The leadership of the House Financial Services Committee has introduced legislation that would allow national banks and their subsidiaries to engage in real estate brokerage activities.
The measure, the "Fair Choice and Competition in Real Estate Act," doesn't have as many cosponsors as the "Community Choice in Real Estate Act," the National Association of Realtors-backed measure that would specifically ban banks from real estate.
In fact, at this writing, Financial Services Chairman Michael Oxley, R-Ohio, and ranking member Barney Frank, D-Mass., are the only backers. But they sit at the top of the panel through which one bill or the other must travel. So it may not matter that more than half the membership of the House has signed on to the NAR measure.
"The entrance of banks into real estate brokerage would help price competition," Rep. Oxley told National Mortgage News, a trade publication. "Realtors already partner with lenders. So why not let banks partner with Realtors."
Earlier, Reps. Oxley and Frank asked the Government Accountability Office to survey "the state of price competition in the market for real estate brokerage services." In particular, the two legislators want the GAO to determine if there has been any negative impact on competition or consumers in states where state-chartered banks are permitted to engage in brokerage and settlement services.
But the NAR says the issue isn't about competition at all. Rather, it's about circumvention of the long-standing government policy calling for the separation of finance and commerce.
"Our members are not afraid of competition; they compete with each other every day of the week. So to characterize it as such is particularly unfair," Jerry Giovaniello, senior vice president of government affairs, said at last week's National Association of Real Estate Editors' conference in Washington, D.C., last week.
With 221 cosponsors, the NAR's bill would prohibit the Federal Reserve Board and the Treasury Department from finalizing a regulation giving brokerage, leasing and management powers to national banks and financial holding company subsidiaries.
The NAR says the regulation attempts to circumvent congressional intent and reclassify real estate as a financial activity under the Gramm-Leach-Bliley Act of 1999. The law reformed the nation's banking laws by, among other things, removing prohibitions on cross-ownership of banks, securities firms and insurance companies. But the NAR claims it did not allow financial institutions to act as realty brokers or managers.
The NAR says to do otherwise could compromise bank lending decisions, set up potential conflicts of interest and possibly even restrict consumer choices. It also is worried that real estate companies would be the subject of increased regulation. But most of all, Giovaniello told the real estate writers, it is doubtful Uncle Sam will be as willing to bail out local realty firms as it might to save a failing bank.
The NAR official also let it be known in no uncertain terms that the 1 million-plus organization is ready to go to the mat on this one. "This is our No.1 issue; it has been No.1 for five years," he said. "A train wreck is coming between us and the Chairman. We expect a huge policy fight."
At the very least, says one observer, the new Oxley-Frank bill will facilitate the issue being argued out in the open rather than through annual budget riders
