WASHINGTON When federal regulators proposed allowing financial holding companies to broker real estate, most industry representatives thought approval would be a cakewalk. Instead, fierce resistance from Realtors has prompted congressional hearings and regulatory delays.
Just after the Gramm-Leach-Bliley Act of 1999 passed, bankers asked their regulators for permission to broker real estate deals. It took the Federal Reserve Board nearly a year to formally propose the idea, and recently the agency pushed back its comment deadline to May 1.
We were surprised by the vehemence Realtors showed in objecting to the idea, said Richard M. Whiting, executive director and general counsel of the Financial Services Roundtable. The Realtors were not involved in discussions with the Gramm-Leach-Bliley Act of 1999, and we took that as a sign that they accepted their part in the financial services industry.
The banking industry has already started fighting back. Five of its major trade groups blasted the National Association of Realtors in a letter to members of Congress, accusing them of instigating a lobbying campaign to intervene in the regulatory process in order to protect Realtors from competition.
The letter, signed by the roundtable, the American Bankers Association, Americas Community Bankers, the Consumer Bankers Association, and the Independent Community Bankers of America, said the proposal is consistent with the financial reform laws plan to have the Fed and the Treasury Department allow activities that are financial in nature.
In Gramm-Leach-Bliley, Congress expressly left these decisions to the Federal Reserve and Treasury in recognition of the need to permit financial service holding companies to adjust to changes in technology and the marketplace, the letter said. Yet, Congress is now being asked to intervene in one of the very first proposals under the new approach.
Rep. Spencer T. Bachus, chairman of House Financial Services financial institutions subcommittee, has scheduled an April 5 hearing on the subject. The Alabama Republican sent a letter last month to the banking agencies questioning what changes had occurred in the financial marketplace that would justify the expansion of powers. A spokesman for the lawmaker said representatives from the Fed, Treasury, ABA, and the National Association of Realtors are expected to testify.
Critics of the new proposal have argued that it goes against the intent of the financial reform law by allowing a dangerous mix of banking and commerce.
But banking industry representatives dispute that claim and say the Realtors stance is hypocritical. They cite several real estate firms that offer similar services, such as brokerage, mortgage lending, and title and property insurance, including Century 21, Coldwell Banker, and Long & Foster.
These companies offer the type of one-stop shopping that the Realtors are now protesting, Steve Bartlett, president of the Financial Services Roundtable, wrote in a separate letter to members of Congress.
There seems to be no substantive policy reason to deny consumers the convenience and option of choosing to do their real estate business with a full-service financial services provider.