BANKS, DRUGS AND MARRIAGE

The biggest business merger in the history of the world--as of the time of
writing at least, April 14--is the proposed union between Citicorp and The
Travelers Group, respectively banking and insurance conglomerates, to form
Citigroup. It's a cleaving valued at $70 billion, and the only factors
threatening a smooth marriage ceremony are the Glass-Steagall Act of 1933
and a Justice Department criminal probe of Citibank, a Citicorp subsidiary,
for washing drug money.

Unlike the money-washing, the Glass-Steagall angle has received some
scrutiny in the press, since business reporters reckon that the megamerger
will finally kick aside this New Deal legislation. As a breed, such
reporters hate the New Deal laws hindering unfettered motions of "free
enterprise." Athwart the concept of competition driving down prices, they're
selling the merger as somehow simplifying life for people, like Trader Joe's
multiplied to infinity. Also, the head of Travelers is the modestly
compensated Sanford Weill ($7,453,000 in salary and bonuses in 1997), who
was prudent enough to attend several of the Clinton kaffeeklatsches in 1995
and 1996 and no doubt imparted to the Supreme Groper his hopes that marriage
to Citi-corp would not be blighted by pesky laws written by Depression-era
bank-haters sixty-five years ago.

Glass-Steagall clings to the statute book despite many decades of lobbying
toil by the banking and securities industries to lay it low. The 1933 act
raised a wall between commercial and investment banking, preventing banks
from acting as securities firms and vice versa. The way the Citicorp deal
was set up, Travelers made the matrimonial proposal, which is legal, since
the Federal Reserve, headed by fearless trustbuster Alan Greenspan, can
issue a five-year waiver allowing uninhibited violations of Glass-Steagall.
So for five years the newly created Citigroup can use its lobbying prowess
for assaults on Glass-Sleagall, recycling some of its profits into
contributions to both political parties. And this process of recycling maybe
offers a clue as to why Travelers might have found Citicorp so alluring.

As I noted a couple of weeks ago, the U.S. share of the cocaine trade alone
was worth $38 billion in 1995. The total world trade in all illicit drugs is
worth $400 billion, and it's plain enough that U.S. banks covertly handle a
large amount of that money In the case of Citibank, the subsidiary of
Citicorp, which is itself to be cocooned in Citigroup, the money trail has
actually been ex-caveated to a certain degree, anent the escapades of Raul
Salinas, a k a Mr. Ten Percent, brother of Carlos Salinas, former president
of Mexico.

Raul Salinas was arrested in 1995 in Mexico on charges of suspected murder
and "inexplicable enrichment." On his $190,000-a-year salary Raul had
managed, in the years of opportunity following his brother's election, to
stash more than $200 million in banks outside the jurisdiction of Mexico.
Raul told Swiss investigators that he had chosen to export his money in
order to "avoid political scandal." Pondering a suitable banking partner, he
dialed Citibank, which, for any millionaire in need, has a division
especially set up to accommodate discreet transfers.

Citicorp's C.E.O., then and now, has been John Reed, a pal of the Salinas
family and frequent guest it the Los Pinos presidential estate in the
Salinas years. Raul's private banking representative at Citibank was one of
its vice presidents based in "New York, a Cuban-American called Amy Elliott.
She set up an elaborate web of accounts for Raul, including an offshore
company in the Caymans that allowed him to move as much as $500,000 a week
into private accounts across the globe, ultimately coming to roost in
Switzerland. After his arrest she said she had no idea where Raul's money
came from and indeed claimed to have been unaware that he had been in his
brother's government. It was the destination of the money that concerned
her, not its origins.

Her indifference did not consort comfortably with US. laws, which require
banks to inspect carefully the background of large depositors and the
possible sources of their swag. From 1992 on, there was lavish reporting in
the Mexican press of how Raul had amassed his criminal fortune. His methods
included shakedown of contractors, sale of access to his brother and
partnerships with the Mexican and Colombian drug cartels, to whom he was
known unflatteringly as "the leech." Elliott averted her eyes from such
accounts, and even Raul's arrest did not prevent her from continuing to reap
commissions for Citibank for advice to Raul's wife on how to manage her
husband's millions.

Finally, in 1996, the Justice Department began a criminal investigation into
Citibank's handling of Ratil's money. But in its consideration of the
Citicorp/Travelers merger, the Federal Reserve will not factor possible
criminal conduct by one of the marriage partners into its assessment. In
other words, drug billions can effortlessly flow into Citigroup without a
squeak from the prime banking regulator, thus giving the green light to a
company already known to flout the rules to do more flouting with no letup
or hindrance.

This is the point on which Maxine Waters, U.S. Representative from South
Central Los Angeles, has seized. It was Waters who was the fiercest critic
of the agency in the wake of Gary Webb's series in the San Jose Mercury News
on relationships between the C.I.A., contras and cocaine imports into the
United States. Now she has taken on not only the C.I.A. and the drug lords
but also the international banking houses, who make money handling their
business.

Waters understands that these colossal financial mergers aren't good for
ordinary people. It's going to be even harder for the poor to find banking
services at competitive rates, and what little credit is available in poor
urban areas will instead flow into the Wall Street money mart, jostling for
investment opportunity with the criminal drug millions garnered by
exploitation of such markets as South Central L.A.