Banking conglomerates are seeking permission to sell and manage real estate via a proposed rule before the Federal Reserve Board and U.S. Department of the Treasury. However, the proposed rule is contrary to what Congress intended when it passed the 1999 Gramm-Leach-Bliley Act. The budget provision, which was inserted at the behest of U.S. Rep. Anne Northup (R-Ky.), specifically precludes the Treasury Department from using any funds to implement the rule in fiscal year 2003, which ends Sept. 30.

Legislation that would amend the Bank Holding Company Act and permanently prohibit big banks from entering the real estate business was reintroduced last month with strong momentum and the same level of bipartisan support the bill gathered in the last Congress. More than 175 members of the House and 10 senators have signed onto the Community Choice in Real Estate Act (H.R. 111, S. 98) since it was introduced by Reps. Ken Calvert (R-Calif.) and Paul E. Kanjorski (D-Penn.) in the House and Sens. Richard Shelby (R-Ala.), Wayne Allard (R-Colo.) and Hillary Rodham Clinton (D-N.Y.) in the Senate.

The vote from the House and Senate sends a clear and strong message to the Treasury that Congress never intended to mix banking and commerce, said 2002 National Association of Realtors President Martin Edwards.

"Both houses of Congress have spoken and officially declared their intent to keep banks out of real estate. We are hopeful that Treasury will deny the rule. We continue to believe that the banks cannot obtain through regulation that which they obviously cannot get through legislation," Edwards said.

The association believes that congressional support for keeping banking conglomerates out of real estate also will mount this year in light of the recent accounting scandals and recent allegations that firewalls in banking activities have been violated.

Consumer, community and small-business advocates have also voiced their support. Advocates believe if big banks are allowed to take over local real estate businesses, there would be a negative impact on communities across America, leaving home buyers and sellers with fewer choices, higher loan fees and a reduced level of customer service.

National Association of Realtors President Cathy Whatley called the vote a "tremendous step forward."

Information provided in this column is presented by the Realtor members of the Silicon Valley Association of Realtors at www.silvar.org. Send questions on any topic to jnewton@jnpr.com.