From Inman News Features
When the Republicans recaptured their former majority position in the U.S. Senate last month, a dear friend of the National Association REALTORS® became an even more powerful ally in the association’s battle to keep banks out of the real estate brokerage business.
The ally is Sen. Richard Shelby, R-Ala., who is slated to replace now-retired Sen. Phil Gramm, R-Tex., as chairman of the Senate Committee on Banking, Housing and Urban Affairs.
Shelby’s succession to the chairmanship of the banking committee is a quite a boon for REALTORS®. He was an initial out-of-gate co-sponsor of the NAR-initiated Community Choice in Real Estate Act, which was introduced last year to fend off opposition to a proposed Federal Reserve and U.S. Treasury regulation that would allow national banks and financial holding companies to get into real estate brokerage.
The senator’s now powerful position in NAR’s battle against the banks wasn’t lost on REALTORS® who attended a public policy political forum NAR’s convention being held last month: the REALTORS® greeted him with a barrage of photo flashes and a 25-second standing ovation as he approached the podium to deliver a speech reiterating his pro-Realtor® stance.
“Real estate is definitely a commercial activity,” Shelby declared to the standing-room-only crowd. “The sale of land is no different than the sale of any other product… banks should not be allowed to control the sale of some particular good and the financing necessary to purchase it.”
Shelby suggested that if banks were allowed to get involved with other business sectors, they would lose their focus as financial intermediaries. He also argued that in the case of real estate brokerage, banks would begin making lending decisions based on business ties rather than the borrower’s creditworthiness. The “healthy skepticism” lenders must bring to mortgage loan approvals would be lost, he said.
Shelby said the banks’ effort to define real estate brokerage as a financial activity instead of a commercial activity was a “slippery slope” that if followed could encompass many forms of commerce, not just real estate brokerage.
“It’s hard to argue there is any real difference between the sale of land and the sale of any other product. Think about it for just a moment—basically any transaction involving the exchange of money for goods or services could be considered financial in nature or incidental to a financial transaction and therefore would be a permissible bank activity under the bank’s petition,” he said.
Shelby also said determining the degree to which banks and commerce could be mixed would be a very difficult challenge laden with such issues as job creation, the competitiveness of financial services firms and economic growth on the one hand, and the effects of credit availability, market consolidation, bank policy and the stability of the financial system on the other.