Realtors Step Up Fight Over Banks
In the latest skirmish between the banking and real estate industries, the National Assn. of Realtors is preparing an all-out campaign to defeat a federal proposal that would allow banks to sell real estate.
NAR is urging its members to help defeat the proposal under consideration by the Federal Reserve Board and the Treasury Department, which would allow federally chartered banks to conduct real estate brokerage and property management services, a controversial addition to the services banks are currently allowed to provide.
Such a policy change would be unlikely to reduce costs for consumers, but banking industry spokesmen say increased competition would improve service.
Under the terms of the 1999 Gramm-Leach-Bliley Act, banks are prohibited from conducting real estate investment and development, but the legislation did allow the Fed to authorize expanded bank activities.
A number of state-chartered banks already broker real estate, according to Steve Bartlett, president of Washington -based Financial Services Roundtable, a banking industry trade group. He said the federal proposal would modernize the law and create national uniformity.
“The current reality is that customers want to decide where they want to do business,” Bartlett said. “The government should not say where and how.”
The Federal Reserve is expected to define real estate brokerage and management services as “financial in nature or incidental to financial activity,” actions deemed appropriate for banks.
NAR representatives say real estate brokerage is a tangible asset that can be bought and sold and therefore breaches the Gramm-Leach-Bliley Act provision that prohibits banks from engaging in commerce.
David Lereah, chief economist for NAR, said that if the Federal Reserve Board allows banks to get into the real estate business, their concentrated market power would drive smaller brokers out of business and limit consumer choices.
“This is where we draw the line,” Lereah said of the contentious issue that has divided the two industries for about 20 years. “Banks are supposed to be limited to financial activities, not commerce. What will they try to do next--sell cars?”
Representatives of the banking industry say the increased competition will benefit consumers, who will be able to enjoy the same one-stop shopping that many real estate brokers already provide.
“This is a case of the pot calling the kettle black,” said Charlotte Birch, an American Bankers Assn. spokeswoman. “Many real estate companies can offer lending services, property insurance and a full array of services. Banks should be able to round out their services too.”
Bartlett said he envisions banks working with independent real estate brokers and hopes the two entities will share commission fees, as many Realtors currently do. He said fees will probably not go down, but he expects the added competition to improve services from both financial institutions and traditional real estate firms.
The Federal Reserve is accepting public comments on its proposal until March 2. Lereah said that if the Fed decides in favor of the banking industry, NAR will take the issue up with Congress.
“We’re not going to stop here.”
