In the mood to take up arms? Itching for a battle? Hungry for a war?

Well, thanks to a recently granted extension, there's still time to jump into the fray over whether federally chartered banks should be able to engage in real estate brokerage and property management.

The Federal Reserve Board, which will make the decision regarding banks later this year, has extended the period for public comment from March 2 until close of business May 1.

Both the National Association of Realtors (NAR) and the American Bankers Association (ABA) are encouraging their members to take part in "grassroots" efforts to sway the Fed in their respective directions. And down to the smallest real estate brokerage and local bank branch, opinions run strong and blood runs high. Rarely are two industries so strongly, and passionately, pitted against one another.

If banks have their way, they will take home a significant prize. Already reveling in the recently won right to broker securities, banks would be able to offer clients a full range of financial services, from banking and investing to home buying and home improvement loans.

Here's the kicker. Both brokers and bankers each argue that their position is more in line with the American virtues of clean competition, a fair shake for consumers, mom and apple pie.

Of course, NAR "strongly opposes the proposed rule change, which would result in domination of the real estate business by just a few large financial holding companies. This would be bad for the economy, bad for business and bad for consumers."

Here's the most colorful rhetoric of the debate, courtesy of NAR: "Like a voracious octopus, the banking industry -- already bloated with recently acquired rights to deal in securities and insurance--has seen something else it wants--the highly successful real estate brokerage. The octopus is now making a big grab for REALTORS®'business."

On the other hand, bankers argue that brokers are the ones with too much power. The ABA points out that many real estate brokerage firms also offer mortgage services similar to those typically provided by banks. And they want to compete in that marketplace, which would better serve the public, bankers claim.

The public, which always reacts viscerally to allegations that a monopoly is in the making, seems to be siding with brokers. In a recent survey by Public Opinion Strategies, nearly two out of three consumers said their interests would be best served by keeping bankers out of the brokerage business.

Nearly 70 percent of survey respondents said they would be hurt by approval of the regulation because bank-owner real estate brokerages would have access to their bank accounts and personal financial information. And 58 percent said banks are too powerful already.

Regardless, this is likely the best shot banks have at entering the real estate brokerage business. They have lobbied for that right for almost 20 years. And in the last three years, the U.S. Congress has rejected the proposal three times.

But the Federal Reserve Board is a different animal, and one that welcomes competition at almost any cost. The key is whether the Fed believes banks will increase competition, as they claim, or eat up hundreds of small brokerages, as the NAR claims.

In the name of maintaining the status quo, NAR likely has the upper hand. But activists on brokers' side of the issue better keep those letters to the Fed coming. This is shaping up to be the interest group battle of the year, and a clear victory is far from apparent.

For more articles by Lesley Hensell, please press here.

Published: March 1, 2001

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