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Greenspan-Backed Bank Targeted in Lawsuit

  • An Alan Greenspan-endorsed financial behemoth now stands accused of predatory lending and fleecing of tens of thousands of its customers.
By James Harrer

Were it not for the nation's banker, Federal Reserve Chairman Alan Greenspan, giving a glowing endorsement to plans to create on the largest financial institutions in the world, the mega-merger that created Citigroup may never have happened. Now, that financial giant is facing a federal lawsuit, alleging deceptive lending Tactics, dishonest double dealing and fleecing its customers.

This month, the Federal Trade Commission (FTC) filed a grim lawsuit in federal district court in Atlanta, Ga, formally charging Citigroup with violations of honest banking practices. The charges included "deceptive lending," lying to clients and fraudulently tricking them into deals that profited the bank bu tipped off the customers.

The FTC's carefully drawn and detailed indictment thus justifies questions first raised by The SPOTLIGHT about the fleecing received by unwitting customers from some of the biggest U.S. banks.

Even more revealing is the trail of Greenspan's personal involvement in the affair.

The financial giant known as Citigroup, now being charged by the FTC, is the result of the merger of three distinct financial institutions. The original Citicorp, a leading, commercial money-center, the Travelers' Group, a multifaceted insurance conglomerate, and multifaceted insurance conglomerate, and Associates First Capital, one of the nation's first consumer lenders, whose salesmen concentrated on poor-working people who would sign almost any deal just to get some credit, formed ne great financial giant.

At the time the mega-merger was proposed, it was illegal under prevailing banking regulations. For the union of the three giant financial firms to take place, it was necessary for Congress to change the law.


Most of the financial services industry and public-spirited lawmakers opposed this. There were sound reasons why Congress had built a legal firewall between various profit-hungry lenders and insurers. The merger seemed doomed -- until Greenspan intervened.

"The proposed three-way merger will prove highly beneficial for the public," argued Greenspan. "It will create a worldwide, full-service financial supermarket, where customers can take care of all their financial needs in a single, state-of-the art money center. People who need loans, small or large, will enjoy faster and more efficient service than ever before.

Congress, as usual, sheepishly made sure that whatever Greenspan wants, Greenspan gets. But as usual, the Fed chairman's proposals proved misleading.

Unless the FTC's recent legal charges of double-dealing and predatory lending by Citigroup are proven false -- and the record suggests that is highly unlikely -- what the customers of the newly-merged "financial supermarket" are actually getting are fraudulent and deceptive rip-offs, rather than the "faster and more efficient service" promised by Greenspan.