Banks' entry into real estate appears put off another year

House panel backs delay at realty brokers' behest

November 16, 2003|By BLOOMBERG NEWS

Banks would have to wait at least another year to enter the real estate business under legislation approved by congressional negotiators last week.

Real estate brokers succeeded for a second year in persuading legislators to add to the Treasury Department's funding bill a one-year delay on regulations that would let banks manage real estate and broker home sales.

House Appropriations Committee spokesman John Scofield said lawmakers approved legislation Thursday that includes the provision.

It now goes to the House and Senate for final votes this week, Scofield said.

The real estate and banking industries have squared off in a lobbying battle over the regulations. Banks argue that they could offer one-stop shopping at lower prices. Real estate agents say banks would be at an unfair advantage and drive small companies out of business.

"We will continue to push for a permanent ban," said Stephen Cook, a National Association of Realtors vice president.

A 1999 bank-modernization law took down barriers separating the banking, insurance and securities industries and left it to regulators to decide which financial services banks may pursue.

Allowing banks to broker real estate would give them access to a market that brought $56 billion in commissions last year, according to Real Trends, an industry newsletter.

The Treasury and the Federal Reserve, which together proposed regulations to allow banks to enter the real estate business in December 2000, have been blocked by Congress from issuing final rules.

The latest legislative provision forbids action before October, when a new budget bill takes effect for the next fiscal year.

Realtors have won backers in lawmakers such as Sen. Mary L. Landrieu, a Louisiana Democrat and former real estate agent.

"The real estate market has been a pretty stable haven in times of uncertainty in the stock markets," Landrieu said. "If it's not broken, why try to fix it?"

The National Association of Realtors, a Washington-based trade group, says the regulations would lead to consolidation and less consumer choice and to real estate brokers trying to cross-sell other financial products, including checking accounts and investment advice.

Bankers argue that Realtors have invaded their traditional turf. Companies such as Cendant Corp., which operates Coldwell Banker Corp. and Century 21 Real Estate Corp., offer both real estate brokerage services and mortgages through subsidiaries.

Savings institutions and credit unions as well as banks chartered in 26 states are allowed to handle real estate brokerage, said Charlotte Birch of the American Bankers Association, another Washington-based trade group. Federally chartered banks are left out, she said.

"This is an issue of fairness," Birch said.

"When you have real estate companies offering bank products, how ... can you turn around and say banks can't do real estate transactions?"

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