Since January of 2001, the Federal Reserve Board and Treasury Department have been working to enact a regulation that would allow big banking conglomerates to enter the real estate business, thus enabling them to provide real estate services. To those in the real estate industry this has become known as "The Big Grab".
As an independent business owner and real estate professional, I adamantly oppose this proposed regulation. It has far-reaching ramifications for independent business owners and our country's free enterprise system.
Banking interests have already proposed this action to Congress, who has stated three times in the past three years that banks should not be in the real estate business. Now they are trying to circumvent the clear intent of Congress by approaching the Federal Reserve Board and Treasury Department. Through these means they clearly intend to abdicate the powers of Congress. The argument between the banks and the real estate industry lies within the question of whether or not real estate services are considered financial in nature, therefore making them "incidental" to a financial activity. This statement is open to broad interpretation, which is what allowed banking interests to put the proposal on the Federal Reserve Board's agenda. According to current legislation, the only way that banks can enter into real estate is if the Federal Reserve Board and Treasury Department define real estate services as "financial services" rather than "commercial services."
Real estate brokerage, leasing, and property management are commercial activities. Financial activity is incidental to these transactions, not the other way around as bankers contend. Real estate brokerage, leasing and property management companies do not offer banking services and banks do not offer commercial services. Commercial firms, including real estate brokerages and banks do compete in offering financial services such as mortgages, insurance, and consumer loans.
I strongly argue that real estate is strictly a commercial business transaction, which focuses on customer - not financial - service. The real estate profession is built upon trust, honesty and integrity. Customers look to us to be their advocate and they entrust us to help them with their most expensive asset - their home. Our very success relies upon providing our clients with valuable services, none of which are directly financial in nature. The overall real estate transaction is very extensive and the financial aspect is only a component of the entire transaction; it does not define it.
The issue at hand has nothing to do with competition, but rather it's about the fact that banks should not be allowed to operate in any commercial transaction-type industries, such as real estate, when they benefit from taxpayer-insured operations. It is equal to having a federally chartered monopoly because they gain huge financial advantages through federal banking. Not only do they receive federal deposit insurance, they also have favorable tax treatment and privileged access to credit. Additionally, banks have ready access to information pertaining to the credit history of nearly every American. If bankers were allowed to operate real estate services, there would be a clear conflict of interest, of which we would all feel the effects - not just REALTORS®.
Ultimately, the deciding factor comes down to this: real estate brokerage is not a financial service. We are professionals who provide the home buying community with valuable customer support and service. If the Federal Reserve Board and Treasury Department validate banking interests in 2003, the way will be cleared for future expansion into anything banks finance, threatening independent businesses of every sector all across the United States. Our entire free enterprise system will be put at risk.
Earlier this year REALTORS® won an important victory in our campaign to keep the nation's banks from entering our industry when Treasury Secretary Paul O'Neill announced that he would delay a decision on the regulation until 2003 because of the tremendous public controversy it has generated. REALTORS® were also able to get more than half the members of the House of Representatives to co-sponsor H.R. 3424, the Community Choice in Real Estate Act, to prevent this power grab.
2003 is quickly approaching and we need Congress to take action by closing the loop hole that allowed banking interests to misrepresent real estate as an "incidental" financial activity in the first place. No governmental body should have the right to put an end to our free enterprise system - not even the seven members of the Federal Reserve Board and Treasury Department who are now faced with making this monumental decision.
