Bills Would Block Banks From Selling Real Estate
Banking industry supporters mobilized last week to pressure lawmakers to defeat proposed federal legislation that would prohibit banks from selling real estate.
The American Bankers Assn. and other industry lobbyists have sent more than 54,000 letters to Congress urging defeat of two bills that would preclude regulations proposed by the Federal Reserve Board and the Treasury Department allowing federally chartered banks to conduct real estate brokerage and property management services.
“We’re making our case as to why it’s counterproductive and illogical to exclude one branch of financial services from doing real estate transactions,” said Charlotte Birch, an American Bankers Assn. spokeswoman. “Brokerage companies offer mortgage services, so what’s good for the goose should be good for the gander.”
The Senate and House bills would alter the 1999 Gramm-Leach-Bliley Act, which prohibited banks from conducting real estate investment and development, but allowed the Fed to authorize expanded bank activities.
Since passage of that act, the Fed has proposed regulations declaring that real estate brokerage and management activities are financial in nature and therefore open to federally chartered banks.
Banking industry supporters say that a number of state-chartered banks already broker real estate, as do security firms, credit unions and insurance companies.
“We think that expanding banks’ services would allow for even more consumer choice in the realm of real estate, and that’s a good thing,” said David Liddle, a spokesman for Washington-based Financial Services Roundtable, a banking industry trade group.
The National Assn. of Realtors disagrees. The trade group claims that the concentrated market power of banks would drive smaller brokers out of business and limit consumer choices.
The Realtors association, which is waging its own public campaign, is running newspaper advertisements urging consumers to pressure legislators to support its position.
National Assn. of Realtors President Martin Edwards Jr. said Wednesday that his group has marshaled bipartisan support for the House bill, which as of Wednesday had 187 co-sponsors.
“I’m wondering what the banking industry is trying to fix,” Edwards said. “When the banks say consumers will get one-stop shopping, it’s really one-bank shopping they’re talking about. Consumers prefer multiple loan options.”
The Realtors association, while expressing confidence in the outcome of the legislative battle ahead, acknowledges that some in its field view industry changes less negatively.
The Realty Alliance, for example, which represents independent residential real-estate brokerage companies, sees the potential for a business model in which agents and banks forge partnerships, similar to those between banks and insurance companies.
But California Assn. of Realtors President Robert Bailey said that a survey by the group’s national organization revealed that 96% of the National Assn. of Realtors’ agents oppose any plan that would allow banks’ entry into real estate brokerage and management.
“Different parts of the real estate industry have different points of view, but the majority of our members are opposed to such a change,” Bailey said.
