Raymond T. O'Keefe, CRE, president of Grubb & Ellis, based here, agrees with the NAR's position. O'Keefe points to the Glass Steagall Banking Act of 1933 that was part of Franklin D. Roosevelt's New Deal legislation and prohibited investment banks from underwriting or dealing in corporate securities, except government bonds; having any deposit business; and being brokers and money managers. Investment banks have entered money market funds and cash management since then and an increasing number of exceptions to the Act have been passed.
O'Keefe argues the Act prevents "exuberances" on the part of banks and that it was the banks' desire to be involved in such far-reaching industries that they were spread too thin in their attentions. "It's part of the reason we had the crash in 1929," he notes. In fact it was the belief that banks were to blame for the stock market crash and ultimately the Great Depression that led to the Act. Recently, however, banks have raised the issue, making it controversial among legislators. Congress nearly repealed the entire Act.
While at this time the proposed regulation concerns residential real estate, it has been widely suggested that the chipping away at the Glass Steagall Banking Act would open the door to banks entering commercial real estate brokerage as well. "I think it would be a bad idea generally," says O'Keefe. "It's not just that in the short-term it could impact the profitability of real estate brokerages, but in the negative impact on consumers would be large and long-term."
He says brokerages are specialized to focus on the intricate needs of consumers and match them to the appropriate space. He says that brokers are focused on "paying the utmost attention" to these details and that a bank simply couldn't offer the same level of services. According to the NAR's findings, most consumers oppose the measure because they fear for their privacy.
While brokers and consumers oppose the regulation, on the real estate investment side of the industry the issue seems not to hold interest. Joseph D. Stecher, based here, a portfolio manager for Real Estate and Alternative Investments at General Motors Asset Management Corp., tells GlobeSt.com from an investment perspective, "Who cares?" In his post, and as a member of the REAI Approval Committee for his company, he structures joint ventures and partnerships, oversees functions such as leasing, budgeting and dispositions and invests in real estate. He says whether or not banks are able to enter the brokerage business does not have an impact on his company's investment strategies in real estate.
Other area brokers told GlobeSt.com they would wait and see if the proposals were extended to the commercial sector before officially commenting on the issue. Those who are interested in making their opinions heard with the Federal Reserve Board were originally only going to have until Friday, March 2 to respond, but the public comment period has been extended to Tuesday, May 1.
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