POINT OF VIEW: Mansell Report

As long as it takes

The NATIONAL ASSOCIATION OF REALTORS® has scored another victory in our effort to keep big banks out of real estate.

By now, you should be well aware of the Federal Reserve–U.S. Treasury Department proposal to place real estate brokerage, leasing, and management into the category of financial services; that would enable large national banks to enter our business. In mid-November Congress held the proposal in check by refusing to fund its implementation in 2005.

Most members of Congress recognize that letting big banks into real estate would be a disastrous misstep on the part of banking regulators. That’s why, for three years in a row, legislators have used the Treasury appropriations bill to stop the regulators from implementing their proposal.

This year, we were agonizingly close to a permanent resolution. House leaders rejected a provision—included in the Senate bill by Senate Banking Chair Richard Shelby (R-Ala.)—that would have permanently prohibited big banks from entering the industry. Thankfully, the one-year prohibition was retained, giving us the opportunity to revisit the issue with the 109th Congress.

It’s frustrating to have to keep repeating yourself. The large banks know that. They think the real estate industry will eventually wear down. But we’ll keep repeating ourselves for as long as it takes to pass the Community Choice in Real Estate Act (H.R. 111/S. 98), legislation that would permanently prohibit banks from entering our business.

Our industry is already highly competitive. Letting in banks, with federally chartered advantages such as a lower cost of borrowing, would tilt the playing field and send consumer costs up. With all the consolidation and technological advancement in the banking industry, have your banking costs gone down? I doubt it. There’s no reason to think large banks would reduce costs on a real estate transaction, either. On the mortgage side, it’s doubtful that real estate brokers working for a bank would have the incentive to find the best mortgage providers for their buyers.

More important, Congress has always mandated the separation of banking and commerce. The bank reform Congress passed in 1999—enabling financial institutions to expand their product offerings—reaffirmed that banks couldn’t own or operate commercial companies. That’s why banks sought to have regulators recategorize our business. But a real estate company is as much a commercial company as your local Target store. We sell, lease, and manage a tangible asset. The fact that financing is often involved doesn’t change that fact. If it did, then the sale of any financed product—a boat, a car, a computer—would be a purely financial transaction.

That alone should be enough to kill the banks’ effort. But also at issue is the safety and soundness of our banking system. Real estate isn’t part of large banks’ core competency. If they fail at real estate, they put their core business at risk.

The big banks are biding their time, hoping we get tired of the fight. Let’s use the NAR Action Center (http://naractioncenter.com) to send a message to the 109th Congress that this is one battle we intend to win, no matter how long it takes.

—NAR President Al Mansell, CRB

ONLINE EXCLUSIVE

Help keep big banks out of real estate. Send messages to Congress through the NAR Action Center, http://naractioncenter.com.