the Acquisition and Bank Merger." FRB App. at 17. The Board should require Citigroup to disclose, publicly, which branches it would close, if this proposed merger (which should be denied, on the ground set forth throughout this comment) were consummated. Section II also reviews Citigroup's evasion of its 1998 commitment to improve its lending in New York, including with reference to 2000 Loan Application Register ("LAR") information that ICP has just obtained.

    Section III demonstrates that, nationwide, Citigroup's normal interest rate lenders disproportionately deny and exclude people of color, while its subprime lenders, including the Associates and CitiFinancial, target people of color for loans at high interest rates, with single premium credit insurance, balloon payments, mandatory arbitration clauses, and punitive prepayment penalties (a virtual definition of predatory lending).

     Section IV reviews Citigroup's past failure to improve the practices of the subprime lenders Source One, IMC and Commercial Credit, now known as CitiFinancial, including description of some sample outstanding litigation against CitiFinancial, and it extensive use of single premium credit insurance. Section V argues that Citigroup's managerial resources are called into question by its standardless involvement in subprime and predatory lending, through its investment bank, Salomon Smith Barney ("SSB"), which does underwriting and otherwise enables predatory lenders across the United States, as well as by numerous other standardless business relationships outlined infra in Section VI. Since November 2000, a Senate investigation into money laundering has again found that Citigroup has insufficient controls in place to prevent money laundering. See, <http://www.senate.gov/~gov_affairs>. See also, New York Times of March 3, 2001, Citibank Admits to Lapses in Dealings With Offshore Shell Banks. This follows previous reports of similar deficiencies at Citigroup. See, e.g., Money Laundering Alert, January 2000, and see Section VI, below.

II. CITIGROUP'S LENDING IS STILL DISPARATE IN NEW YORK (WHERE IT OVERLAPS WITH EAB); CITIGROUP HAS EVADED ITS 1998 "COMMITMENT" TO IMPROVE ITS LENDING HERE

      Citibank, N.A. and EAB overlap in New York City and on Long Island. In mid-February 2001, Citigroup officials told journalists that Citigroup would, if this merger is consummated, close branches. See, e.g., Bloomberg News of February 12, 2001: "Citigroup said it plans to close some branches after completing the acquisition in mid-2001." The Application disingenuously states that Citigroup "has made no final decision regarding branch offices to be closed (if any) as a result of the Acquisition and Bank Merger." App. at 17. The Board should require Citigroup to disclose, publicly, which branches it would close, if this proposed merger (which should be denied, on the ground set forth throughout this comment) were consummated.

    Citigroup has a history of closing branches in low- and moderate income neighborhoods, and in communities of color. See, e.g., "Citibank's Quiet Branch Closings And Switch to ATMs Stir Outrage," American Banker, February 12, 1996; "Pols Fight Citibank's Plan to Exit," N.Y. Daily News, February 1, 1996; "Bank Won't Give in On Closings," N.Y. Daily News, January 24, 1996. Furthermore, Citigroup in the most recent year for which HMDA data is available disproportionately denied and excluded people of color from its normal interest rate credit products.

      On New York’s Long Island, where Citigroup substantially overlaps with EAB, Citicorp Mortgage’s 1999 denial rate disparity between African Americans and whites for conventional home purchase loans was 6.26.

   In the New York City Metropolitan Statistical Area ("MSA") in 1999, Citicorp Mortgage made 1236 conventional home purchase loans to whites, and only 56 such loans to African Americans, and only 58 to Latinos. Meanwhile, Citicorp Mortgage denied 14.9% of applications from African Americans, versus a 4.5% denial rate for whites. Citicorp Mortgage denies African Americans 3.31 times more frequently than whites (other lenders in New York deny African Americans 2.0 times more frequently than whites).

     Adding Citicorp Mortgage and Citibank, N.A. together, Citigroup is still worse than other lenders in the market. The industry aggregate in the NYC MSA in 1999 made 5385 conventional home purchase loans to African Americans, 4841 to Latinos, and 36,467 to whites. Among these three groups, 11.5% of the industry aggregates loans were to African Americans, and 10.4% to Latinos. The figures for Citicorp Mortgage added with Citibank, N.A. are only 7.0% percent of loans to African Americans, 8.0% to Latinos: both less than the industry aggregate. Meanwhile Citigroup denied African Americans three times more frequently than whites, versus the industry aggregates two-to-one disparity.

* * *

     The years of 1999 and 2000 (see below) are by no means the first years in which Citi's lending has been disparate in New York. When Citicorp and Travelers proposed to merge in 1998, ICP documented Citicorp's disproportionate exclusion of communities of color, including in New York's Bronx County. 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. Specifically, Citi's regulatory counsel, Carl Howard, in a July 22, 1998 letter to the NYBD, committed inter alia 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 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."

     Citigroup claims, including in the application, 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 showed 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, into which Citi proposes to merge EAB, 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. 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.

     ICP, as a community organization headquartered in The Bronx, which timely commented opposing Citicorp-Travelers in 1998, hereby contends that Citigroup's disingenuous evasion of its 1998 commitment (see supra) injures ICP, other Bronx residents, and other NYS residents, and raises serious questions under the managerial resources and other statutory standards that the Board must rule on in connection with Citigroup's application. Citigroup has proffered an "explanation" of the above-analyzed micro-mortgages, claiming that in order to "re-enter" markets like The Bronx, it began to offer small home improvement loans, to establish "relationships." These disputes of fact should be resolved at the hearing ICP is requesting.

  The analysis above (and below, in Section III) uses the most recent publicly-available data, for 1999. On March 10, 2001, ICP received from Citigroup print-outs of Citibank N.A.'s and CitiMortgage's 2000 Loan Application Registers ("LARs") for the New York City MSA. ICP has reviewed these LARs; ICP urges the FRB and OCC to request and review them, as well. Consider:

     Dozens of pages, 32 records / applications per page, consist solely of $1,000 home improvement loans. While many of these "micro-mortgages" are granted to applicants for whom no gross annual income is reported, in a number of cases, applicants from the South Bronx, African-Americans or Latinos, are in fact DENIED even these $1,000 loans, despite having a reported income. (Hereinbelow, "South Bronx" is defined, as it is by the NYC Department of City Planning, as Community Districts 1-6). For example, in South Bronx Census Tract (CT) 233.02 (in the Tremont neighborhood), Citibank in 2000 denied a Hispanic applicant a $3,000 home improvement loan (page 60 of Citibank's LAR). The reason given is "debt-to-income ratio." But what, then, of the approved non-minority applicants for whom no income level is reported? Similarly, on page 79, an African-American applicant in Bronx CT 16 is denied a $1,000 home improvement loan, on "debt-to-income ratio" grounds. On page 90, an African-American applicant in South Bronx CT 121.01 (Crotona Park East) is denied a $1,000 home improvement loan, on "debt-to-income ratio" grounds. On page 95, an applicant listed as "Race Not Available" is denied for a $1,000 home improvement loan -- this in South Bronx CT 379, Bathgate (a nearly entirely "minority" census tract). On page 96, a Latina applicant in South Bronx CT 119 (Longwood) is denied for a $24,000 refinance loan -- despite having an income of $68,000. On page 101, a Latino applicant in South Bronx CT 25 (Port Morris) is denied for a $14,000 home improvement loan, despite having an income of $39,000.

    On page 117, a Latino applicant in South Bronx CT 211 (Highbridge) is denied a $1,000 home improvement loan, despite having an income of $43,000. Incredibly, the ground given for denial was "debt-to-income ratio."

    On page 121, an African American applicant in South Bronx CT 371 (Tremont / Belmont) is denied for a $5,000 home improvement loan, despite an income of $32,000. The reason given is "debt-to-income ratio."

      On page 124, an applicant listed as "Race Not Available" in South Bronx CT 175 (Morrisania, over 99% "minority") is denied for a $5,000 home improvement loan, despite an income of $26,000. On page 136, an applicant listed as "Race Not Available" in South Bronx CT 75 (Melrose, nearly entirely "minority") is denied for a $20,000 home improvement loan, despite an income of $32,000. The reasons given were "debt-to-income ratio" and "other." On page 141, an applicant listed as "Race Not Available," in South Bronx CT 381 (Bathgate) is denied for a $20,000 home improvement loan, despite an income of $52,000 -- here, the entire grounds for denial is listed as "other." There is more; ICP urges the FRB and OCC to obtain this Loan Application Register, and to make appropriate inquiries.

     The 2000 Loan Application register of CitiMortgage (or "CM"), in the New York City MSA, should also be carefully scrutinized by the Board. Simply as examples, and beginning in the middle: on page 69, an applicant listed as "Race Not Available" in South Bronx CT 379 (Bathgate) is denied for a $42,000 refinance loan, despite having an income of $38,000. The reason given for denial was "collateral." On page 74, an African-American applicant in South Bronx CT 169 (Claremont) is denied for $24,000 refinance loan, on "debt-to-income" grounds. On page 77, an African American applicant in South Bronx CT 71 (Mott Haven) is denied a $10,000 refinance loan. Despite having an income of $32,000, "debt-to-income ratio is listed as one of two grounds for denial." The other ground is "collateral" -- difficult to understand, on a $10,000 loan presumably secured by a home (which is reported as "owner-occupied). There is more; ICP urges the FRB and OCC to obtain this Loan Application Register, and to make appropriate inquiries. ICP will be submitting a supplemental comment once it receives the rest of the data it requested, a month ago, from Citigroup -- including Associates' 2000 LARs. On this ground and others, the comment period should be extended.

III. WHILE CITICORP MORTGAGE DISPROPORTIONATELY DENIES AND EXCLUDES PEOPLE OF COLOR FROM NORMAL RATE CREDIT, THE ASSOCIATES TARGETS PEOPLE OF COLOR FOR HIGH COST LOANS WITH PREDATORY FEATURES

    Beyond New York, Citigroup's conventional home purchase lending is similarly disparate in other markets in which it has a CRA duty. In the Chicago MSA in 1999, Citicorp Mortgage denied 29.2% of applications from African Americans for conventional home purchase loans, versus only 5.0% of applications from whites, meaning that Citicorp Mortgage denies African Americans 5.84 times more frequently than whites. In the Oakland MSA in 1999, Citicorp Mortgage’s denial rate disparity between African Americans and whites for conventional home purchase loans was 4.04.

     Most of the worst predatory lending practices take place in the refinance mortgage and home equity loan markets. ICP's analysis, below, comparing the refinance mortgage lending of Citigroup's normal interest lenders, its banks and Citicorp Mortgage (at times, "CM"), and of Citigroup's subsidiary Associates Financial Services (at times, "AFS"), a high interest rate, "subprime" lender, finds that CM disproportionately excludes people of color for its (normal interest rate) lending, while AFS targets people of color with high-cost, predatory loans. Following this quantitative analysis is a review, including pending class actions and governmental investigations of discrimination, of Citigroup's Associates' practices, which ICP contends are predatory.

    But first the numbers: in the Buffalo NY MSA in 1999, Citicorp Mortgage made 61 refinance loans to whites, and only two to African Americans, a ratio of 30.5 to one. Citigroup's subsidiary Citibank (New York State) in this MSA in 1999 made 109 refinance loans to whites, and only four to African Americans, a ratio of 27.25 to one. Citibank (NYS) denied the applications of African Americans more than three more frequently than those of whites -- essentially driving the disproportionately denied African Americans to higher-cost lenders, including one that Citigroup now controls. Associates Financial Services in Buffalo in 1999 made 85 refinance loans to whites, and 31 to African Americans -- a ratio of 2.74 to one. This Citigroup-controlled subprime lender is more than eleven times more likely to target African Americans with its high cost loans than is Citicorp Mortgage, and is over nine time more likely to target African Americans with its high cost loans than is Citibank (NYS), with normal interest rate loans.   [snip - contact ICP for more recent data]

    While ICP's data analysis has focused on Associates Financial Services, the Board should inquire -- including in light of the FTC enforcement action -- into the practices of all others Associates subsidiaries, including The Associates (TX), Associates First Capital Mortgage (TX), Associates Mortgage Group, Inc. (KY), Kentucky Finance Company, TranSouth Financial Corporation, First Family Financial Services, Associates' subprime auto lending business (including that acquired with Arcadia Financial), and Associates Home Equity Service (TX).

   Beyond the above-cited March 6, 2001, Federal Trade Commission lawsuit, consumer attorneys have informed ICP that it is Associates' practice to put balloon payments (as high as $48,000) in initial loans, and then call the borrowers a few months later, pointing out this disadvantageous feature, and offering to refinance the loans (for $10,000 in points, of course). Similarly, The Associates has long been drumming up refinance (that is, flipping) business among its customers, with the main goal of adding mandatory arbitration clauses.

    The public record is replete with other examples of Associates' predatory practices. See, e.g., "Loan Sharks, Inc.: High-Interest Rate Loans Are Soaking the Poor From the South Bronx to California -- And Wall Street Can't Get Enough," Village Voice, July 15, 1997, at 33 (reporting inter alia Associates' practice of loan flipping, in Brooklyn, New York and elsewhere); "Cashing In On Poverty," by Mike Hudson, The Nation, May 20, 1996, at 11 (reporting inter alia that former Associates loan officer Philip White routinely misled customers, at his employer's instructions, which he summarized as "If you had to lie about the points we charged them, lie to 'em. They're stupid anyway"); "A Man and His Loan: Why Bennie Roberts Refinanced Ten Times," by Jeff Bailey, Wall Street Journal, April 23, 1997, at A1 (in this case, the effective number of points, taking into account all refinancings, was 83: on an initial loan for $9,349, Bennie Roberts came to owe Associates $45,000, after ten refinances in four years, costing $19,000 in loan fees and points); and "Company Says It Will Battle Any Bias Lawsuit," by Jim Fuquay, Fort Worth Star Telegram, June 23, 2000.

     Citigroup decided to acquire Associates First Capital despite not only the above-cited articles in the public record -- the "Disclosure Schedule" to the Citigroup - Associates Merger Agreement listed the following pending cases, among others:

Section 3.1(h)
Compliance with Applicable Laws; Litigation
(i)
FRI Investigation -- the FTC, in conjunction with the Department of Justice, is continuing its investigation into the Company's lending practices
Attorney Preferences Cases (South Carolina)
Bessette v. Avco; Barrett v. Avco (Rhode Island and Massachusetts)
Darden v AHES
Echostar v. Associates (Colorado)
Garske v. Arcadia (California)
Gilliam v. Associates (Indiana) (Class Action)
Laura Martin v. Associates
Givens v. Associates (Minnesota)
Gomez v. Avco (California)
Henry v. AHES (California)
Mississippi Litigation
North Carolina Attorney General Investigation
Nydia Estades v. AFSCI (Puerto Rico)
Amburn, et al. v. ACS (Tennessee)
Vogel v. AFSCI (Ohio)
Mims, et al. v. KFC (South Carolina)
Martinez v. TransSouth (Texas)
Crawford, Larry
Drummond (Alabama)
H&T Mason Contractors
Private A.G. Inc. (Florida)
Turner, Denise (Oklahoma)
Privacy Class Actions (California)
Internet Gambling Class Actions (New Orleans and Dallas)
Shell Repricing Class Actions (North Carolina and California)
Bank of New York
Federal Trade Commission/Detroit Investigation of Ford Consumer Finance, Inc.
United States v. Associates National Bank: Department of Justice Delaware litigation
IRS Audit (see attachment)
(iii) and (v)
Federal Trade Commission/Detroit Investigation of Ford Consumer Finance, Inc.
FTC/Department of Justice Investigation

     Beyond the cases and investigations disclosed in the September 2000 "Disclosure Statement," here are some (CitiFinancial) foreclosure actions, in a representative 12 days:

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.

   ICP urges the FRB and OCC to inquire into the status and underlying facts in all of the above-cited cases and investigations. The allegations, including by government agencies like the FTC, that are swirling around Citigroup's subprime lending business strongly militate for the public hearing that ICP is hereby timely requesting.

    Currently (2001), word has reached ICP 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. As with the other cases listed above, the Board should inquire into these cases.

      The FRB and OCC should hold the public hearings that ICP is requesting, inter alia because Citigroup has refused to respond, in public forums, to questions about its subprime lending practices. Last Fall, ICP commented to the South Dakota Division of Banks ("SDDB"), in connection with one of Citigroup's applications to acquire an Associates subsidiary, and was granted "full party" status, including the right to cross examine, for the SDDB's hearing on October 10, 2000. See, e.g., "Citigroup's Purchase of Associates Challenged in State Hearing," Bloomberg, October 10, 2000.

    Citigroup's lead witness, Eugene Rowenhorst, testified inter alia that Citigroup "has policies and procedures to address the issues raised by Inner City." On cross examination, ICP's representative asked Citigroup to describe some -- any - of these "policy and procedures." The Citigroup witnesses refused. Citigroup's representatives were similarly non-responsive at the October 2000 hearing held by the Missouri Department of Insurance ("MDI"), stating only that Citigroup "stood" on its previous testimony: the mere words, "we have policies and procedures." It appears clear that the FTC does not agree (that Citigroup's "practices and procedures" resolve the Associates issues, and harms to consumers).

    Citigroup's own (pre-Associates) lending record is also in dispute. At the a public meeting held on November 10, 2000, by the New York Banking Department, ICP inter alia testified that in the Buffalo MSA 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, a ratio of 30.5 to one. 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, a ratio of 27.25 to one. Citibank (New York State) denied the applications of African Americans more than three more frequently than those of whites -- essentially driving the disproportionately denied African Americans to higher-cost lenders, including the one that Citigroup now controls: Associates / CitiFinancial.

    Following the NYBD hearing, in "Citigroup Faces Attacks on Loan Record," Wall Street Journal, November 13, 2000, C19, a "spokeswoman for Citigroup" was quoted as saying 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), on <www.ffiec.gov>, and reiterated: 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, 2000, 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, 2000: Source One.

     But note that Citigroup acquired Source One in the middle to end of 1999, and that 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. Particularly in light of Citigroup's refusal to answer questions in public forums, and the lack of clarity surrounding Citigroup's claims about its lending record (including in the Application), the Board should schedule and hold the requested hearings.

* * *

      Citigroup on November 7, 2000, announced certain purported reforms of the practices of CitiFinancial. ICP found, and finds, these to be less than meaningful, often misleading, and full of loopholes. ICP will amplify on that at the requested hearing. 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. While a "referral-up" is purportedly being instituted in four states, no explanation is given why prime loans can't simply be programmed into CitiFinancial's "Maestro" computer system. Citigroup's November 7, 2000, commitment was and is illusory, and only further militates for the federal hearings that the FRB and OCC should now schedule and hold.

IV. CITIGROUP DID NOT IMPROVE COMMERCIAL CREDIT'S (OR IMC'S OR SOURCE ONE'S) PRACTICES; THIS RECORD DOES NOT SUPPORT CITIGROUP'S CLAIMS THAT IT WILL BE IMPROVING THE PRACTICES OF ASSOCIATES FIRST CAPITAL CORPORATION, AND WOULD NOT ADVERSELY AFFECT EAB'S PRACTICES

    Travelers already owned the subprime lender Commercial Credit (since renamed CitiFinancial), prior to merging with Citicorp in 1998. After that merger, and prior to acquiring Associates First Capital on November 30, 2000, Citigroup acquired the subprime lender IMC, and the mortgage company Source One (which had, and has, a subprime channel). Consider, in terms of Citigroup's claims that it improves the compliance practices of the companies it acquires, that state regulators in Connecticut have received, from September 21, 1995 to September 21, 2000, 18 complaints about Commercial Credit (the former name of CitiFinancial), three complaints against CitiFinancial (since its renaming), four complaints against Citigroup-owned IMC Mortgage, 165 complaints against Citibank, N.A., and four complaints against Citigroup-owned Source One Mortgage.

      As to IMC, we direct the Board to, and incorporate into the record by reference, the Chicago Sun-Times of September 27, 2000, at 34, "Lenders preyed on poor homeowners, lawsuit says." Significantly, and as an adverse managerial resources factor, it appears clear that the Citigroup official (and Citigroup CEO's relative) most responsible for Citigroup's acquisition of IMC was, during the relevant time frame, engaged in "substance abuse": see, e.g., "Citigroup's Marc Weill Left Firm to Battle Drug Habit," Wall St. J., Nov. 22, 2000. In a February 5, 2001, press release, CitiFinancial disclosed that it had found errors in IMC's servicing software and programming. And see Section VI, below, for more on the managerial resources factor.

* * *

     In 1997, when Travelers applied to the Office of Thrift Supervision ("OTS") for a savings bank charter, ICP commented, to the OTS and to the New York State Banking Department ("NYBD"), that Travelers' Commercial Credit units were presumptively violating the Home Mortgage Disclosure Act, inter alia by refusing to request, record and report data on the race and gender of applicants, and by reporting less-than-credible approval percentages, as high as 100%. See, e.g., "Travelers Unit's Loan Record Hit," National Underwriter, June 23, 1997; see also American Banker of June 13, 1997, at 3.

     After several months of comments and response, Travelers acknowledged to the NYBD that it had been violating HMDA. In itself, this shows a problematic compliance culture at Commercial Credit (now CitiFinancial) and Travelers (now Citigroup). But CitiFinancial's 1999 HMDA data reflects the same high levels of "Race Not Available" notations for loan applicants, and, in instance, the same less-than-credible 100% approval rate.

    For example, CitiFinancial Company (DE), in the Pittsburgh MSA in 1999 reported "Race Not Available" for 667 refinance applications, while reporting race for only 63 applications from whites, and only seven from African Americans -- and reported ALL of these applications as having resulted in originations. This is a presumptive -- and continuing -- violation of the Home Mortgage Disclosure Act, the Congressional purpose of which is to allow the public and the regulators to assess mortgage lenders' compliance with anti-discrimination laws.  [snip - contact ICP for more recent data]

     Citigroup may attempt to argue that its subprime CitiFinancial units report a high percentage of applications as "Race Not Available" because they take most applications by telephone. But (1) not all CitiFinancial units have such high "Race Not Available" percentages (see, e.g., CitiFinancial Mortgage Co. (MD), which in the Chicago MSA in 1999 reported seven conventional home purchase loan applications from African Americans, two from whites, and only three as "Race Not Available;" see also the fair lending analysis in this Section). Also note that among the "irregularities" in the Commercial Credit HMDA data that ICP commented on in 1997 were applications that Commercial Credit claimed were "by phone," but turned out to have been through Smith Barney brokers (that is, "face to face," at an affiliate). As Citigroup's number of affiliations has only increased since then, ICP directs the Board to inquire into the basis, or lack thereof, for CitiFinancial's unprecedentedly high percentage of "Race Not Reported" applications -- with particular reference to Primerica/PFS, whose representatives take applications on a face-to-face basis.

     In 1998, when Travelers applied to various regulatory agencies to acquire Citicorp and its subsidiaries, ICP commented to, inter alia, the Delaware insurance regulator. As a formal hearing held in Dover, Delaware, senior officers of Travelers (and now Citigroup) heard specific, sworn testimony about problematic loans (including flipping) done by Commercial Credit. No action, to ICP's knowledge, was ever taken by Citigroup on this testimony. And see above.

     As to Citigroup's Primerica subsidiary, ICP last month received by the following complaint:

Subj: Citigroup
Date: 2/26/01 3:57:31 PM Eastern Standard Time
From: [ ] (deleted at submitter's request; ICP will provide to the agencies upon request)

To: CitiWatch [at] innecitypress.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...

    The Board should schedule public hearings, which ICP is hereby timely requesting, to take testimony from those affected by all of Citigroup's subprime affiliates. On the current record, the Board could not legitimately approve this application.

V. CITIGROUP'S SALOMON SMITH BARNEY IS ALSO INVOLVED IN PREDATORY LENDING

     Citigroup, through its investment bank Salomon Smith Barney, is also deeply involved in questionable subprime lending. For example, in 1998 Salomon Brothers Realty Corp. provided warehouse lines of credit of $775 million to subprime lender New Century Mortgage Corporation ("New Century"), requiring New Century either to securitize $1 billion of loans through Salomon Smith Barney as sole underwriter, or, in the alternative, to sell $1 billion in loans to Salomon Brothers Mortgage Securities VII for their own securitization.

   To document for this proceeding that the subprime lender New Century disproportionately targets its high interest rate loans at people of color, consider its refinance lending record in the following MSAs, compared with the aggregate's refinance lending record:

   In the Philadelphia MSA in 1999, New Century made 134 refinance loans to whites, and 61 to African Americans, a ratio of 2.2 to one. The aggregate industry made 42,476 refinance loans to whites in this MSA, and 5301 to African Americans, a ratio of 8.01 to one. New Century is over 3.5 times more likely to target its (high interest) refinance loans to African Americans in this MSA than is the industry aggregate, with its (admittedly blended interest rate) loans. [snip - contact ICP for more recent data]

     In 1999, Salomon Brothers Realty Corp. provided a $100 million repurchase line of credit to Long Beach Mortgage -- a subprime lender that was sued by the Department of Justice of race discrimination and pricing disparity grounds.

     Salomon Smith Barney was the underwriter for the subprime mortgage backed securities issuances Centex Home Equity 1999-4 and 2000-A, and well as Ameriquest Mortgage Securities 2000-1.

    To document for the record that the Citigroup/SSB-underwritten subprime lender Ameriquest disproportionately targets protected classes with its (Citigroup-enabled) high-interest rate loans, consider Ameriquest Mortgage Co.’s refinance mortgage lending in the New York City MSA in 1998: 371 loans to African Americans, 214 loans to whites, a ratio of 1.73 to one. The aggregate industry in this MSA in 1998 had a ratio of 0.240 to one. In the NYC MSA, SSB-underwritten Ameriquest targets African-Americans 7.21 times more frequently than the aggregate with its high interest rate refinance loans.  [snip - contact ICP for more recent data]  What standards do SSB and Citigroup have for working with subprime lenders? Apparently none.

      In light of Citigroup's November 30, 2000, acquisition of The Associates, as well as Associates' earlier announcement that it will begin to securitize most of its (subprime) loans (see Asset-Backed Alert of June 20, 2000, reporting inter alia that SSB managed a $1 billion securitization of Associates' subprime credit card portfolio in early 2000), Salomon Smith Barney is the prospective logical underwriter for future securitization of Associates' / CitiFinancial subprime loans, including those of the type documented by the FTC's March 6, 2001, lawsuit.

VI. CITIGROUP RUN AFOUL OF THE "MANAGERIAL RESOURCES" FACTOR IN NUMEROUS OTHER WAYS

   Under the explicit "managerial resources" factor of the Bank Holding Company Act (the "BHC Act"), ICP presents the following:

      A recent Senate investigation into money laundering has found, for the umpteenth time, that Citigroup has insufficient controls in place to prevent money laundering. See, <http://www.senate.gov/~gov_affairs>. See also, New York Times of March 3, 2001, March 3, 2001, Citibank Admits to Lapses in Dealings With Offshore Shell Banks. This follows previous reports of similar deficiencies at Citigroup. See, e.g., the General Accounting Office ("GAO") report issued on November 29, 2000 (GAO-01-120; "Possible Money Laundering Through U.S. Banks"), which found that Citibank, until April, 2000, 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"). See also, Money Laundering Alert, January 2000.

     In this light, ICP directs the Board to a submission that Citigroup made to the California Department of Insurance ("CDI") last fall, in connection with its application(s) to acquire Associates First Capital and its subsidiaries. In response to the CDI's Question 8 ("Provide a list, and certified copies of all criminal, civil, regulatory and administrative actions(s) taken against applicant and/or applicant's ultimate controlling parent by any government body including actions outside the United States (within the last ten (10) years"), Citigroup stated:

California Certificate of Authority Application

Attachment C

Response to Item 8

To the best of Citigroup's knowledge, aside from certain environmental issues, there have been no criminal, civil, regulatory or administrative actions taken against Applicant (Citigroup Inc.) by any governmental body including actions outside the United States within the last ten years. From time to time, Applicant has come within the regulatory scope of federal and state environmental agencies through its acquisition or merger of companies previously engaged in manufacturing activities. In the past, these environmental agencies have required Applicant to undertake certain actions and all such issues have been satisfactorily resolved. Additionally, the direct and indirect subsidiaries of the Applicant are in regulated businesses and as a result are subject to regulatory examinations and actions in the ordinary course of business by the banking regulators, Securities and Exchange Commission and the insurance departments of the various states. Governmental bodies are also customers, account holders and insureds of the subsidiaries of Application, which may be involved in disputes or litigation regarding terms and coverage in the ordinary course of business. To the best of our knowledge, there have been no criminal proceedings brought against any subsidiary of the Application while they were subsidiaries within the last 10 years. Information concerning major proceedings had been described in the periodic reports filed by Citigroup and its predecessors with the Securities and Exchange Commission. Citigroup's Annual Reports Form 10-K for the past two years are included with this Form A application.

     ICP hereby formally asks the Board, as Citigroup's primary regulator, to consider the validity of the above-quoted answer, that Citigroup provided to the California Department of Insurance in connection with its acquisition of The Associates last Fall.

* * *

   This very transaction has highlighted conflicts of interest, and insufficient safeguards, within Citigroup. Citigroup's Salomon Smith Barney was an "advisor" to North Fork Bancorporation on its preparations to bid for EAB, and only late in the process disclosed the obvious conflict (that Citibank, N.A. was a bidder). See, e.g, The Daily Deal of February 27, 2001.

     This raises "managerial resources" and conflict of interest concerns that must be inquired into by the Board. The lack of safeguards (and of due diligence) was also apparent in Citigroup's (ill-considered) acquisition of Associates First Capital. At the above-referenced October 2000 hearing at the Missouri Department of Insurance, CitiFinancial's general counsel, Mr. Martin Wong, testified that "[t]he due diligence process that was conducted prior to the execution of the merger agreement basically occurred over the Labor Day weekend in a span of three or four days in essence. The persons involved in the due diligence process from both sides... were limited. There were four individuals, in essence, that were representing Associates, and these were obviously high-level executives, and I would say there would probably be about a dozen or so Citigroup folks representing Citigroup in the due diligence process.... There were -- there was an insurance person from our end, Jay Fishman, who asked questions again of the Associates person about the insurance business... I don't know the answer to your question...". MDI Tr. at 104-105. The described due diligence was inadequate, and reflects adversely on the managerial resources factor that the Board must consider.

     As relates to both Citigroup and the Federal Reserve, in the above-referenced MDI hearing, ICP questioned Citigroup's Martin Wong about whether Citigroup had communicated with the FRS about the legal effect of Associates National Bank's less than satisfactory CRA rating, Tr. at 70:


11 MR. LEE: One follow-up question, Mr. Wong.
12 To your knowledge, has Citigroup sought a ruling by the
13 Federal Reserve Board on this issue?
14 MR. WONG: I do not know. I do not have an
15 answer to the question. I do not know the answer to that
16 question.

     After the October 18, 2000, MDI hearing, ICP received a copy of a Federal Reserve Bank of New York e-mail, under the Freedom of Information Act ("FOIA"), reflecting a September 5, 2000, telephone meeting between Citigroup regulatory attorney Carl Howard and the FRS. On November 17, 2001, ICP received another FOIA response from the FRS, this time including an e-mail reflecting two further meetings between Citigroup and the FRB, on October 2 and October 13, 2000. In an October 2, 2000, e-mail, FRB staffer Adrienne Hurt wrote to FRS attorney Scott Alvarez and others, "I have been asked to confirm the next meeting with Citigroup." (After that, two full lines were redacted). It is clear, however, 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]."...ICP calls on the Board to forthwith schedule public meetings on Citigroup's application, and calls on the Board to deny Citigroup's application.

* * *

    Finally, as matters concerning (and injuring) the public interest, consider that Citigroup is extensively involved in "resource extraction," much of it environmentally destructive, through such units as Citicorp Ventures Philippines, Inc., Citicorp Petrolease, Inc., Phibro Energy Production, and Phibro Commodities. Since November, 2000, 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..

     Citigroup's SSB has served as advisor and done underwriting for problematic projects like the Three Gorges dam in China, for the World Bank and controversial projects like the proposed Chad - Cameroon oil pipeline, and for the genetic engineering firms Deltagen, Orchid BioSciences, Genaissance Pharmaceuticals, and Genecor International. Citigroup's SSB has acted as lead underwriter, not only for presumptively predatory mortgage loans, but also for Wackenhut Corrections Corp.'s initial public offering of the private prison-based REIT, Correctional Properties Trust. Giving increasing public awareness of, and opposition to, such practices, Citigroup's involvement must be considered in connection with the notice, under not only the "managerial resources" factor, but also (prospectively), the financial resources and ability factors -- as does the potential financial ramifications of the FTC's March 6, 2001, predatory lending lawsuit.

VII. CONCLUSION

     For the reasons set forth above, the FRB and OCC should schedule and hold a public hearing on these applications, and, on the current record, the FRB and OCC should deny the applications.

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

Respectfully submitted,


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

cc:   Board of Governors of the Federal Reserve System

       New York State Banking Department

For or with more information, contact us.


How to Contact Us     Site Map    Search This Site    Inner City Press' Community Reinvestment Reporter   Global Inner Cities   Inner City Reporter Bank Beat   Inner City Poetry   Community Reinvestment   Environmental Justice Insurance Redlining In the Bronx FCC/Telecommunications About Inner City Press Inner City Arts&Culture Inner City Housing ICP's Freedom of Information Guide Links/Resources Frequently Asked Questions   The Inner City Reporter's Federal Reserve Beat Privacy Policy    For the Media Inner City Public Interest Law CenterWhat's New on Site


Copyright 2001- 2003 Inner City Press/Community on the Move, Inc..   All rights reserved.   For further information, or to request reprint or other permission, contact: Permissions Coordinator, Legal Administration, Inner City Press, P.O. Box 580188, Mount Carmel Station, Bronx, NY 10458.  Phone: (718) 716-3540.  Fax: (718) 716-3161.  E-mail:  CitiWatch [at] innercitypress.org