Commercial PropertyNAR Beats Oxley Back, But Only Temporarily
The hearings called for by U.S. Rep. Mike Oxley (R-Ohio), Chairman of the House Committee on Financial Services that oversees Wall Street, banks, and the insurance and housing industries concluded with a loss for Oxley as his own committee indicated that they are about 238 to two against his bill to allow banks in real estate. The majority -- 238 of 435 have reservations.
In a room down the hall from Oxley"s hearings, a House Appropriations committee, which oversees the Treasury, passed a spending bill that would bar the department from finalizing a regulation to let banks into real estate brokerage.
Congress is tired of the bickering between banks and real estate proponents, and with competing bills on the table, things have simply gone too far. The fight began in 2001 when the Federal Reserve Board and the Treasury Department tried to add banks to entities that could conduct real estate activities under Gramm-Leach-Bliley, and Congress has voted to bar the Treasury from finalizing the regulation every year since.
But Realtors shouldn"t celebrate just yet. Oxley still has the GAO up his sleeve, which he asked to investigate the real estate industry and come back to him with an extensive report.
Before it"s even written, it"s a sure bet that the report will be at the least unflattering, and at best damaging to Realtors because of the nature of the "have-you-stopped-beating-your-wife?" questions about real estate commissions. His contention is that Realtors don"t allow enough competition which adds to the cost of the transaction to consumers.
Under that kind of supposition and scrutiny, anyone can be made to look overpaid. And that"s the point. Is it the business of the government to look into the market conditions that control what practitioners make? If they"re so worried about overpaid workers, how about concentrating on trimming the bloated salaries of every CEO on Wall Street -- especially the ones who have been hauled into courts lately saying they were too high up to know what was going on in their corrupt companies. Please.
But this isn"t really about saving commission expenses for consumers, it"s about cutting down commissions to make room for a new line item on cooperative banks" HUD 1 statements -- a federal transfer tax. Funny, that didn"t come up at the hearings, but it"s definitely on everyone"s mind who attended this witch hunt.
Witnesses to the hearings, which were so crowded that they overflowed into another room, said that Oxley appeared punitive and misinformed, especially when he inaccurately accused the National Association of Realtors of being sued by the Department of Justice. NAR President Al Mansell corrected the congressman who should have known better that the NAR"s policy was being investigated, but that no suit exists.
Mansell, say those who were there, kept the ball in his court the rest of the day.
While it was difficult to come back from such a gaffe, Oxley did his best, along with the Financial Services committee"s leading Democrat Barney Frank of Massachusetts, to promote arguments that regulators should let banks into real estate, but Mansell volleyed back with, "All the firewalls in the world won"t cool off the zeal of the money-center lenders trying to sell their most profitable loans to people who shouldn"t be taking such risks. If lenders were to become real estate brokers, nothing would stand in their way."
"What became clear in the hearing room," said one witness, "is that most of the members present opposed Oxley on his own committee. It"s 238 against two -- Frank and Oxley. The purpose of the hearings was to push Oxley"s bill forward, but it didn"t succeed. What was clear was the majority of the committee didn"t support it."
Says Steve Cook, spokesperson for the NAR, "If you wanted to bring about a change in congressional policy based on the DOJ investigation over the VOW policy and the impending investigation by the GAO, those issues haven"t changed the overwhelming support we have enjoyed in Congress. The question really is about a lame duck chairman who has 18 months left in his chairmanship and what he"s going to do."
Is Oxley at the head of a conspiracy to dismantle the real estate industry and rebuild it in the image of banks? "I see less of a conspiracy than most people," says Cook. "It"s not like they sat down and talked it over. It"s a matter of egos and competing interests, I don"t see a conspiracy. We"re fighting transfer taxes all over, because of the increased valuation of housing, and state budgets are in need of money, so they turn to real estate whenever they can."
There are those who feel Oxley won"t take this defeat lying down. There"s still the GAO study, set to be ready in September.
Explains Cook, "How this works is not really fair. The GAO works for Congress, and when a chairman asks for a study, he dictates the terms and the agency comes back with the findings, and they ask more questions until it is directed the way he wants. In a way it"s like having editorial power -- it"s not the questions you ask and the stories you do, it"s why look at some things and not at other things, so it"s also what you leave out. I believe they will focus on the commission structure, and say it is much too high, which isn"t fair because the GAO is a research arm. They will work that report over five ways to Sunday until they have something they want and it won"t be friendly. I would expect that they will come up with something that won"t make good headlines for us. If I were Oxley, I"d make sure I"d go to a specific place that would help me, like the Wall Street Journal, and give it to them and with an exclusive the WSJ will make a bigger story out of it."
Said another observer, "Oxley"s goal was to establish jurisdiction, clarify the Gramm-Leach-Bliley Act legacy and put NAR on notice. He accomplished his goal."
While Congress clearly wants a compromise, the NAR says there is no room to negotiate with banks, which have responded that they could "invigorate" the business with "new choices and products at competitive prices."