Some heard the news while shaving, others while driving to work. Wherever they were, financial leaders across the country paused last Monday morning to consider the imponderable: Citicorp merging with Travelers Group. The $70 billion deal, many concluded, was proof positive that the traditional boundaries in financial services are falling fast, with or without help from Congress. Industries that long were distinct - banking, insurance, and securities - seem increasingly to be one. For Alan "Ace" Greenberg, chairman of Bear, Stearns & Co., the announcement was also the occasion for some ribbing of Sanford I. Weill, chairman of Travelers. "I felt very sorry for Sandy because he left Bear Stearns," said Mr. Greenberg, recalling that Mr. Weill got his first job there, as a messenger, in the mid-1950s. "His career has now finally straightened out and I'm very happy for him." What follows are reactions to the deal from nine top executives throughout financial services.

John B. McCoy John B. McCoy had his first inkling that something might be up when Citicorp's John S. Reed canceled a golf date with him the weekend before the announcement. Mr. McCoy, chairman of Banc One Corp., easily forgave Mr. Reed for skipping out. "I love the transaction," he said, adding that it helps tear down regulatory walls. "I've always been for leveling the playing field." Mr. McCoy said he doesn't see the proposed Citigroup posing much of a competitive threat to Columbus, Ohio-based Banc One. "My guess is, Chase and Merrill Lynch are more concerned about this than we are," he said. "I've never felt, except in certain businesses, that Citicorp is my competitor," Mr. McCoy said. "In general, we are more at the low end, and they are at the high end." He cautioned against expecting the deal to reshape the industry dramatically. "This one transaction is not going to change the world," he said. "All this deal does is say, 'Here is a new direction.' " Robert H. Benmosche To Robert H. Benmosche, president and chief operating officer of Metropolitan Life Insurance Co., news of the Citigroup deal sounded like a happy wake-up call to Congress. "This deal represents to us a good shot across the bow of regulators and legislators in our country," he said. "It says, 'We can no longer afford to have regulation hampering companies to be competitive.' " Mr. Benmosche (pronounced Ben-mo-SHAY), who will succeed Harry P. Kamen as chairman of Met Life on July 1, said the deal may speed passage of state and federal financial modernization legislation, which would help his company considerably. Met Life wants to buy other companies and offer stock to the public, but New York law governing mutual holding companies impede it from doing so. "We have a strategy; we know where we're going," said Mr. Benmosche, who joined the $330 billion-asset mutual insurance company in 1995. "This may help move the legislative process along so we have the right to do it." A veteran of PaineWebber Inc. and Chase Manhattan Corp., Mr. Benmosche said he had expected a cross-industry megadeal but not between Citicorp and Travelers. "We all heard a lot of rumors," he said. Now that the deal is on the table, he hopes legislators will clear away grandfather clauses that allow certain institutions to take back doors into "other people's business." He said, "Everybody has to have a level playing field to be able to compete across the board and to have the right corporate structure to do so." Edward D. Miller Edward D. Miller, chief executive officer of $500 billion-asset Equitable Cos., said the Citicorp-Travelers merger "shows that the landscape has changed, and we're going to see even more momentum." Mr. Miller, a former senior vice chairman at Chase Manhattan Corp., is intimately familiar with convergence. Indeed, he participated in it through the 1991 merger of Manufacturers Hanover Corp. with Chemical Banking Corp. and the 1996 combination of Chemical and Chase, before he jumped ship last year to run one of the nation's largest life insurance companies. He said the Citicorp-Travelers merger is in some ways less complex than the mergers he has endured. "It's doable," he said. Equitable itself is an amalgam. Its subsidiaries include a traditional life company, with 7,200 agents in the field; Donaldson, Lufkin & Jenrette, a specialty brokerage and underwriting firm; and Alliance Capital Management, a mutual fund company. The prospect of Citigroup has not altered Equitable's strategy. "I feel comfortable where we are," Mr. Miller said. "We are not going to build everything organically, but we will only look to enhance what we currently have." Douglas A. Warner 3d Douglas A. "Sandy" Warner 3d, chairman and chief executive officer of $262 billion-asset J.P. Morgan & Co., was in his car driving to work Monday morning when he heard the news - Citicorp and Travelers Group were to merge. "Wow," he said emphatically. Then he thought again. Mr. Warner, who since 1995 has guided the nation's fourth-largest bank through the rough-and-tumble world of securities underwriting and investment banking, said the $70 billion megamerger solidified Morgan's own business strategy. "It has reinforced my confidence in our direction," Mr. Warner said. The plan has been to build Morgan's underwriting businesses from scratch, beginning in 1989, when the Federal Reserve Board granted the company power to underwrite debt securities for large corporate clients. But the deal would create a new competitor for Morgan, as it puts Travelers' Salomon Smith Barney unit in direct contact with Citi's roster of corporate lending clients. That doesn't seem to scare Mr. Warner. He said the merger "recognizes appropriately the convergence in the industry. Separation of banks, insurance companies, brokerage firms, with great bold lines, doesn't recognize the reality of today's markets. Change is long overdue." Mr. Warner said he telephoned the key players - chairmen John S. Reed of Citicorp and Sanford I. Weill of Travelers - to congratulate them and wish them well. "I've known them for a long time, and I'm excited for them both." William N. Shiebler For William N. Shiebler, president of Putnam Investments' retail mutual fund area, the convergence trend gripping financial services doesn't raise any red flags. As one of the largest U.S. mutual fund manufacturers, Boston-based Putnam has managed to maintain its distribution agreements with institutions even after they go through big mergers. But some of Putnam's rivals have not been as fortunate, Mr. Shiebler conceded. "Some of the small (fund) firms have lost out because institutions consolidate and focus their distribution on a short list of names after they merge," he said. Mr. Shiebler heard about the Citicorp/Travelers Group deal at a breakfast meeting on Monday. Though surprised, he noted, "The consolidation trends were already in place. This was just a megadeal." Only time will tell how the proposed merger plays out, from both regulatory and business perspectives, he said. "There are skeptics that say individuals don't necessarily want supermarkets to buy all their financial services," Mr. Shiebler said, "just as they don't want to go into one place to buy all their clothing." Still, Mr. Shiebler said he believes the financial services industry will continue to consolidate over the next few years as institutions look to go global. Richard M. Kovacevich As Citicorp and Travelers prepare for their gargantuan experiment in cross- selling, Richard M. Kovacevich feels like he finally has some company. Mr. Kovacevich's Norwest Corp. has been pushing hard for more than decade to sell multiple products to each of its customers, establishing itself as a clear leader in such efforts. "We felt like lone rangers," said the chairman and chief executive. "A lot of people talk about cross-selling, but not a lot of people are walking that talk." The emergence of Citigroup puts cross-selling at the very forefront of the industry's strategic thinking. And it points to Mr. Kovacevich's oft-stated view of banking and related businesses: "There's only one industry, and it is financial services." Minneapolis-based Norwest, with $88.5 billion of assets, already is highly active in businesses ranging from traditional banking and consumer finance to investment management and corporate leasing. For banks, Mr. Kovacevich said, the deal could well hasten the demise of old prohibitions. "It may allow us to do something faster than we previously thought possible," he said. "Either the laws will change or the market will make it happen anyway." He added: "These are important steps, but your overall vision can be realized very closely with or without a change in the law." Donald P. Marron For Donald P. Marron, chairman and chief executive officer of PaineWebber Inc., the news of the planned merger of Citicorp and Travelers affirmed one of his key beliefs: This is the age of the consumer. "There are great opportunities in the decade of the individual," Mr. Marron said. And judging from the run-up in the merger partners' stocks last Monday, "the market believes it also." The new Citigroup would serve 100 million customers in 100 countries around the globe, offering them everything from student loans to sophisticated investments for their retirement. That's right up Mr. Marron's alley. He's positioning PaineWebber to play a central role in the lives of baby boomers as they plan for retirement. Mr. Marron has also played a prominent role in the debate over the future of Social Security. "We are driven to create products to go with the flow of funds," he said. "In the U.S., that is defined contribution plans." In this country, assets in defined contribution plans are going to grow by $1 trillion in the next five years, he said. As banks and others pursue that market, old geographic and regulatory boundaries are certain to fall. "In the U.S., there are going to be companies that will compete all over the world," he said. The merger is "very positive for our industry and for us." Eli Broad SunAmerica chairman Eli Broad heard the news while shaving, but he says his hand never wavered. "It's not a big development to us," Mr. Broad said of the Citigroup deal. "We've carved out a niche - retirement planning - and believe we will continue to be better at it than anyone else." If anything, the deal heightens SunAmerica's profile. "We get a lot of calls from major banks in this country and overseas that would be very interested in our business," Mr. Broad said. "But we are not for sale." Mr. Broad expects his Los Angeles-based organization to continue to grow beyond its current $54 billion of assets under management but not because of pressure from the megamerger. "We will continue to acquire companies that fit our plans," he said. In fact, the deal could benefit SunAmerica, which offers its mutual funds and annuities through both Citicorp and Travelers - and expects to continue doing so. "We have a very good relationship," Mr. Broad said. He tipped his hat to Citicorp chairman and CEO John S. Reed for recognizing that a commercial bank cannot be a world force on its own. "If you want to be a global player, you have to do more than banking well," Mr. Broad said. Though Mr. Broad has seen many failed combinations during his tenure in the financial services business, he gives Citicorp and Travelers a better chance than others. "They are very astute businessmen and have identified the synergies and cross-selling opportunities that are necessary to succeed," Mr. Broad said. David Daberko David Daberko, chairman and chief executive officer of Cleveland-based National City Corp., said the proposed Citigroup deal could jolt Congress into action on financial reform. "This just makes it more likely that the legislation will come back," said Mr. Daberko, whose banking company has $79 billion of assets. On March 31, leaders of the U.S. House of Representatives abruptly withdrew legislation that would restructure the financial services industry. The bill, HR 10, would have permitted a convergence of the banking, securities, and insurance businesses. But House Republican leaders vowed to revive the legislation in May, and Senate Banking Committee Chairman Alfonse M. D'Amato expressed optimism Thursday that a measure would pass both houses this year. Mr. Daberko said the Citigroup deal could spell out to lawmakers the arguments in favor of financial reform. Since other countries do not have such restrictions, U.S. companies feel they are at a disadvantage. "This is a monumental transaction," Mr. Daberko said. "It sends another wake-up call to Congress that these forces are at hand and legislation needs to be passed." Reported by Brett Chase, Katharine Fraser, Jacqueline S. Gold, Yvette D. Kantrow, Liz Moyer, Niamh Ring, and Karen Talley

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