Lobbyists do battle as banks try to enter real-estate market
BY GLEN JUSTICE BLOOMBERG NEWS
Posted on Sunday, August 24, 2003
Three years ago, the American Bankers Association began lobbying to gain the right to broker home sales. The group has sent every member of Congress a Monopoly game ? a message that real-estate agents have a lock on the U.S. housing market.
The National Association of Realtors opposed bankers by putting the image of a giant cartoon octopus with a tentacle wrapped around a house and the words "Stop the Big Grab" on buttons, stickers and even Beanie Babies.
The octopus makes the group?s point that bankers are sticking their tentacles where they don?t belong. If banks get into home sales, many Realtors would be put out of work, said Martin Edwards, who was the association?s president in 2002. "I don?t think a lot of people understand the resolve of the membership on this issue," he said. "It is not going to die."
The two sides, which are among the country?s largest and most-influential lobbies, have been battling over whether banks may legally intrude on Realtors ? turf. So far, the Realtors have halted the banks? advance ? first in the Bush administration and then in Congress ? by winning a one-year moratorium preventing bankers from brokering real estate. "We have put together one of the most effective lobbying campaigns this city has ever seen," said Stephen Cook, vice president of public affairs for the Realtors association.
The war is far from over, said Edward Yingling, director of government relations for the bankers association. "We?ve always looked at this as a long-term fight," he said.
At stake is access to a market that brought real-estate agents $56 billion in commissions last year, according to Real Trends, an industry newsletter. "It?s a huge market," said Marshall Front, chairman of Front Barnett Associates LLC, a Chicago investment firm with $1.5 billion under management and more than $1 million invested in Citigroup Inc. and J. P. Morgan Chase & Co.
Front said banks could eventually win over real-estate customers simply by sending out ads and fliers in monthly mailings. "You can see the flier in the bank statement going to every customer, millions and millions of them," he said. Brokering real estate could also help banks sell other services to real-estate customers. "The home buyer is the ideal bank customer," Cook said. "They?re all terrific prospects to cross sell other services." Yingling said that if banks can broker home sales, they?d gain the opportunity to sell mortgages, other loans, insurance, checking and savings accounts, investment advice, and retirement plans to home buyers.
REALTORS INVADE Realtors have already invaded the traditional turf of banks. Companies such as Long & Foster Cos. and Cendant Corp., which operates Coldwell Banker Corp. and Century 21 Real Estate Corp., offer real-estate brokerage services and mortgages through their own subsidiaries.
Yingling said that gives Realtors a competitive advantage. "That?s where the person goes first," he said. "We may never see that customer."
The lobbying campaign is the first test of the Financial Modernization Act, which Congress passed in 1999. It altered the 47-year-old Bank Company Holding Act, which barred banks from entering other fields.
The law left it to the Treasury Department and the Federal Reserve Board to jointly regulate which financial services and related activities banks can pursue.
So far, the fight between Realtors and bankers has trapped Republicans in Congress and the Bush administration between two lobbies that provide campaign money and support as the 2004 elections approach. "The Republican Party in general didn?t want anything to do with this fight," Cook said. "We?ve got bankers and Realtors, both of whom are traditional Republican constituencies, going at each other tooth and nail."
The three-year duel shows how lobbies bring their weapons to bear. The bankers have a 28-person office in Washington and use at least half a dozen outside lobbying firms.
With 908,000 members, the Realtors claim to be the largest U.S. trade association, and at $3.7 million in last year?s elections, their political action committee gave more to candidates than any other, according to the Center for Responsive Politics, which tracks campaign financing.
The two sides spent at least $41.9 million on lobbying from 2000 to 2002, according to filings in Congress. They spent a combined $12.3 million on campaign contributions in the past two federal elections.
Early in 2000, the bankers association asked the Treasury Department and the Fed to set a rule allowing banks to broker home sales. In December 2000, the two agencies released a proposal that would have allowed bankers to broker real estate.
Realtors and bankers sought support from lawmakers. So far, Congress has passed a one-year moratorium preventing the Treasury Department from making an immediate decision on whether banks can broker real estate.
In June 2001, the Realtors met with then-Treasury Secretary Paul O?Neill to discuss their interpretation of the 1999 law.
The Realtors Association hoped legislation would give O?Neill the proof he needed from Congress, Edwards said. The Realtors turned to an often-used strategy, collecting large numbers of co-sponsors for the bill.
House members swarmed to a bill to block banks? entry into real estate. By April 2002, Realtors reached a magic number: 219, a majority of the House.
Five days after the Realtors Association signed up a House majority, O?Neill announced that the Treasury Department and the Fed would not decide on the matter for at least another year.
Bankers didn?t give up, Yingling said. Their lobbyists attempted to strip out the language, and Rep. Michael Oxley issued a statement showing his displeasure at having his Financial Services Committee bypassed. Those efforts failed, and President Bush signed the bill into law Feb. 20.
It was as much a beginning as an ending. The clash is shaping up to be an annual event, as Realtors are trying to get another one-year moratorium in the 2004 spending bill.
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