January 15, 2002
Congressmen Support Legislation To Block Banks From Entering Real Estate
By Bridget McCrea
Inman News Features
Three U.S. Congressmen who recently introduced legislation to block financial institutions from entering the real estate brokerage business have stated that Congress didn?t intend to open the doors for that possibility when it passed the Gramm-Leach-Bliley Act in 1999.
The three Congressmen are Ken Calvert (R-Calif.), Paul E. Kanjorski (D-Pa.) and Steven C. LaTourette (R-Ohio), and their bill, H.R. 3424, so far has attracted the support of 125 other House members.
Calvert said he clearly recalls the initial debates over GLB and that Congress then went on the record in support of the separation of banking and commerce. The law outlines certain financial activities that financial institutions can carry out, he said, but real estate brokerage and property management didn?t make the list.
Still, Calvert said, banks immediately began trying to get into real estate anyway after GLB was enacted.
H.R. 3424 and a similar Senate bill, S. 1839, go head-to-head with a regulatory proposal by the Federal Reserve and Treasury that would declare real estate brokerage and property management to be financial activities and consequently open to federally chartered banks under GLB. The proposal is still under consideration and no date for a final decision has been announced.
Congressional intent behind GLB is at issue, and that?s why the Congressmen are set on gathering an impressive list of co-sponsors for the new legislation.
"The secretary of the Treasury, the senate and everyone else will take a very close look at the number of people on this legislation," Calvert said. "The legislation shows the intent of Congress was?and still is? hat financial institutions not get involved in commerce."
LaTourette said he received a telephone call from the National Association of Realtors asking him to help thwart the regulatory proposal, but it was real estate agents in his suburban Ohio Congressional district that prompted his involvement with the legislation.
"They are vital to the leadership structure of our Chambers of Commerce and our communities," he said. "It?s important that their industry remain viable."
LaTourette also remembers the 1999 debate over GLB and his own concerns about banks becoming involved in title insurance.
"I had a problem with banks writing title insurance," he said. "The (entity) doing the financing shouldn?t also be guaranteeing the title?there was definitely a potential conflict of interest in that."
LaTourette said he understands the appeal of one-stop shopping for financial services, but he also believes using local or neighborhood-based real estate agents, bankers and title insurance companies is most beneficial for consumers.
"Maintaining that balance is appropriate," he said. "Disturbing it is dangerous."
Kanjorski said his top concern is the potential negative societal effects of banks entering the real estate brokerage business.
Kanjorski is enthusiastic about the growing number of H.R. 3424 co-sponsors and the fact that the senate is working on its own initiative. He said such support represents a broad bipartisan cross-section of Congress and illustrates that GLB wasn?t intended to provide banks an entryway into the real estate business.
"America?s small to mid-sized communities are limited in terms of community leadership," he said, adding that many small bankers who once were important local businessmen in recent years have disappeared due to industry consolidation. "Lawyers and accountants were also community leaders, but they too are disappearing with the advent of larger (global) firms," he said.
The trend has stripped small to mid-sized towns of professionals willing to serve their communities, said Kanjorski. The problem could worse should banks move into real estate because large institutions would "cherry-pick and knock off some of these valuable community leaders," he said, and put their attention on large banking areas instead of smaller communities.
"We needed to back up and ask whether this was the type of world we wanted to structure for the future?one that doesn?t provide for these professionals and businesses that are geared toward community life," Kanjorski said. "Banks moving into real estate is a very big invasion of that."
Copyright: Inman News Service