With all of the fallout from the financial industry and housing market, I was shocked when I read an article on the National Association of Realtors web site that in early 2001, the Federal Reserve Board and the U.S. Treasury Department proposed rules to expand the powers of national bank conglomerates. The agencies proposed allowing national bank conglomerates to engage in real estate brokerage and management, reclassifying these activities as financial in nature.

I for one am happy to know that President Obama recognizes how dangerous this could have been to our economy and its consumers. On March 11, 2009, President Obama signed into law the FY2009 Omnibus Appropriations Act that permanently prohibits banks from entering the real estate brokerage and management businesses.

This could have been a disaster larger than the foreclosure situation we are in today. Essentially the Banks would control the Real Estate market. As a consumer you would no longer have someone working in YOUR best interest to buy or sell real estate. Bank Affiliated Agents would be under pressure to do what is in the best interest of their company. They also would have access to Federally funded tax dollars to subsidize their business and marketing. Where as it is now, and how it should be,  Real Estate Brokers use their own funds to compete in the market place.

From the National Association of Realtors Web Site:

If banks had been allowed to engage in real estate brokerage, it would have created anti-competitive and anti-consumer concentrations of power within the financial services sector, which would ultimately increase costs for homebuyers. Banking conglomerates with direct and indirect federal subsidies would:
(1) have been able to compete unfairly with real estate firms and their affiliates because they have access to cheap sources of capital (thanks to federal deposit insurance and loans from the Federal Home Loan Bank System) and
(2) have cross-subsidized their commercial operations.

Permitting banks to engage in commerce also would have compromised bank lending decisions and created conflicts of interest while restricting consumer choice and competition among mortgage lenders.

Consumers-especially first-time home buyers might have experienced adverse effects if banks were allowed to become real estate brokers and managers. Bank employees would not have had the same fiduciary relationship with consumers that independent real estate professionals have.

The current financial crisis illustrates why it is so important to keep banks focused on banking and other financial activities. The last thing the economy needs is to allow banks to branch into commercial activities where they have already proven they lack expertise.

As a Realtor, Investor and Homeowner, I am glad to know that laws are being put in place to prevent the "powers that be" will not be able to drive our housing market even further down a terrible path.

 

To Your Wealth,

 

Dan McCutchen
Exit SourceOne Realty

o) 301.805.8338

dan@helpfulinvesting.com

http://www.helpfulinvesting.com

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