Subcommittee Hears Testimony on Banking Proposal

WASHINGTON, DC-The debate over whether banks should be allowed to enter the business of real estate went before a subcommittee of the US House of Representatives on Wednesday, as officials grapple over the exact nature of real estate transactions. The question: Are they financial or commercial?

Federal Reserve Board governor Laurence H. Meyer laid out the debate for the House Subcommittee on Financial Institutions and Consumer Credit. In 1999, when Congress passed the Gramm-Leach-Bliley Act that reformed the banking industry, it amended the Bank Holding Company Act to allow banks to engage in activities the Fed, in conjunction with the Secretary of the Treasurer, determine to be “financial in nature or incidental to a financial activity.”

Not surprisingly banking officials argue that real estate and property management are financial or incidental to financial activity, while real estate officials argue they aren’t. According to Meyer, most of the comments received by the Fed and the Secretary of the Treasury have been against the measure, mostly from real estate brokers.