Magazine article American Banker

Realty-Broker Dragon Attacks Reform, but This Monster Is Pretty Moth-Eaten

Magazine article American Banker

Realty-Broker Dragon Attacks Reform, but This Monster Is Pretty Moth-Eaten

Article excerpt

Just when we thought the three-decade-old war to modernize the U.S. financial system was won, the dragons from battles past rise up to fight another round.

This time the dragons come in the form of real estate brokers seeking to protect themselves, and their fixed commissions, from competition. It's all so reminiscent of the long fight waged by insurance brokers in their ultimately unsuccessful war against free markets.

The Gramm-Leach-Bliley Act permits financial holding companies to engage in a broad range of financial activities and authorizes the Federal Reserve and Treasury to expand the list of permitted bank activities. Among the activities the agencies are currently considering adding is real estate brokerage.

That real estate brokerage is financial in nature is hardly debatable -- nor is it debatable that banks and thrifts have vast experience in real estate. Banks and thrifts are major lenders against real estate, and they own considerable real estate either directly or on behalf of clients in trust departments.

Some real estate brokers are waging a vigorous campaign against allowing financial holding companies to engage in real estate brokerage. They offer a number of specious arguments, including the contention that authorizing real estate brokerage would breach the wall separating banking from commerce.

Brokerage of insurance, stocks, and bonds is permissible to financial holding companies. There is no basis whatsoever for putting real estate brokerage in a separate category. Moreover, banks in half the states of the United States are already authorized to engage in real estate brokerage, either directly or through subsidiaries.

The real estate brokers' next contention is that their business would threaten the safety and soundness of banks. They even conjure up images of the Asian banking crisis. …

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