 Overview
Talking Points
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Overview
The Federal Reserve Board and the U.S. Treasury Department are
considering a regulation that will allow the financial service
holding companies and national bank financial subsidiaries to
compete directly with REALTORS® in brokerage, property
management and relocation.
No longer would the real estate broker be the first point of
contact for homebuyers and sellers. Banks, with their extensive
customer databases and deep pockets, will become the first point
of customer contact. Banks will discount their brokerage
services to out-compete independent brokers. They will
cross-subsidize their real estate operations with profits from
taxpayer-insured operations.
The decision by the Fed and Treasury will hinge on whether
they find that real estate brokerage is classified as a
financial activity or incidental to a financial activity, or
whether it is a commercial activity.
A web page is posted on www.realtor.org with campaign tools and information you can
use to fight this Fed/Treasury proposal.
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Talking Points
NAR strongly supports H.R.3424 and S.1839, The Community Choice in Real Estate Act.
The legislation prohibits the Federal Reserve Board and Treasury Department from authorizing real estate brokerage and management powers for national bank and financial holding company subsidiaries. The Secretary of the Treasury may not determine that real estate brokerage or real estate management activities are financial in nature, incidental to any financial activity, or complementary to a financial activity.
Real estate brokerage and management are commercial activities, not financial.
Under H.R.3424/S.1839, the Federal Reserve Board may not determine that real estate brokerage or real estate management activities are financial in nature, incidental to any financial activity, or complementary to a financial activity. The Gramm/Leach/Bliley Act preserved the separation of commercial and banking activities. It granted insurance and securities powers to national banks and financial holding companies. It did not grant real estate powers.
Allowing large national bank and financial holding companies to broker and manage real estate will create conflicts of interest.
Because of the “special nature” of banks and the many federal subsidies that flow through a bank (e.g., deposit insurance, privileged access to credit), Congress has continually repeated its intent to separate banking activities from commerce activities in an effort to avoid conflicts of interest, adverse market outcomes and fairness issues that can be caused by a bank’s special privileges. Real estate services customarily apply to a broad range of activities involved in the day-to-day management and brokering of real estate. Frequently, firms with property management operations also engage in real estate investment and development. All of these activities relate to the day-to-day operation of a commercial enterprise and any financial activity that occurs in connection with their operation is incidental to the commercial real estate activity. Involving banking organizations in real estate activities would create an unfair competitive environment for real estate firms not affiliated with banks.
Huge national banking conglomerates have advantages by virtue of their federal charter that would give them an unfair advantage against REALTORS®.
Banks have access to cheaper federal funds and deposit insurance. Huge banks are also deemed "too big to fail". The advantages banks enjoy because of their federal charter should not be used to compete with commercial businesses such as real estate brokerages and management firms.
H.R.3424/S.1839 contains clarifications that would permit affected financial institutions to continue to dispose of real estate property acquired in foreclosure and to continue fiduciary and trust activities involving real estate. It would also allow banks to manage property they use or occupy, just as present law allows today.
Congress never intended to bundle real estate brokerage services and concentrate the home buying and selling process into financial institutions. Just as regulators have not deemed automobile or boat sales, grocery or jewelry sales to be open to financial holding companies, federal regulators must not be allowed to grant by regulation that which Congress has clearly not intended by legislation.
Keywords:
Bankers
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