In a letter to the House and Senate, ICBA expressed support for a pending proposal from the Federal Reserve Board and the Treasury to allow financial holding companies and financial subsidiaries of national banks to engage in real estate brokerage and management activities. The ICBA and four other financial services trade association cosigners also expressed strong opposition to legislation that would intervene in this regulatory process by prohibiting financial institutions from entering the real estate brokerage market.
In promulgating the proposed rule in 2000, the Federal Reserve and Treasury found that real estate brokerage and management activities were "financial in nature or incidental to a financial activity," and therefore permitted under the Gramm-Leach-Bliley Act. Former Treasury Secretary Paul O'Neill told banking groups that a rule would be promulgated early in 2003 despite strong opposition from the realtors, but O'Neill has since been replaced. We urge that the regulation be promulgated.
Legislation has been introduced in the House and Senate — identical to legislation introduced but never passed in the last Congress — that would specifically prohibit financial institutions from engaging in real estate powers. However, the letter noted that a number of real estate firms, such as Century 21, Coldwell Banker and Long & Foster, already offer financial products among an array of services that, under the legislation, would be denied to banks. We pointed out that this is special interest legislation aimed at protecting the real estate industry from competition and it should be rejected.
Importantly, the Gramm-Leach-Bliley Act specifically prohibits national banks and their holding companies and subsidiaries from engaging in real estate development activities which, in contrast to brokerage activities, are considered too risky. Thus the proposed rule should not raise safety and soundness concerns.