CUNA Comment Letter

Real Estate Brokerage for Banks

May 1, 2001

Real Estate Brokerage and Management Regulation
Office of Financial Institution Policy
U.S. Department of the Treasury
1500 Pennsylvania Avenue, NW
Room SC 37
Washington DC 20220

To Whom It May Concern:

The Credit Union National Association is pleased to comment on the Federal Reserve Board’s proposal developed with the Treasury Department to allow financial subsidiaries of national banks to act as real estate brokers and managers under the Gramm-Leach Bliley Act (PL 106-102, 113 Stat.1338 (1999)). CUNA represents over 90% of our nation’s 10,614 state and federal credit unions; their assets total $460 billion. Approximately 81 million consumers in this country belong to credit unions. We are filing an identical letter with the Federal Reserve Board.

In considering whether to adopt this proposal, we urge the Board and Treasury to consider its potential impact on consumers and the commercial marketplace as well as its legal ramifications.

Regarding the economic implications, we question whether the proposal would provide a wider range of options for consumers or would in effect establish a framework under which banks could control most aspects of the mortgage market.

We believe it is fair to point out the hypocrisy that underlies banker support for real estate brokerage powers for financial holding companies (FHCs). At the same time banks are reaching out for additional powers that many contend will ultimately limit consumers’ choices and increase bank dominance in their financial and commercial affairs, banker groups are zealously pursing limitations on credit union growth and survivability.

Despite banks’ consistent growth and dominance in the financial institution marketplace, over the last several years the American Bankers Association has seized and created many opportunities to challenge the powers of credit unions. Currently, the ABA is suing the National Credit Union Administration to overturn the agency’s policy on credit union membership developed under the Credit Union Membership Access Act and are contesting credit union field of membership applications at the state level as well. In February, the ABA filed a comment letter with NCUA categorically opposing a new incidental powers proposal that would incrementally increase activities for federal credit unions, as the Office of the Comptroller of the Currency has done for national banks.

Should the incidental powers rule for federal credit unions be approved, many would still not be able to exercise the panoply of powers that banks possess. Nonetheless, banker organizations rail against any new authority that would better allow credit unions to keep pace with marketplace developments and enhance credit unions’ ability to serve their members.

No less a banking expert than Mr. William Seidman, former chairman of the Federal Deposit Insurance Corporation, has focused on the potential consequences of this proposal on the financial system. In a recent editorial in the American Banker, Mr. Seidman pointed out:

Selling a building is fundamentally a commercial transaction. Indeed, if the Fed and Treasury decide to classify real estate brokerage as a financial activity, the distinction between commercial brokerage and financial brokerage will be lost. The outcome could open doors to allow banks to broker anything, from automobiles to airplanes. Homebuyers are also customers for insurance, future home equity loans, savings and investment products – just about everything a bank offers at retail. Banks should not be in a preferred position for this business, but should compete for it with the other vendors available.

There is no question that the concept of incidental powers in the context of financial institutions signals Congress’ strong intention that, as consumer demands evolve, so should the ability of such institutions to provide the types of services consumers seek. This is just as true for credit unions as it is for banks. However, given the dominance of commercial banks in consumer financial markets, the Board and Treasury must carefully consider the impact on such markets, as well as the legal authority to allow FHCs to engage in real estate brokerage activities.

Thank you for the opportunity to comment on this very important issue. If you have any questions about our comments, please do not hesitate to contact me or CUNA’s Associate General Counsel Mary Dunn at 202-682-4200.

Sincerely,

Daniel A. Mica
CUNA President and CEO

Cc: Rep. Michael Oxley Rep. Paul Kanjorski
Rep. Spencer Bachus Rep. John LaFalce
Rep. Richard Baker Rep. Maxine Waters