New legislation has been introduced to the U.S. Senate that would prevent financial holding companies and national banks from engaging, directly or indirectly, in real estate brokerage or real estate management activities.
The bipartisan bill - the Community Choice in Real Estate Act - has been on the congressional table several times in years past, but was again put forth by ""Sen. Barbara Boxer"":http://boxer.senate.gov/ (D-California) and ""Sen. Richard Burr"":http://burr.senate.gov/public/ (R-North Carolina) in late January.
The ""National Association of Realtors"":http://www.realtor.org (NAR) has been a strong proponent of such a bill, calling for Congress to enact new laws that would permanently ban banks from entering into real estate transactions. According to the association, allowing large national banks to enter into real estate brokerage and property management could be devastating to the safety and security of the nation’s economy.
During the introduction of the bill, Sen. Boxer said, ""Permitting banks to engage in commerce could compromise their lending decisions and create conflicts of interest while restricting consumer choice and competition among mortgage lenders. In the wake of the damage caused to the financial system by deregulation and the erosion of financial firewalls, removing the separation between banking and real estate risks additional harm that we just can’t afford.""
Since the passage of the Gramm-Leach-Bliley Act in 1999, some banks have petitioned the federal government for the power to own and operate local real estate brokerage and property management companies. In early 2001 the Federal Reserve and the Treasury even proposed rules to allow national banks to move into these commercial sectors, but since 2003, the language of annual appropriations bills has temporarily blocked the use of funds to implement these regulations. The Community Choice in Real Estate Act would make that prohibition permanent.
According to NAR President Charles McMillan, the crisis in the financial sector and overall economy would be far worse if banks had been permitted to enter into commercial activities such as real estate. ""We hope that Congress will work quickly to close any loopholes and pass laws that maintain the separation of banking and real estate and protect our nation’s economy from unnecessary and avoidable risks,"" McMillan said.