Fed: Real Estate Development under Op-Sub Rule Too Risky

By Anasan, Dean | American Banker, May 8, 1997 | Go to article overview

Fed: Real Estate Development under Op-Sub Rule Too Risky


Anasan, Dean, American Banker


The Federal Reserve Board has warned the Office of the Comptroller of the Currency that allowing national banks to develop real estate could cause a financial debacle akin to the 1980s thrift crisis.

In a comment letter this week, the Fed urged the OCC to reject an application by NationsBank to enter the real estate development business through a direct operating subsidiary.

The power to develop property would be "incompatible with sound banking" and could expose banks to "greater potential losses," Fed Secretary William W. Wiles wrote.

"Approval would take national banks down a road that Congress has historically barred and that could very well lead to serious financial consequences for the banking system and ultimately the taxpayer," Mr. Wiles said.

The thrift crisis testifies to the "imprudence" of mixing banking and real estate development, according to the letter. "The board believes that it would be unwise to risk repeating this experience with the national banking system."

Besides the Fed, the National Association of Realtors and dozens of Realtors from Arizona to Florida flooded the OCC with letters of opposition.

The Fed and the realtors similarly argued that financial institutions that lack the necessary expertise have suffered huge losses in real estate ventures. Expanded powers would put national banks in competition with their borrowers and could create conflicts of interest, they added.

Banks with development subsidiaries could deny loans to a competitor, misuse proprietary information on competitors who apply for loans, or favor projects that complement their subsidiaries, opponents said.

"This is opening the door too far for the banking business," wrote realtor Lynn Waller of Cadiz, Ky.

The Fed's response was the latest volley in an ongoing turf battle with the Comptroller's Office. While the Fed wants new activities to be housed in holding company units, the OCC contends banks should be able to offer new products and services directly.

In March, the lead bank of Charlotte, N.C.-based NationsBank Corp. asked the OCC for permission to develop property and to finance real estate leasing through direct operating subsidiaries. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Fed: Real Estate Development under Op-Sub Rule Too Risky
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.