Realtor Racket Update: Banks Want In, and I Say “Let ‘em In”
Don’t mind the link source. This IS a story about the US, and how banks want to get into the real estate brokerage business, that was originally published at MarketWatch (registration required):
Monday, February 20, 2006
AFX News LimitedWASHINGTON (AFX) — In 1999, big U.S. banks won a victory with the passage of the Gramm-Leach-Bliley Act, which allowed them to offer investments, insurance and other products and services for the first time. Seven years later, banks have their sights set on offering one more service: real estate brokerage.
But, in an escalating fight, real-estate brokers are pushing back against banks and urging regulators to throw out a proposed rule that would let banks compete for buying and selling properties.
Real-estate brokers are increasingly edgy about what they perceive as banks’ growing powers. And the banks’ push to offer brokerage services comes at a prickly time for the realty industry. Online and discount brokers are giving traditional, full-service agents a run for their role as middle-men between property buyers and sellers.
Banks argue that existing law supports their entry into the real estate brokerage and property businesses — which could represent new and potentially lucrative areas to compete in. Trade groups like the Financial Services Roundtable, which represents banks, say solidifying legal authority for brokerage rights is a legislative priority for 2006.
Banks claim that consumers will enjoy better convenience and lower prices if they’re allowed to use banks as real-estate brokers. Real-estate brokers say they welcome competition in the brokerage business but argue banks’ federal backing gives them an unfair advantage. They also claim consumers won’t save any money using a bank as a broker.
But as the feud continues, some analysts say it could only be a matter of time before banks get into the brokerage business.
“Over time, brokerage is going to be in trouble” from the challenge by banks, says Peter Wallison, who studies financial issues at the American Enterprise Institute.
….. Real-estate brokers have been on the defensive against banks since 2001, when the Treasury and Federal Reserve published a proposal — still unapproved — giving banks the green light to operate as brokers.
….. Banks believe the Gramm-Leach-Bliley Act allows them to enter the real-estate brokerage industry. Based on that law, the Treasury and Federal Reserve published a proposal in 2001 giving banks the green light to operate as brokers. But Congress hasn’t OK’d the proposal yet.
….. Banking advocates say consumers will win if national banks are permitted to act as brokers.
“We believe consumers benefit from more competition in this area,” said Floyd Stoner, congressional relations director for the American Bankers Association.
….. Analysts like Wallison believe banks will eventually be able to persuade Congress that real estate is a financial service. But he acknowledges banks have an uphill fight. “The Realtors are very powerful in Congress,” he said. “More powerful than the banks are.”
Where bankers see more competition — and more business for themselves — Realtors cry foul. They argue the law permits banks to engage in financial activities — and that real estate isn’t one of them.
Gramm-Leach-Bliley addressed insurance and securities, says NAR spokesman Steve Cook. “It did not address real estate.”
….. the fight over brokerage rights is expected to drag on. Realtors are seeking a meeting with Treasury Secretary Snow, but nothing’s been scheduled yet, according to a Treasury spokeswoman.
But it’s questionable whether Snow could change the comptroller’s decisions: the office is under Treasury but is independent.
I’d be more sympathetic to the realtors if they themselves didn’t operate like a closed cartel. But they do (link is to an August BizzyBlog post, “The Realtor Racket”). So I say, let the sunshine of competition in. Quickly.
