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Realtors and Bankers Square Off in Washington
The nation’s bankers and realtors are in Washington this week, bringing their turf war to the nation’s capitol. The House Financial Services Committee is holding hearings on a proposal from the Federal Reserve Board and the Treasury Department that would allow banks to engage in real estate brokerage activities. Not too surprising, the National Association of Realtors opposes the idea.
Groups including the American Bankers Association, the Financial Roundtable, the National Association of Realtors and the Consumers Union will all be there to contribute their "two cents worth." Back in December, both the Federal Reserve and the Treasury issued a proposed rule aimed at expanding the list of permissible activities for financial holding companies under a new financial reform law. That law includes allowing banks to get into the real estate brokerage area.
Banking groups, such as the American Bankers Association, say that allowing banks to engage in real estate brokerage sales would promote competition, increase consumer choice and lower consumer cost. On the other side of the fence, the realtors, led by the National Association of Realtors, claim that including the real estate area would increase cost to consumers and decrease consumer protection. Joining the realtors is the Consumers Union. They are prepared to tell the House panel that allowing banks to engage in real estate activities may not be in the consumer’s best interest as the banks claim.
The Federal Reserve and the U.S. Treasury have already put forth the idea as a positive one. So, now we’ll see, as the big dance goes on in Washington, whether the realtors can get Congress to intervene on their behalf.
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Recent reports on inflation have been pretty good. Earlier in the year there was the threat that inflation was actually picking up, but it looks more and more now to have been just a blip. Of course, to state the obvious, if inflation stays under control, the Fed has more room to maneuver as it attempts to make sure we avoid a recession. Even with the Fed’s recent "surprise" half-point cut, many feel there are still more cuts in interest rates coming, the next one likely to be at their May 15 meeting. That door was certainly left open by Anthony Santomero, the President of the Federal Reserve Bank of Philadelphia, who last week indicated that the Fed has room to ease monetary policy, again, in response to economic weakness.
Santomero told a group in Delaware that the Fed’s four interest rate cuts so far this year should begin to boost the economy in the months ahead-- for that reason, he says, he expects economic growth to pick up in the second half of this year after a period of slow growth throughout the first half. Santomero assured the group that the Fed can lower interest rates again if necessary, noting that current economic growth is "much too sluggish." He said that while some positive signs have emerged recently in the economic data, there are still many reasons for concern. Santomero says he believes our country can sustain an economic growth of 3% to 4% per year, and an unemployment rate of between 4% and 5% without an acceleration of inflation from its current annual pace of about 2.5%.
The bottom line on all of this remains the same, that is, the Fed has contended since the first of the year that they would do whatever it takes to assure that we avoid a recession. Alan Greenspan has a long, distinguished record, and I, for one, hope and feel that he can once again get the job done. But obviously, the jury is still out, and only time will tell.
(Tom Butenhoff is a First Vice President with J. E. Liss and Company, Inc.
in Milwaukee. The views are his, and not necessarily those of Liss
Financial Services or the Job Connection/Hiring
Network.)