Summary of the
Written Statement of the National Association of REALTORS®
Federal Deposit Insurance Corporation
Hearing on the Petition for Rulemaking to Preempt Certain State Laws
May 24, 2005
The National Association of REALTORS® (NAR) is pleased to submit its views to the Federal Deposit Insurance Corporation (FDIC) on the petition for rulemaking to preempt state laws to permit state banks to operate nationally under the laws of their home states. REALTORS® are involved in all aspects of the residential and commercial real estate industries. Because the real estate business is inherently local, the issue of preemption of state and local laws applicable to depository institutions is one of great concern to us.
NAR and its members have been deeply involved in issues relating to competition among federally-chartered depository institutions, state-chartered banks, and nonbank financial institutions because they play such an important role in helping American families purchase their homes. We believe the OCC preemption regulations, issued early last year, have hurt efforts of state and local governments to protect their citizens and provided an unfair competitive advantage to national banks. As a result, the OCCs actions have disrupted the competitive balance between national banks and state-chartered depository institutions as well as the balance between national banks and nondepository institutions that compete with national banks.
NAR also has actively participated in the joint regulatory proceedings of the Treasury Department and the Federal Reserve Board on whether to expand the definition of financial activities under the Bank Holding Company Act and the National Bank Act to include real estate brokerage and management. NAR opposes the proposed regulation because it would permit financial holding companies and financial subsidiaries of national banks to engage in real estate brokerage and management, which are commercial activities. We firmly support this Nations longstanding tradition of maintaining a separation between banking and commerce to protect the safety and soundness of the banking system, and believe that it is not appropriate for banking organizations to engage in commercial activities, and most especially not by regulatory fiat.
NAR believes that none of the proposals presented by the Petition warrant action by the FDIC. The Petition is a response to an alleged competitive imbalance attributable to the OCCs actions. But the cure for any imbalance is for Congress or the OCC itself, under new leadership, to roll back the OCC regulations, not to use them as a model for the state banking system. NAR believes that granting the Petition would further harm the ability of states to protect their citizens; result in undue concentration of banking services and less choice for consumers; open the door to the mixing of banking and commerce; destroy the state banking system, not save it; and disrupt the competitive balance among financial service providers. Considering the significant restructuring of the financial services industry and unintended consequences that would result from granting the Petition, the decision should be the exclusive domain of Congress, not a regulatory agency. Finally, we do not believe that the FDIC possesses legal authority to grant the relief requested by the Petition.
The written statement elaborates on our concerns in 12 sections:
The relief requested will undermine state consumer protections.
The relief requested will result in an undue concentration of resources and fewer consumer choices.
The relief requested will open the door to banks becoming involved in commercial activities.
The relief requested will promote competition in laxity among states.
FDIC action would conflict with and undermine the dual banking system.
The relief requested will disrupt the competitive balance between depository institutions.
Any confusion as to applicable law is attributable to OCC actions.
The relief requested will adversely affect competition between depository and nondepository institutions.
The FDIC has no authority to interpret Riegle-Neal.
FDIC will find itself inundated with requests for interpretations.
The FDIC has no authority to determine nonbranch activities of state banks.
The FDIC has no authority to preempt host state laws applicable to operating subsidiaries.
In view of the adverse consequences that we believe are inevitable if the FDIC preempts state and local law as requested by the Petition and considering the serious questions about whether FDIC possesses the legal authority to preempt state law, the National Association of REALTORS® urges the FDIC to deny the Petition.