U.S. Defers Ruling on Banks Entering Real Estate
U.S. Treasury Secretary Paul H. O’Neill told Congress on Monday that the government won’t decide this year whether banks can enter the real estate business, putting off a politically sensitive call until after the November election.
The Treasury and the Federal Reserve are due to issue rules on whether banks can enter real estate brokerage and management under the recent comprehensive financial services overhaul law.
“The volume of letters demonstrates the sensitivity of this particular determination as well as the difficulty of the task that Congress gave us in promoting competition in financial services,” O’Neill wrote to House Financial Services Committee Chairman Michael G. Oxley (R-Ohio).
Banks keenly support the ability to expand their business. Real estate agents are just as firmly opposed to it.
Congress in its 1999 Gramm-Leach-Bliley financial services law prohibited banks from entering the real estate business, but gave Treasury and the Fed the ability to issue regulations overturning those restrictions.
Banking and real estate trade associations, both carrying substantial political clout, lobbied their sides of the issue hard.
In January, the Fed issued proposed rules opening the real estate business to federally chartered banks. Members of Congress have proposed legislation that would block that expansion of banks’ activities.
O’Neill was responding to an April 18 letter from Oxley requesting a report on the status of the regulations.
O’Neill said the rule was especially challenging because it would establish a precedent for future decisions about what activities would be allowed under the financial services law. He said Treasury had received around 35,000 letters during a four-month comment period, demonstrating the high degree of interest in the issue.
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AIG Asks NYSE, SEC to Probe Trading Activity
American International Group Inc., the biggest insurer, on Monday asked the New York Stock Exchange and Securities and Exchange Commission to investigate trading in its stock, which fell as low as $67.49--its weakest level since the one-year low of $67.05 reached on Sept. 21.
The New York-based company said it observed “considerable” short selling in its shares. Short sellers borrow stock and sell it, betting the market price will decline. If they’re right, they can repurchase the shares at a lower price later and pocket the difference.
Joe Norton, an AIG spokesman, declined to comment immediately on what the company wanted the NYSE and SEC to investigate. John Nestor, a spokesman for the SEC, and Ray Pellecchia of the NYSE declined to comment.
AIG shares pulled up from their low to close at $69.71, off $1.08 for the day. The price is down 12% this year.
Bloomberg News
