Bankruptcy

National Banks in Real Estate Brokerage

By Adam Levitin

It appears that Congress is going to permanently ban national banks from engaging in real estate brokerage.  This is a major win for the National Association of Realtors, who worry that if banks get in the brokerage business, they will eat their lunch (in part by being able to offered bundled brokerage/lending services).

I'm uncertain how to view this.  On the one hand, there's a lot of reason, especially now, to be skeptical about the expansion of national banks into new lines of business.  The original 1863 National Bank Act kept national banks out of real estate lending.  How much happier would the financial system be today had that restriction been upheld. As banks and their affiliates expand into new lines of business, it becomes increasingly hard for banks' regulators to keep on top of the total safety-and-soundness picture of banks. 

On the other hand, there's plenty to complain about with the current state of real estate brokerage, including a variety of anticompetitive practices that sustain uncompetitively high brokerage prices.  It's unclear, however, whether the entry of national banks into the real estate brokerage business would make things more competitive in any way that would benefit consumers. 

Interesting discussion of the issue on Bank Lawyer's Blog. 

Full post as published by Credit Slips on March 11, 2009 (boomark / email).