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Citigroup Proposal Meets Skeptics

Banking: Opponents of firm's CalFed takeover say its community assistance plan is more show than substance.


Citigroup Inc. said Wednesday that it would commit $120 billion in loans and investments over 10 years to minority and lower-income customers in California and Nevada, but the plan was greeted with skepticism by community groups opposing the banking giant's takeover of California Federal Bank.

Citigroup's proposal includes $80 billion in mortgages, $10 billion in small-business loans and $3.5 billion for community development. Citigroup also pledged $35 million the first year for "community giving and outreach": charity, financial education, below-market-rate loans and marketing to minorities.

The commitment is one of the largest made in California to comply with laws requiring banks to serve all population segments. A Citigroup news release described it as "meaningful steps to improve the community" through "a broad array of products and services."

The proposal is part of Citigroup's effort to win regulatory approval for its purchase of Golden State Bancorp Inc., CalFed's San Francisco-based parent company. The community groups, lobbying for greater commitments by Citigroup, have filed objections with regulators. The groups will air their grievances at a private Bay Area meeting Monday called by the Office of Thrift Supervision.

The advocacy groups for the poor and minorities said Citigroup's plan was more show than substance. They accused New York-based Citigroup of treating California as a "colony" and attacked its sub-prime finance operations for alleged predatory practices.

Robert Gnaizda of San Francisco's Greenlining Coalition said that as the country's largest financing services company, Citigroup should have pledged more community lending.

"We think [the commitment] should have been $200 billion," Gnaizda said. "And it should have been far more specific."

He said the plan didn't specify how loans would be provided to minorities, made no offer to reduce charges for Latinos who wire money abroad and failed to adopt measures other banks had taken to guard against predatory lending.

Another coalition, the California Reinvestment Committee, said it believed Citigroup units would target needy areas with high-cost loans and high-interest credit cards.

The CRC complained that "low-cost" checking accounts at Citigroup's Citibank subsidiary cost 50% more than at other big banks and that borrowers weren't regularly provided the lowest-interest loans for which they qualify.

"It's a two-tier approach," CRC President Alan Fisher said. "Good products for the wealthy and sub-prime for poor folks."

Citigroup spokesman Steve Silverman said Citigroup "is proud of our lending practices" and had "raised the bar" for the industry on real estate loans. Buying CalFed would allow Citigroup to offer high-quality prime loans more widely by adding 335 branches in California and 17 in Nevada, Silverman said.

Citigroup announced May 22 that it had agreed to buy GSB for $5.8 billion in cash and stock.

If Citigroup wants to expand in California, it should become the leader in financial education, Gnaizda said. Instead, he said, Citigroup was leading efforts to block a new state law requiring more disclosure by credit card issuers.

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