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The 'Big Grab'-I've written about it before,
but it's time for an update. It's quite possible that you haven't heard this
term used before, that is unless you work in the real estate or banking
industries. However it's quite serious and something that home owners and the
business community should be made well aware of. The 'Big Grab' refers to a proposal that has
been facing the Federal Reserve Board and Treasury Department since last April.
The issue at hand is whether or not banks should be allowed to expand their
business into real estate brokerage, thus enabling them to provide real estate
services. Depending on what side of the industry one represents, opinions differ
greatly-but one thing is certain, this is a highly controversial issue that
continues to receive a lot of attention on Capitol Hill-even after five trying
months of discussion. Basically what it comes down to is that banking interests are arguing that real estate services are an "incidental" financial activity, thus making them financial in nature. This statement is open to broad interpretation, which is what allowed banking interests to put the proposal on the Federal Reserve Board's agenda in the first place. If the Federal Reserve and Treasury Department agree that real estate is a "financial activity," the door will be opened to banks to operate as real estate brokerages. Banking interests have already proposed this action to Congress, who has turned them down three times over the past three years. Now they are trying to circumvent Congress' decision by approaching the Federal Reserve Board and Treasury Department. Those representing certain real estate
interests argue that real estate services are not an incidental financial
activity. Furthermore, those opposed to the proposal believe that real estate is
a business transaction that succeeds because of the relationship between an
agent and their client. Many argue that the real estate transaction is very
extensive and the financial aspect is only a small component of the overall
transaction, but does not define it. Another important point to consider is that
banks benefit from taxpayer insured operations. Because of this, it has been
argued that there is absolutely no way that independent real estate companies
can compete with the advantages gained through federal banking. Not only do
banks receive federal deposit insurance, they also have favorable tax treatment
and privileged access to credit. Furthermore, real estate interests argue that a
bank-employed realtor quite possibly would have different motivations because
their employer is also handling the financial aspect of the transaction. In
essence, if this proposal is approved, banks would control the real estate
transaction from start to finish, creating a clear conflict of interest from
which the real estate consumer would yield the primary effects. Ultimately, what those in opposition to the
issue are arguing is that if banks are allowed to enter the real estate arena,
eventually the way will be cleared for future expansion into anything that banks
finance, such as automobiles, boats, homewear and consumer goods. If this
happened, bank-owned businesses would eventually monopolize the entire
independent business industry and the independent business owner and the economy
will inevitably suffer. In the case of real estate, consumers would be greatly
impacted by this because their realtor would no longer be the first point of
relationship during the home buying process. Instead the realtor would be
replaced by the bank whose motivation, it could be argued, is profit driven, not
customer focused. The fate of the independent real estate brokerage is now in the hands of the Federal Reserve Board and Treasury Department. If they validate banking interests, this situation has the potential to threaten independent businesses of every sector all across the United States. I strongly encourage independent business owners from every industry to discuss the role of banks with your local trade associations. I also encourage concerned citizens to contact the Federal Reserve, Treasury Department and your state representatives. |
