Mixing Banking and Commerce: Bad for Consumers and Bad for the Economy
The U.S. economy depends in large part on the health of the financial and real estate industries. Several regulatory actions that would allow banks in the real estate industry are putting our economy and the well-being of United States consumers at risk. These ill-considered moves would upend one our nation’s most fundamental economic policies – the separation of banking and commerce. In return, we’re likely only to get bigger banks, higher costs, and less consumer choice and service.
Regulations set up by the Fed Reserve and U.S. Treasury would allow big financial institutions into the real estate brokerage and property management business.
If adopted, the change in regulation will lead to:
* The same large-scale consolidation that has taken place in the financial institution industry itself.
* Less competition, less choice, and higher costs for consumers.
* Pressure on bank-affiliated real estate brokers and agents to market and sell financial products such as insurance, securities, and credit cards.
* Banks networking of private data obtained in real estate transactions with their affiliates and third parties.
* Unfair competitive advantages for banking conglomerates, which benefit from access to capital at lower rates--thanks to federally insured deposits--than local real estate companies.
According to a J.D. Power survey, 28 percent of homebuyers had problems with their lenders, such as errors in closing documents, miscommunications of loan terms and unavailable or no responsive from loan consultants or mortgage brokers.
If almost 1 in 3 homebuyers can’t get adequate one on one service for their loan then how will they be served by banks during the much more complex process of buying or selling a home?
Financial Institutions are Unique - So Let’s Keep Them That Way
Banks play a unique role in our financial system. In response to the bank failures of the 1930’s, the government established the (FDIC) federal deposit insurance. As a trade-off, banks accepted comprehensive federal regulation and limitations on their eligible activities. The Savings &Loan crisis of the 1980’s demonstrated the importance of strong federal rules to keep financial activities separate from commercial services.
To avoid bank's receiving an big advantage over non-banking firms, Congress has established the national policy against mixing banking with commerce. It’s simple, it’s straightforward, and it avoids the entanglements that dilute the clear mission of banks to provide and support a strong payment system and provide banking services that are essential to a healthy economy.
Allowing banks to enter the real estate industry is inconsistent with this policy and weakens the regulatory structure necessary to protect the federal deposit insurance fund, the payment system, and the United States economy.
Loosening restrictions on the activities of federally insured financial institutions led to the Savings and Loan crisis of the 1980’s. There was no reason to risk a rerun of that $124 billion debacle. But it started all over again in 2004-2005 with an unprecedented rise in property values and continues to hurt the economy to this day.
Banks Want To Consolidate the Industry
Bank controlled RE brokerages would become marketing arms for mortgage departments and other proprietary products and services banks sell, even if they are in the consumer’s interest or not.
The real estate industry, dominated by thousands of small businesses, would lose its consumer service focus if banks are sucessful in consolidating the industry.
The American People Agree:
According to a recent national survey conducted by Public Opinion Strat., American consumers believe that bank owned real estate brokerages will result in bad customer service, trample privacy through unrestricted access to private financial information, force them to pay more and higher fees, and cause serious conflicts of interest. Not to mention maybe even create a monopoly in the industry.
According to survey results:
American's believe people are going to be hurt by banks that own real estate brokerages and have access to home buyers and home sellers bank account and other financial information.
Americans believe it would be a conflict of interest for a bank to offer and approve loans on homes that they were already involved in as a real estate broker. (66% say true – 28% say false)
Americans believe banks will pass on real estate costs to their account holders. (64% say true – 29% say false)
* +/- 3.46% Margin of Error
published by the National Association of Realtors
