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Inner City group opposes Citigroup-Banamex merger

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  • narconews@hotmail.com
    SOURCE: http://www.innercitypress.org/citimex.html Opposition to Citigroup - Banamex Updated June 4, 2001 On May 17, 2001, the chief executive of the largest
    Message 1 of 1 , Jun 4, 2001
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      SOURCE: http://www.innercitypress.org/citimex.html

      Opposition to Citigroup - Banamex

      Updated June 4, 2001

      On May 17, 2001, the chief executive of the largest bank in the
      United States, Citigroup, appeared at a press conference in Mexico
      City, to announced Citigroup's $12.5 billion proposed acquisition of
      Banacci / Banamex, the second largest bank in Mexico. Combined with
      Citigroup's Confia operation, Citigroup would control 26.4% of the
      Mexican banking market, and over 21% of all Mexican bank accounts.
      On June 1, Citigroup stated that it had already submitted its
      required application to the U.S. Federal Reserve Board, and would
      soon be applying to other agencies.

      On June 4, 2001, Inner City Press / Community on the Move and
      its affiliates (ICP) filed comments opposing Citigroup's
      applications, with the Federal Reserve Board, the California
      Commissioner of Financial Institutions, the Mexican National Banking
      and Securities Commission, and regulators in Argentina, the Cayman
      Islands, Bahamas and the United Kingdom. ICP's comment to the
      Federal Reserve is summarized below; below that is ICP's initial
      comment to the Mexican bank regulator, which has since been
      supplemented. What promises to be a trend-setting proceeding has
      begun (see, e.g., the American Banker's front-page article of May 31,
      2001). We will be running updates in this space, weekly or more
      frequently. For or with more information, contact us.

      [ICP's June 4, 2001 comment to the Federal Reserve Board:]


      June 4, 2001

      Federal Reserve Bank of New York
      Attn: Mr. James Beit, Bank Supervision Officer, et al.
      33 Liberty Street
      New York, NY 10045-0001
      Via e-mail to comments.applications@...

      RE: Timely comment in opposition to, and requesting a hearing on,
      Citigroup's applications under Section 3 of the Bank Holding Company
      Act, and under the Board's Regulation K, to acquire Grupo Financiero
      Banamex Accival, S.A. de C.V., Banamex, California Commerce Bank and
      their affiliates

      Dear Mr. Beit, 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 timely comment opposing and
      requesting hearings on the applications and notices of Citigroup,
      Inc. (along with its affiliates, "Citigroup") to acquire Grupo
      Financiero Banamex Accival, S.A. de C.V., and its affiliates,
      including California Commerce Bank ("CCB") and Banamex
      (collectively, "Banamex" or "Banacci").

      Citigroup's proposal raises numerous policy and regulatory
      issues, including under the Bank Holding Company Act (the "BHC Act")
      and the Community Reinvestment Act (the "CRA"). The Federal Reserve
      Board's (the "FRB's") duties go beyond reviewing Citigroup's proposed
      acquisition of Banacci's bank in the U.S., CCB: if it acquires
      Banacci, Citigroup would control over 25% of banking assets in
      Mexico. The FRB enforces the cap of 10% of U.S. deposits that any one
      institution can control. Here, a U.S.-based bank seeks to control
      over 25% of the banking assets of the U.S.'s neighbor to the south,
      Mexico.

      The FRB should hold hearings -- this is particularly true in
      light of the U.S. Federal Trade Commission's (the "FTC's") pending
      lawsuit against Citigroup and CitiFinancial, f/k/a Associates First
      Capital Corporation, for predatory lending (discussed below), and
      Citigroup's statements that it would seek to offer, in Mexico and to
      Latinos in the U.S. through the Banamex brand, the high interest rate
      consumer finance lending product for which it is being sued. See,
      e.g., Business Week of June 4, 2001: "In Mexico, says Victor Menezes,
      Citi's head of emerging markets, the group hopes to build a consumer-
      finance business -- which typically specializes in high-interest
      lending to people with poor credit -- with the help of Keith Hughes,
      the former Associates CEO, who will serve as a consultant."

      As set forth below, the FRB has to date been lax in its
      regulation of Citigroup, on issues including predatory lending and
      money laundering. In 1998, the U.S. General Accounting Office found
      that Citibank had violated its own supposed safeguards, in assisting
      Raul Salinas de Gortari in whisking $90 to $100 million out of
      Mexico. See, GAO/OSI-99-1, "Private Banking: Raul Salinas, Citibank
      and Alleged Money Laundering." Citigroup suffered few to no
      repercussions. In November 2000, a U.S. Senate investigation into
      money laundering again found that Citigroup has insufficient controls
      in place to prevent money laundering. See, e.g., New York Times of
      March 3, 2001, Citibank Admits to Lapses in Dealings With Offshore
      Shell Banks. Citigroup here proposes to acquire Banamex (subject to a
      May 1998 FRB cease and desist order on money laundering) and its
      affiliates in, among others, Bahamas and the Cayman Islands. This is
      another reason for the requested hearings.

      The $12.5 billion that Citigroup proposes to pay for Banacci
      makes this the largest corporate acquisition proposal in Mexican
      history. In 1998, Citigroup acquired Confia (which the FRB soon
      forced to disgorge $12.2 million in money laundering-related funds);
      Citigroup was granted by FOBOPROA what amounted to a subsidy of $120
      million a year, in the form of interest payments on a $2.5 billion
      high yield promissory note. Citigroup did not obtain a prepayment
      penalty clause, which it had sought (analogous, ironically, to
      Citigroup's predatory lending practices in the U.S., analyzed below).

      As public outrage grew, FOBOPROA's successor, IPAB, paid off
      this note in May 2000. Citigroup sued, and also threatened to pull
      out of Mexico. Ernesto Zedillo, just before leaving office in
      November 2000, agreed to continue (subsidy) payments to Citigroup.
      Serious questions are being raised about this arrangement, about the
      tax treatment of this proposal, about Citigroup's proposed continued
      ownership interest in the telecommunications firm Avantel, and about
      certain of the $3.6 billion of troubled loans that Banamex
      transferred to FOBOPROA / IPAB. These are all issues that must be
      inquired into and addressed, in proceedings before the FRB and other
      agencies, before the FRB even considers acting on (other than deny)
      these Citigroup - Banamex applications.

      The FRB in November 2000 allowed Citigroup to acquire
      Associates, a company which had already been sued for discrimination
      against Latinos by the U.S. Justice Department, without even allowing
      public comment on Citigroup's Regulation K applications to acquire
      Associates' affiliates. Significantly, on March 6, 2001, the FTC sued
      Citigroup, CitiFinancial, and Associates, alleging 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, and
      incorporated herein by reference). Under its powers as "umbrella
      regulator," enshrined in the Gramm-Leach-Bliley Act of 1999 ("GLBA"),
      the FRB is Citigroup's primary supervisor. It is troubling that that
      it was the FTC, and not the FRB, that took action on Citigroup's
      questionable subprime lending; it is increasingly troubling that the
      FRB refuses to conduct any on-site examination of CitiFinancial, even
      as its practices would be exported to Mexico (see above). Under the
      principles of the Foreign Bank Supervision Enhancement Act of 1991
      ("FBSEA"), and the principles promulgated by the Basel Committee on
      Banking Supervision (the "BCBS"), the FRB is Citigroup's home country
      supervisor. ICP contends that the FRB has a duty to fully inquire
      into and act on Citigroup's subprime lending practices, which are
      alleged by the FTC to be predatory, before acting on (other than to
      deny) these Citigroup - Banamex applications. Citigroup's April 16,
      2001, response to the FTC predatory lending complaint claims, as its
      first argument, 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 in November 2000, it argued --
      including to the FRB -- that its acquisition would be beneficial to
      consumers, including Associates' customers. But in 2001, Citigroup
      has argued 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 FRB
      and others last Fall. It is also another reason that Citigroup should
      not be granted approvals to acquire Banamex, and to export
      Associates' practices to Mexico.

      When it acquired Associates in November 2000, Citigroup
      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 has continued selling single premium credit life
      insurance, where this cost is rolled into the loan, and never
      recouped by the borrower. Citigroup continues 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
      continues 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, no explanation
      has been 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 furthermore, Citigroup
      has yet to implement significant parts of it. ICP has submitted to
      the FRB (and incorporates herein by reference) a six-page chart,
      mailed to ICP by the New York Banking Department, 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]...;" "Sales Practices Compliance Programs...
      TBD..."; "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 - Banamex proceeding 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.

      There are also numerous other Citigroup practices which evidence
      a lack of social, environmental and even human rights standards,
      which the FRB should inquire into and address before even considering
      allowing Citigroup to acquire the second-largest bank in Mexico, and
      to export these practices. See Section VI, below.

      In a speech on August 25, 2000, at the FRB's symposium in
      Jackson Hole, Wyoming, the FRB's chairman noted some "resonat[ing]
      arguments" questioning the type of trade and investment regime
      represented by this proposal, through which a U.S.-based bank would
      come to control over 25% of banking assets in Mexico, and stated
      that "those of us who support continued endeavors to extend market-
      driven globalization need to understand and, if possible, address the
      [se] concerns...". See,
      http://www.federalreserve.gov/boarddocs/speeches/2000/20000825.htm;
      and see, "Protesters' Concerns Should Be Addressed, Says Fed Chief,"
      National Post, August 26, 2000, Pg. D3. Consistent with that, the FRB
      should conduct a full-scope and transparent review of Citigroup's
      proposal to acquire Banamex, including holding the requested
      hearings. While Citigroup clearly "support[s and profits from]
      continued endeavors to extend market-driven globalization," it does
      not appear committed to transparency, or public participation. On May
      17, Citigroup's senior officials bragged that Citi had already
      presented the Banamex deal to the FRB and its chairman. 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"). As we noted 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"), ICP believe that it is inappropriate for FRB staff to hold ex
      parte discussions with corporations which will soon submit
      applications, subject to public comment, for regulatory approval.
      According to Citigroup's two most senior officials, such
      communications have already taken place in this case. ICP has
      requested a summary of, and all records reflecting or relating to,
      these communications, under the Freedom of Information Act ("FOIA")
      and otherwise, but has yet to receive any documents or summary from
      the FRB. The documents and summary should be released forthwith, and
      the FRB should schedule and hold hearing on this Citigroup - Banamex
      proposal.

      II. CITIGROUP'S APPLICATION SHOULD BE DENIED UNDER CRA, AND UNDER THE
      BHCA'S "CONVENIENCE AND NEEDS" STANDARD

      According to the Form S-4 that Citigroup filed with the
      Securities and Exchange Commission on June 1, 2001, Citigroup has
      already "filed two applications with the [FRB]. The first, under
      Section 3 of the Bank Holding Company Act of 1956, seeks the Federal
      Reserve Board's approval of our acquisition of Banacci's U.S. bank
      subsidiary, California Commerce Bank. The second, under the Federal
      Reserve Board's Regulation K, is a notice regarding the acquisition
      of Banacci and its foreign subsidiaries and operations."

      The FRB must consider the Community Reinvestment Act, 12 U.S.C.
      §2901 et seq. ("CRA"), including Citigroup's record of fair service
      to its communities, particularly low- and moderate-income ("LMI")
      neighborhoods. Since Citigroup's subprime lending activities, alleged
      to be predatory by the FTC and others, occur in every service area of
      each of Citigroup's banks, these activities must be reviewed and
      acted on by the FRB, under the CRA and otherwise. It is also
      significant that Citigroup controls a bank with a rare Needs to
      Improve CRA rating -- under the Gramm-Leach-Bliley Act of 1999, this
      is supposed to preclude Citigroup from acquiring another bank in the
      U.S. (in this case, CCB). In late 2000, 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 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. Citigroup's ANB still has a Needs to Improve
      CRA rating. 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.

      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. Under the
      Board's Shawmut precedent (see above), prior to any final Board
      action on the applications, the predatory lending issues documented
      by the FTC and others must be fully investigated and addressed. In
      the interim, the Board should schedule and hold public hearings.

      Beyond the CRA and the above-cited FRB precedents, Section 3 of
      the BHC Act provides that in "every case, the Board shall take into
      consideration the financial and managerial resources and future
      prospects of the company or companies and the banks concerned, and
      the convenience and needs of the community to be served... The Board
      shall disapprove any application under this section by any company
      if... in the case of an application involving a foreign bank, the
      foreign bank is not subject to comprehensive supervision or
      regulation on a consolidated basis by the appropriate authorities in
      the bank's home country."

      As to the first part of the above-quoted, ICP contends that
      the "communit[ies] to be served" for purposes of these application
      are not only the market area of CCB, or of Citigroup's existing
      banks. In 1998, Citigroup acquired Confia and its 400 branches. By
      February 2001, Confia had only 197 branches left. See, e.g.,
      LatinFinance, February, 2001, "Citibank's New Start." Banamex has
      over 1,300 branches in Mexico (as well as, in the U.S., not only CCB,
      but also agencies in New York and Texas). Citigroup's projected cost
      savings rely on "rationalizing" (i.e., imposing its branch closing
      axe to) Banamex's operations. ICP contends that an inquiry into
      Citigroup's branch closing and service reduction practices, not only
      in the U.S. (where Citigroup proposes to close 24 branches, in
      connection with a proposed acquisition of 97 branches), but also in
      Mexico, is necessary in this case.

      On Citigroup's under-service with branches of low-income
      neighborhoods, even in its headquarters city, an ICP representative
      on April 17, 2001 asked Citigroup's CEO about the settlement
      Citigroup reached earlier that 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 also
      asked Citigroup's CEO why, if Citigroup claims to be a leader, it is
      seeking "confidential treatment" from the FRB for 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 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. Citigroup's initiatives to dominate the
      legislative process would, needless to say, be further exported and
      expanded if these applications were approved.

      While the FRB in 1996 made a FRBSEA determination as to Banacci
      (see, e.g., Grupo Financiero Banamex Accival, S.A. de C.V., Banco
      National de Mexico, S.A., Banamex USA Bancorp, Order Approving the
      Formation of a Bank Holding Company and a Proposal to Engage in
      Certain Securities Activities, 82 FED. RES. BULL. 1047, 1049 (Nov.
      1996), in the half-decade since then, Banamex, Citigroup's Confia and
      at least four other institutions have been subject to money
      laundering-related enforcement orders, and controversy has grown
      around privatization and bail-out deals, including with respect to
      Banamex and Citigroup's Confia. A detailed and updated inquiry into
      the "comprehensive supervision or regulation on a consolidated basis"
      statutory factor is needed -- frankly, the FRB's failure to take
      action on Citigroup's questionable subprime lending (see above)
      raises questions about the U.S. / FRB's compliance with this standard
      of the BHC Act, and core principle of the Basel Committee on Banking
      Supervision. It is imperative that the FRB hold public hearings on
      Citigroup's proposal to acquire Banamex.

      III. QUANTITATIVE EVIDENCE OF CITIGROUP'S DISPARATE LENDING IN ITS
      U.S. COMMUNITIES

      The analysis below uses the most recent Home Mortgage Disclosure
      Act ("HMDA") data available from the Federal Financial Institution
      Examination Council ("FFIEC"), 1999, and Citigroup's 2000 Loan
      Application Register ("LAR") data.

      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 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. 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 has obtained 2000 LAR data from Citigroup; ICP urges the FRB
      to request and analyze 2001 data (and not simply Citigroup's
      summaries thereof) 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 to obtain this (and Citigroup's
      2001) Loan Application Register, and to make appropriate inquiries.

      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." In an April 20, 2001, submission to the
      FRB, Citigroup claimed 3,623 Citibank loans in "majority-minority"
      census tracts in the New York City MSA in 2000 -- but the submission,
      at page 10, showed that only 1,606 of those loans, less than half,
      were home purchase or refinance loans. More than half, then, were the
      misleading "micro-mortgages" analyzed above.

      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, and elsewhere in the
      U.S. (that is, on actual retail, non-prescreened loan applications).

      IV. 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 (and
      the FTC and others) contend are predatory.

      For the record: 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. This is both discriminatory and
      predatory; this merger should not be approved.

      In 1999 in the Washington, DC MSA, Citicorp Mortgage made 159
      refinance loans to whites, and only 22 to African Americans, a ratio
      of 7.23 to one. Citicorp Mortgage denied the applications of African
      Americans more than eight times more frequently than those of whites.
      Associates Financial Services, the high cost lender, made 61
      refinance loans to whites in Washington in 1999, and 84 to African
      Americans -- a ratio of 0.72 to one. The subprime lender that
      Citigroup now controls is more than ten times more likely to target
      African Americans with its high cost loans than is Citicorp Mortgage,
      with normal interest rate loans. Again, this is both discriminatory
      and predatory.

      In the Philadelphia MSA in 1999, Citicorp Mortgage made 89
      refinance loans to whites, and only three to African Americans, a
      ratio of 29.67 to one. Associates Financial Services, on the other
      hand, made 64 refinance loans to whites, and 74 to African Americans -
      - a ratio of 0.86 to one.

      In the Newark, NJ MSA in 1999, Citicorp Mortgage made 68
      refinance loans to whites, and only two to African Americans, a ratio
      of 34 to one. Citicorp Mortgage denied the applications of African
      Americans more than seven times more frequently than those of whites.
      Associates Financial Services, the high cost lender, made 14
      refinance loans to whites in Newark in 1999, and 15 to African
      Americans -- a ratio of 0.93 to one.

      In the Chicago MSA in 1999, Citicorp Mortgage made 361 refinance
      loans to whites, and only 25 to African Americans (a ratio of 14.44
      to one) and only 69 to Latinos (a ratio of 5.23 to one). On
      applications for these loans, Citicorp Mortgage denied Latinos 4.48
      times more frequently than whites, and denied African Americans 3.32
      times more frequently than whites. Associates Financial Services, the
      high cost lender, made 313 refinance loans to whites, and 203 to
      African Americans -- a ratio of 1.54 to one. This Citigroup-
      controlled subprime lender is more than nine times more likely to
      target African Americans with its high cost loans than is Citicorp
      Mortgage, with normal interest rate loans (for which CM denies
      African Americans more than four times more frequently than whites).

      In the Los Angeles MSA in 1999, Citicorp Mortgage made 138
      refinance loans to whites, and only 10 to African Americans (a ratio
      of 13.8 to one) and only 36 to Latinos (a ratio of 3.83 to one). On
      applications for these loans, Citicorp Mortgage denied African
      Americans 3.5 times more frequently than whites -- essentially
      driving the disproportionately denied African Americans to higher-
      cost lenders, including one that Citigroup now controls. Associates
      Financial Services, the high cost lender, made 12 refinance loans to
      whites, and 15 to African Americans (a ratio of 0.8 to one) and 25 to
      Latinos (a ratio of 0.48 to one). This Citigroup-controlled subprime
      lender is more than 17 times more likely to target African Americans,
      and almost eight times more likely to target Latinos, with its high
      cost loans than is Citicorp Mortgage, with normal interest rate loans
      (for which CM denies African Americans more than three times more
      frequently than whites). This is both discriminatory and predatory;
      this merger should not be approved.

      In the Phoenix MSA in 1999, Citicorp Mortgage made 36 refinance
      loans to whites, and only one to a Latino, and NONE to African
      Americans. Associates Financial Services, the higher cost lender, on
      the other hand, made 307 refinance loans to whites, and 144 to
      Latinos, 15 to African Americans, and 11 to Native Americans.
      Similarly, in the Tampa, Florida MSA, Citicorp Mortgage in 1999 made
      nine refinance loans to whites, and one each to Latinos and African
      Americans. The higher cost Associates Financial Services made 173
      refinance loans to whites, 28 to Latinos, and 83 to African
      Americans. This merger should not be approved.

      In the Oakland MSA in 1999, Citicorp Mortgage made 82 refinance
      loans to whites, and only five to African Americans (a ratio of 16.4
      to one) and only ten to Latinos (a ratio of 8.2 to one). On
      applications for these loans, Citicorp Mortgage denied African
      Americans 4.05 times more frequently than whites -- essentially
      driving the disproportionately denied African Americans to higher-
      cost lenders, including one that Citigroup now controls. Associates
      Financial Services, the high cost lender, made 29 refinance loans to
      whites, and 26 to African Americans (a ratio of 1.12 to one) and ten
      to Latinos (a ratio of 2.9 to one). This Citigroup-controlled
      subprime lender is more than 14 times more likely to target African
      Americans, and over 2.8 times more likely to target Latinos, with its
      high cost loans than is Citicorp Mortgage, with normal interest rate
      loans (for which CM denies African Americans more than four times
      more frequently than whites).

      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, 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.

      The American Banker of March 13, 2001, at 11, reported 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....".

      See also, "FTC SUES ASSOCIATES FIRST CAPITAL; PROBED LENDER HAS
      POOR RECORD HERE," Madison (Wisc.) Capital-Times, March 9, 2001,
      reporting 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."

      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 inquiring into the above-quoted communication,
      the FRB 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.

      As to Citigroup's Primerica subsidiary, ICP recently received
      the following complaint:

      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...

      Citigroup is already expanding Primerica into Spain; if these
      applications are approved, it is foreseeable that these (and
      Associates') practices would be further expanded in Mexico. The FRB
      must inquire into and act on these issues, before even considering
      (other than denying) these applications.

      V. CITIGROUP'S INVESTMENT BANK IS ALSO INVOLVED IN PREDATORY LENDING

      Citigroup, through its investment banking operation, is also
      deeply involved in questionable subprime lending. For example, 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. 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.

      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. What
      standards do SSB and Citigroup have for working with subprime
      lenders? Apparently none. Most recently, Citigroup has
      sought "confidential treatment" for even the names of the subprime
      lenders with which it does business. The FRB should obtain and
      release this list, and hold the requested hearings.

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

      Under the explicit "managerial resources" factor of Section 3 of
      the Bank Holding Company Act and Regulation K, and in light of the
      FRB's duties under the principles promulgated by the Basel Committee
      on Banking Supervision, ICP presents the following:

      A recent Senate investigation into money laundering has found,
      once again, that Citigroup has insufficient controls in place to
      prevent money laundering. See,
      <http://www.senate.gov/~gov_affairs/022801_psi_case_contents.htm>.
      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, and see the following, from
      Mother Jones magazine's December 2000 article, "Tax Cheater's
      Paradise:"

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

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

      -emphasis added.

      Since the above-quoted, the FRB on May 31, 2001, settled
      enforcement proceedings with the above-referenced Carlos Hank Rhon.
      Particularly in this light, and in light of the FRB's 1998 cease and
      desist order against Citigroup's Confia, ICP explicitly requests that
      the FRB act on 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 FRB, as Citigroup's primary
      regulator, to consider the (in-) validity of Citigroup's above-quoted
      answer, to another regulatory agency which, under the GLB Act, relies
      on and defers to the FRB.

      * * *

      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 its applications
      and notices to acquire Banamex, 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 Board should schedule and
      hold a public hearing on these applications, and, on the current
      record, the Board must 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

      NOTE: This page will be updated, when we receive the information
      that Citigroup is seeking to withhold, in the face of Freedom of
      Information requests from ICP and others, and Citigroup's responses
      to the regulatory agencies. For or with more information, contact us.

      (First) Report of May 29, 2001: On May 17, Citigroup's CEO Sandy
      Weill appeared at a press conference in Mexico City, to announced
      Citigroup's $12.5 billion deal to acquire Banacci / Banamex, the
      second largest bank in Mexico... The questions asked at Citigroup's
      May 17 teleconference with investment analysts were generally
      superficial and congratulatory (from analysts from Merrill Lynch,
      Morgan Stanley, among others). Asked about Banacci's 55% holding in
      the telecommunications firm Avantel, and whether continued ownership
      by Citigroup would be legal, Sandy Weill said "we're confident we can
      handle that." A question asking for an elaboration on Citigroup's
      planned use of Banamex in the United States was not answered. To a
      final question about "regulatory and political risks," Weill said
      Citi hopes to close in the third quarter of 2001, since "initial
      reactions on both sides of the border have been positive," but the
      closing has been set for the fourth quarter, since "you never know
      what comes up... we hope not too many hurdles."

      In an interview on May 17, Robert Rubin hinted that Citigroup
      would move to open more branches in the United States under the
      Banamex name, targeting Mexican-American communities. Whether this
      targeting would include the allegedly predatory products of
      Associates / CitiFinancial was not disclosed. Nor were specifics
      given about branch closings in Mexico, as cost would be wrung out of
      Confia's and Banamex's operations...

      Here is a summary of ICP's initial comment to the Mexican bank
      regulator, which has since been supplemented -- we'll appreciate from
      readers of this Report any further information about the regulatory
      process in Mexico (or, going forward, in other nations).


      May 24, 2001
      Comision Nacional Bancaria y de Valores
      Attn: Federico Nunez Gonzalez, et al.
      Insurgentes Sur 1871 Torre sur 10 piso
      Colonia Guadalupe Inn
      01020 Mexico DF

      RE: The Proposal by Citigroup, Inc. to Acquire Banacci and Banamex
      and their affiliates -- request for copies of all related
      applications, timeline to submit comments, etc.

      Dear Federico Nunez Gonzalez or to whom it may concern:

      I am writing on behalf of Inner City Press/Community on the
      Move and its affiliates (collectively, "ICP")... ICP desires to
      submit formal comments to your agency regarding the proposal,
      announced on May 17, 2001, for Citigroup, Inc. ("Citigroup") to
      acquire Banacci, Banamex and their affiliates
      (collectively, "Banacci"), but first desires to receive and review
      all applications or notices that your agency receives concerning
      Citigroup's proposal.

      The first purpose of this letter, accordingly, is to request
      that you send copies of all documents that are submitted to your
      agency, related to Citigroup's proposal..

      The second purpose of this letter is to request confirmation of
      the Mexican statutory law, and regulations, applicable to Citigroup's
      proposal... We would appreciate a copy, or Internet citation, to the
      law and regulation that your agency will apply to Citigroup's
      proposal, and thank you in advance in this regard.

      We have previously commented to the U.S. Federal Reserve Board
      concerning Banacci, and its affiliates Banamex USA Bancorp and
      California Commerce Bank. See, e.g., Grupo Financiero Banamex
      Accival, S.A. de C.V., Banco National de Mexico, S.A., Banamex USA
      Bancorp, Order Approving the Formation of a Bank Holding Company and
      a Proposal to Engage in Certain Securities Activities, 82 FED. RES.
      BULL. 1047, 1049 (Nov. 1996). As noted above, we desire to comment to
      your agency on Citigroup's proposal to acquire Banacci. You should be
      aware, and we hereby formally enter into the record before you, that
      Citigroup has been sued by the U.S. Federal Trade Commission ("FTC")
      for so-called predatory lending (essentially, the gouging of
      consumers in violation of law). See, e.g., 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>. We have also noted
      troubling disparities in Citigroup's lending in New York
      to "Hispanics," a category encompasses the vibrant Mexican-American
      community here. In the New York City Metropolitan Statistical Area
      ("MSA") in 1999, Citicorp Mortgage made 1236 conventional home
      purchase mortgage loans to whites, and only 58 to Hispanics. The
      industry aggregate of conventional home purchase loans in the NYC MSA
      in 1999 was 4841 to Hispanics, and 36,467 to whites, along with 5385
      to African Americans. Among these three groups, 10.4% of the industry
      aggregate's loans were to Hispanics. The figure for Citicorp Mortgage
      added with Citibank, N.A. was only 8.0% of loans to Hispanics: less
      than the industry aggregate.

      In the Chicago MSA in 1999, Citicorp Mortgage made 361 mortgage
      refinance loans to whites, and only 69 to Hispanics (a ratio of 5.23
      to one). On applications for these loans, Citicorp Mortgage denied
      Hispanics' applications 4.48 times more frequently than whites' --
      essentially driving the disproportionately denied Hispanics,
      including Mexican-Americans, to higher-cost lenders, including one
      that Citigroup now controls, that has been sued for predatory lending
      by the U.S. FTC.

      ICP desires to submit more extensive comments to your agency,
      including on Citigroup's record in Mexico and elsewhere -- but first
      desires to receive and review all applications or notices that your
      agency receives concerning Citigroup's proposal to acquire Banacci...
      We appreciate your prompt attention.

      Very Truly Yours,


      Matthew Lee, Esq.
      Executive Director

      Until our next update of this Report, for or with more
      information, you can contact us.
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