Rarely has pending legislation suggested changes to the financial services arena as controversial as the recent Gramm-Leach-Bliley Act (GLB Act).  The proposed rule would declare real estate brokerage, real estate management, and employee relocation to be activities that are "financial in nature" or "incidental to a financial activity" under the GLB Act. This would allow financial holding companies and national bank subsidiaries to enter these businesses.

The impact on the real estate brokerage industry has escalated and this GLB Act has become one of the most highly profiled public, advertising, social media campaigns and debates on main street, the grapevine, Chicago and Capitol Hill.

Before we end with the final result, let's quickly summarized where it started.

Spurred by the 1929 market crash and in the belief that the stock market speculation by the banks led to their collapse, the 1933 Banking Act was aimed at restoring confidence in the banking system. It established the Federal Deposit Insurance Corporation (FDIC), which insured customer accounts and prohibited banks from both accepting deposits and underwriting securities. In a section called the Glass-Steagall Act (GS Act), it forced the separation of commercial and investment banking.

Following World War II, banks sought ways around the restrictions by forming holding companies that in turn engaged in commercial activities. Then in 1956 the Bank Holding Company Act (BHC Act; amended in 1970) placed further restrictions on what banks could do in the insurance business and once again reinforced the division of commercial and investment banking activities.

By the mid 1990s many economists and policymakers viewed the terms of the GS Act to be largely unnecessary and in November 1999 President Clinton repealed the GS Act and introduced the Gramm-Leach-Bliley Act (GLB).

That is where the new debate started.

The act specifically allows a bank holding company or a foreign bank that qualifies as a financial holding company to engage in a broad range of activities that are defined by the GLB Act to be "financial in nature" or "incidental to a financial activity." 

The fight was on.

Fast forward to 2009 and the "bloody" almost decade long battle ended quietly last week when Congress passed an Appropriations Bill that would permanently ban the Federal Reserve Board and Treasury Department from finalizing the 2000 proposal to allow federally chartered banks into the real estate brokerage business.

NAR wins with a technical knock out in Round #8.

So what happened?

Well, the American Bankers Association, which had led the crusade and was able to get a series of some eight-one-year delays, just decided to give up. According to the Associations president, "It was no longer on our priority list." Well, with the state of the financial market no-one is surprised.

So, it's over?

Well for now, at least. Will there be another challenge or initiative in the future? Most likely. Meanwhile, also remember that this rule only applies to federally chartered banks and not state banks.

That said, this battle is over, and NAR remains the reigning champion.

A detailed 20+ page whitepaper discussing the issues titled "Real Estate Confronts the Banks" was published in 2001 by RealSure, Inc. and is available for free downloading.