Banks in Real Estate - Issue Summary
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| What is the fundamental issue? |
| In early 2001, the Federal Reserve Board and the U.S. Treasury Department proposed rules to expand the powers of national bank conglomerates. The agencies proposed allowing national bank conglomerates to engage in real estate brokerage and management, reclassifying these activities as financial in nature. NAR strongly opposed the proposed rule, arguing that 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 nonfinancial, inherently commercial activities. Congress has now permanently blocked the Fed and Treasury Department from expanding bank authority, as proposed in 2001. |
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| I'm a Realtor®. What does this mean to my business? |
| If banks had been allowed to engage in real estate brokerage, it would have created anti-competitive and anti-consumer concentrations of power within the financial services sector, which would have ultimately increased costs for homebuyers. Financial holding companies and bank subsidiaries with direct and indirect federal subsidies would (1) have competed unfairly with real estate firms and their affiliates because they have access to cheap sources of capital (thanks to federal deposit insurance and loans from the Federal Home Loan Bank System) and (2) have cross-subsidized their commercial operations. Permitting banks to engage in commerce would have compromisd bank lending decisions and created conflicts of interest while restricting consumer choice and competition among mortgage lenders. |
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| NAR Policy: |
| NAR strongly supports maintaining and strengthening the national policy against mixing banking and commerce. NAR believes that, if permitted to engage in real estate brokerage and management, national bank conglomerates would have had an unfair competitive advantage and inherent conflicts of interest would have been the result. |
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| Legislative/Regulatory Status/Outlook: |
| On March 11, 2009, President Obama signed into law the FY2009 Omnibus Appropriations Act that permanently prohibits banks from entering the real estate brokerage and management businesses. |
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| Related Information: |
| NAR's page on Banks in Real Estate |
 Link to Thomas
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