The 'Big Grab' Continues To Threaten Realtors?
J. Lennox Scott
Word Count: 801
The 'Big Grab'-I've written about it before, but it's time for an update. It's quite possible that you haven't heard this term used before, that is unless you work in the real estate or banking industries. However it's quite serious and something that home owners and the business community should be made well aware of.
The 'Big Grab' refers to a proposal that has been facing the Federal Reserve Board and Treasury Department since last April. The issue at hand is whether or not banks should be allowed to expand their business into real estate brokerage, thus enabling them to provide real estate services. Depending on what side of the industry one represents, opinions differ greatly-but one thing is certain, this is a highly controversial issue that continues to receive a lot of attention on Capitol Hill-even after five trying months of discussion.
Basically what it comes down to is that banking interests are arguing that real estate services are an "incidental" financial activity, thus making them financial in nature. This statement is open to broad interpretation, which is what allowed banking interests to put the proposal on the Federal Reserve Board's agenda in the first place. If the Federal Reserve and Treasury Department agree that real estate is a "financial activity," the door will be opened to banks to operate as real estate brokerages. Banking interests have already proposed this action to Congress, who has turned them down three times over the past three years. Now they are trying to circumvent Congress' decision by approaching the Federal Reserve Board and Treasury Department.
Those representing certain real estate interests argue that real estate services are not an incidental financial activity. Furthermore, those opposed to the proposal believe that real estate is a business transaction that succeeds because of the relationship between an agent and their client. Many argue that the real estate transaction is very extensive and the financial aspect is only a small component of the overall transaction, but does not define it.
Another important point to consider is that banks benefit from taxpayer insured operations. Because of this, it has been argued that there is absolutely no way that independent real estate companies can compete with the advantages gained through federal banking. Not only do banks receive federal deposit insurance, they also have favorable tax treatment and privileged access to credit. Furthermore, real estate interests argue that a bank-employed realtor quite possibly would have different motivations because their employer is also handling the financial aspect of the transaction. In essence, if this proposal is approved, banks would control the real estate transaction from start to finish, creating a clear conflict of interest from which the real estate consumer would yield the primary effects.
Ultimately, what those in opposition to the issue are arguing is that if banks are allowed to enter the real estate arena, eventually the way will be cleared for future expansion into anything that banks finance, such as automobiles, boats, homewear and consumer goods. If this happened, bank-owned businesses would eventually monopolize the entire independent business industry and the independent business owner and the economy will inevitably suffer. In the case of real estate, consumers would be greatly impacted by this because their realtor would no longer be the first point of relationship during the home buying process. Instead the realtor would be replaced by the bank whose motivation, it could be argued, is profit driven, not customer focused.
The fate of the independent real estate brokerage is now in the hands of the Federal Reserve Board and Treasury Department. If they validate banking interests, this situation has the potential to threaten independent businesses of every sector all across the United States. I strongly encourage independent business owners from every industry to discuss the role of banks with your local trade associations. I also encourage concerned citizens to contact the Federal Reserve, Treasury Department and your state representatives.
J. Lennox Scott is the president of John L. Scott Real Estate. Lennox Scott is President of John L. Scott Real Estate. The John L. Scott network has 92 offices and over 2,500 sales associates in the states of Washington, Oregon, and Idaho. Last year John L. Scott closed over 37,500 transactions for over $7 billion in volume. Real Trends ranked John L. Scott Real Estate as the 10th most productive independent real estate company in the nation. John L. Scott’s website,
www.johnlscott.com, is one of the top-rated real estate web sites in
the nation and with the entire MLS listing inventory included, it receives over 12 million hits per month. Copyright? 2000-2001, J. Lennox Scott. All rights reserved. For addition information, please contact the Frog Pond Group at 800.704.FROG (3764) or email Susie@frogpondgroup.com; http://frogpondgroup.com.