[Congressional Record (Bound Edition), Volume 150 (2004), Part 9]
[Extensions of Remarks]
[Page 12396]
[From the U.S. Government Publishing Office, www.gpo.gov]




                     OCC AND THE BANK-REALTOR FIGHT

                                 ______
                                 

                           HON. BRAD SHERMAN

                             of california

                    in the house of representatives

                         Tuesday, June 15, 2004

  Mr. SHERMAN. Mr. Speaker, I would like to submit for the Record an 
article recently published in the American Banker, entitled, ``OCC 
Caught in the Middle of Bank-Realtor Fight.''

                [From the American Banker, June 2, 2004]

             OCC Caught in the Middle of Bank-Realtor Fight

                          (By Todd Davenport)

       The possibility that banks will one day sell houses makes 
     the real estate brokers' lobby shudder and has galvanized it 
     to fight against any incursion it perceives.
       For the last three years the most obvious threat has been a 
     joint proposal by the Treasury Department and the Federal 
     Reserve Board that would let financial holding companies and 
     financial subsidiaries offer real estate brokerage services.
       But in the past year the National Association of Realtors 
     has targeted the Office of the Comptroller of the Currency's 
     recent efforts to stake out its preemption authority. The 
     trade group says the OCC's ability to insulate national banks 
     from state laws that require real estate and mortgage 
     licensing is also a threat.
       The OCC has countered that there is little, if any, 
     connection between preemption and real estate brokerage, but 
     right or wrong, the trade group has become an unexpected and 
     powerful opponent to the OCC's preemption regulations at a 
     time when it needs all the friends it can get.
       The regulations were finalized in January, but some 
     lawmakers on Capitol Hill have threatened to take action 
     against them.
       ``The Comptroller's position is that this has nothing to do 
     with real estate brokerage, but I don't think the Comptroller 
     has been successful in deflecting the awareness of people on 
     the Hill that the Realtors are concerned,'' said Gil 
     Schwartz, a lawyer with Schwartz & Ballen LLP in Washington.
       The Realtors ``have brought a lot of people focused at the 
     local level,'' Mr. Schwartz said. ``They have brought much 
     more awareness of not just what can happen now but what can 
     happen in the future.''
       The group says preemption is relevant, because the OCC 
     could let banks into real estate brokerage independent of the 
     joint Fed-Treasury proposal, which was made under the 
     auspices of the Gramm-Leach-Bliley Act.
       ``Right now a national bank could apply to the OCC for real 
     estate brokerage to be considered a permissible banking 
     activity,'' said Lynn King, a regulatory representative at 
     the trade group.
       Realtors say the OCC could rely on an existing 
     interpretation that authorizes national banks to operate as 
     ``finders.'' That broad power effectively allows a bank to 
     act as the middleman in many financial transactions.
       Some banking lawyers say they doubt the OCC will use that 
     interpretation to allow real estate brokerage.
       ``Finder authority had been on the books for years, and 
     that never was perceived or regarded as giving national banks 
     authority to sell insurance as an agent or broker on an 
     unrestricted basis,'' said Ken Ehrlich, a lawyer with Nutter 
     McLennen & Fish LLP in Boston.
       But real estate brokerage may be consistent with the 
     business of banking, he said.
       ``National banks by virtue of the business they conduct 
     every day are arguably fully equipped to get into the real 
     estate brokerage business and do it well without raising any 
     safety-and-soundness issues, significant consumer protection 
     issues, and without a whole lot, if any state regulation,'' 
     Mr. Ehrlich said.
       An OCC spokesman would not discuss its plans, but in the 
     past agency officials have said they are not contemplating 
     the extension of real estate brokerage powers to national 
     banks.
       Realtors say they want certainty.
       ``Everything that they've said in testimony, everything 
     that they've said publicly, we just want them to put in some 
     sort of official format that we can rely on for the future of 
     our industry,'' Ms. King said.
       The threat is imminent, because banking companies ``want to 
     put real estate people in the bank or the operating 
     subsidiary,'' she said. ``They want to put them as close as 
     they can to the loan, the mortgage transaction.''
       Doing so would be anticompetitive, Ms. King said. OCC 
     preemption--which a Connecticut judge said last week extends 
     to operating subsidiaries--would give the mortgage arms of 
     large banks ``a free pass on all these state laws and 
     registrations and licensing,'' and ``our members aren't going 
     to be able to play in that field.''
       Banking lawyers took the opposite view.
       ``The Realtors' position is anticompetitive,'' said Melanie 
     Fein, a lawyer at Goodwin Procter LLP in Washington. ``Just 
     like the securities industry, the insurance industry, the 
     data processing industry, the courier industry, they all have 
     fought against bank involvement.''
       The group is behaving ``like Chicken Little,'' but ``the 
     sky is not going to fall--and if it does fall, it would be to 
     the benefit of consumers,'' she said
       Realtors say they would stand down in this battle if the 
     OCC were to write regulations keeping banks out of real 
     estate brokerage. They also said that if the long-pending 
     Fed-Treasury proposal disappeared, the Realtors' opposition 
     to OCC preemption would disappear with it.
       (The proposal has been on hold, because the Realtors have 
     successfully lobbied for enactment of spending bills the last 
     two years that have barred the Treasury from using its budget 
     to finalize the proposal.)
       ``We almost view this thing as the Trojan horse at the 
     gates,'' said Joseph Ventrone, the trade group's managing 
     director of regulatory and industry relations. If the Fed and 
     the Treasury were to drop their December 2000 proposal, ``our 
     vehemence on OCC'' preemption ``would not be as strong, would 
     probably not be at all.''
       To some, that's evidence that the Realtors do not have a 
     legitimate beef with the preemption rules.
       The group ``developed a strategy where they believe they 
     can use the debate going on today about preemption to 
     insulate themselves from competition from the national bank 
     industry,'' said Howard Cayne, a lawyer with Arnold & Porter 
     LLP in Washington. ``But they don't have an inherent interest 
     in preemption.''
       Perhaps not, but their stance on preemption has made for 
     unusual politics.
       The group is allied with state bank regulators against 
     preemption, even though they continue to disagree about 
     whether banks ought to have real estate brokerage powers. 
     More than 30 states have said that banks may offer such 
     services, but few banks have done so.
       ``We share some fundamental, common beliefs,'' including 
     ``that major changes in public policy should come from 
     legislative bodies, and shifts in applicable state and 
     federal law should be clearly intended by Congress,'' said 
     John Ryan, an executive vice president at the Conference of 
     State Bank Supervisors. ``Our appeal is philosophical; theirs 
     is dollars and sense,'' but regardless, ``they are 
     influential businessmen in their local communities, and they 
     are influential in the political process.''
       Donald Lampe, a lawyer with Womble Carlyle Sandridge & Rice 
     PLLC in Greensboro, N.C., said the emergence of the realty 
     group on preemption ``changes the dynamic'' of the debate.
       ``That they have stood up and raised their hand over these 
     rules is a significant event,'' he said. ``That doesn't mean 
     that I think they are correct, but the Realtors cannot ever 
     be ignored in this town.''
       That banks and real estate agents will continue to spar 
     seems certain.
       Banks ``have to continue to grow the portfolio; they need 
     new lines of business,'' Ms. King said. ``The best line of 
     business right now and in the future is real estate. They 
     already have insurance. They already have securities. Other 
     than real estate, there's not a whole heck of a lot else out 
     there.''

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