Citicorp and Travelers Group defended the legality of their $70 billion merger in a massive application filed Monday with the Federal Reserve Bank of New York.

"The merger would conform to the requirements of federal and state laws," the companies asserted in the 8,000-page document.

Most of the application is confidential, but 244 pages addressing what the merged Citigroup would have to do to conform to current laws is public.

The public portion also explains the proposed company's business strategy, including plans to aggressively cross-market products and reduce overhead costs.

"Citigroup consumer and commercial customers will have the opportunity conveniently and efficiently to purchase a range of banking, securities, and insurance products, whether at a bank, insurance agency, or securities broker office," the application states.

Citigroup will offer products under a single brand name and a customer's costs will drop if multiple Citigroup products are purchased. To find cross-selling opportunities, Citigroup said it plans to mine its customer data bases.

Customers will get a single statement reflecting balances in banking, insurance, and securities accounts and have access to all three business lines from ATMs and a single toll-free number, according to the application.

To bring Citigroup into compliance with current laws and rules, the companies vowed to modify their overseas investments, mutual fund operations, and securities underwriting practices.

Citigroup's overseas investments would exceed limits included in the Fed's Regulation K, which governs the foreign activities of U.S. banks. Rather than divest assets, the companies asked the Fed to impose more liberal foreign investment caps included in a proposed Reg K rewrite, which the Fed is expected to adopt this summer.

Citigroup's mutual fund operations also would violate a law barring banks from distributing shares in open-ended investment companies. The companies promised to comply with the law by finding an independent distributor for all mutual funds operated by Salomon Smith Barney, Citibank, and other Citigroup subsidiaries.

Also, Travelers' Robinson-Humphrey brokerage unit would violate a Fed rule barring any section 20 unit from earning more than a quarter of its revenue underwriting commercial securities.

The companies asked the Fed to aggregate Robinson-Humphrey's revenue with the revenue earned by the other three section 20 units Citigroup would operate. Barring that, they vowed to comply with the 25% limit for each unit.

Citibank also could be in violation of rules limiting loans to affiliates if the deal is approved. The companies said Citibank would stop making unsecured loans to Travelers and either have the insurer collateralize or terminate existing lines of credit.

In the application, the companies also reiterate their argument that federal law gives Citigroup up to two years to divest insurance underwriting units.

They said Citigroup would sell Travelers Insurance Co., Travelers Life and Annuity Co., Primerica Life Insurance Co., and similar underwriting subsidiaries if Congress does not remove barriers separating the banking and insurance industries.

The companies also said:

Antitrust issues are negligible because they do not compete in most business lines.

The management team has not yet been selected.

The combined company would be considered "well capitalized," with a 5.7% leverage capital ratio, 8.4% Tier 1 capital, and 11.1% total capital.

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