Have you been following the attempt by the banks and large
financial conglomerates to get into the real estate brokerage and
management business, which is being opposed by the National
Association of Realtors (NAR)? NAR, the nation’s largest
professional trade association with more than 1.2 million members
representing all facets of the real estate industry, including
brokers, salespeople, property managers, appraisers and counselors,
is urging Congress to enact H.R.111 and S.98, the Community Choice
in Real Estate Act, to block banks from real estate brokerage,
leasing and property management.
Have you been following the attempt by the banks and large financial conglomerates to get into the real estate brokerage and management business, which is being opposed by the National Association of Realtors (NAR)? NAR, the nation’s largest professional trade association with more than 1.2 million members representing all facets of the real estate industry, including brokers, salespeople, property managers, appraisers and counselors, is urging Congress to enact H.R.111 and S.98, the Community Choice in Real Estate Act, to block banks from real estate brokerage, leasing and property management.
Of course, it might make things easier. Then when you go to the grocery store you could get food, visit your bank and buy a new house at the same time. But I digress. Let’s look at what it all means.
In early 2001 the Federal Reserve and the U.S. Treasury Department proposed regulations to increase the scope of national bank conglomerates by allowing national bank conglomerates to do real estate brokerage and management, reclassifying these activities as financial in nature. NAR maintains the Bank Holding Company Act of 1956 and the Gramm-Leach-Bliley Act (GLB Act) of 1999 do not authorize banking firms to provide real estate brokerage and property management services, as these are not financial activities.
NAR vehemently supports enactment of the Community Choice in Real Estate Act, H.R.111/S.98, which removes the powers of the Fed and the Treasury Department to regulate real estate activities. NAR fears potential problems stemming from the activity of national conglomerates but does not oppose the limited real estate activities, authorized by law, engaged in by a few state banks, credit unions, and thrifts. It supports separation of banking and commerce because national bank conglomerates would have an unfair competitive advantage and inherent conflicts of interest would result.
The banks argue that the Federal Reserve/Treasury proposal gives financial institutions the opportunity to offer a fuller range of financial services that increase competition and benefit customers. They also feel large real estate conglomerates such as Coldwell Banker and Century 21 already provide the same array of services they are seeking to provide.
The NAR believes the Fed/Treasury proposal assembles anti-competitive and anti-consumer concentrations of power in the financial services sector. Financial holding companies and subsidiaries with direct and indirect federal subsidies will compete unfairly with real estate firms and their affiliates because they have access to cheap sources of capital and will cross-subsidize their commercial operations. Allowing banks into this new arena could compromise bank lending decisions, producing conflicts of interest with restricted consumer choice. Competition among mortgage lenders would be reduced. If the rule is adopted, real estate brokers’ and managers’ activities would be considered financial in nature, and thus subject to increased regulation by the Federal Reserve, Treasury Department, and the Federal Trade Commission. The increased regulatory burden could involve privacy regulations, financial solvency, and reporting requirements. The additional cost would – whoa,doggies! – be passed on to you and me. What a surprise.
Since 2002, Congress has enacted one-year bans (currently effective through September 30, 2006) against the Treasury Department from issuing a final rule okaying national bank conglomerates’ participation in real estate brokerage and management. NAR continues to urge Congress to enact a permanent ban. Once again H.R. 111/S. 98 was reintroduced, the fifth consecutive year that authorizing legislation has been brought forth. Congress has not acted yet.
In the April 21 issue of The Week magazine (which I love, by the way) there is an interesting article on the attempt by Wal-Mart to have the Federal Deposit Insurance Corporation (FDIC) approve a bank charter for an industrial bank to process its credit and debit card transactions. Naturally, the bank industry lobbyists claim this “a Trojan horse” allowing Wal-Mart to get its foot in the door. They believe Wal-Mart would then begin “its trademark race to the bottom” and slash fees, putting local banks out of business. Then, the lobbyists claim, the Bank of Wal-Mart would not lend to local merchants, forcing them out of business.
Other voices claim the lobbyists speak with forked tongue. The other view is that Wal-Mart will reduce its transactional costs by tens of millions of dollars, and pass that savings on the consumer. I don’t know about that. I’m a consumer and I don’t ever seem to get any savings passed on to me. Maybe I’m looking for love in all the wrong places.
Whatever happened to Tom Peters’ advice to business to “Stick to Your Knitting”? The banks want to morph into real estate brokerages. Wal-Mart wants to morph into a bank. I guess that means I’m morphing into a discount department store. Attention, Blue Light Shoppers. For the next two hours on Penny Royal Court all houses are 10 percent off!
Let’s take a quick look at the market. Gosh, inventory is WAY UP. In San Benito County there are 266 available properties, in south Santa Clara there are 395. Let’s call it, folks. We’re back into a buyers’ market, though there are lots of transactions happening every week. If you need detailed information about the market, contact your local Realtor.
And be kind to your Realtor.
