The National Association of Realtors said it had asked federal regulators to reject Home Depot’s plan to buy EnerBank USA, citing potential competitive harms [Reuters] In a statement on Tuesday, the group said it told the Federal Deposit Insurance Corp. in a letter that the buyout could create potential conflicts of interest, pose risks to the U.S. financial system and discourage competition in financial services.

NAR raised similar objections a while back when Wal-Mart applied to the FDIC to buy their own bank. Essentially NAR claims that the Home Depot bank “EnerBank” will be biased toward contractors who already do business with Home Depot. EnerBank is an existing bank that specializes in kitchen and bath renovations and it therefore seems to be a natural fit for Home Depot. Why would NAR care about this at all?

NAR fought the earlier Wal-mart application because they claim it mixes banking and commerce and places banks in a more speculative position. Banks claim that NAR already has a monopoly on real estate brokerage. Again, why would NAR care about Home Depot?

Its the principle that will end up shooting bankers in the foot.

The Wal-Mart application opposition was unusual because NAR and the banking industry were actually on the same side.

For more than five years, the realtors have tenaciously fought a Washington-style, lobbyist-intensive battle against allowing banks into real-estate brokerage. What was their argument? You guessed it–the need to maintain the separation of banking and commerce. So the banks trying to prevent Wal-Mart from entering their business and the realtors hoping to avoid competition from banks are both citing the same “principle.” This should tell us a lot about what the separation of banking and commerce is really about.

The banking industry is being nailed (sorry) quite astutely by the NAR [AEI].

The results of this shortsighted strategy are easily seen in the banks’ fruitless effort to enter the real-estate brokerage business. For five years, the Fed, under pressure from Congress and the realtors, has been unable to decide whether real-estate brokerage is a financial activity and thus permissible for banking organizations. The banks are outraged by this delay–and they should be; but they do not seem to see either the link between the separation idea and the realtors’ successful defense, or the conflict between their opposition to Wal-Mart’s entry into banking and the realtors’ opposition to their entry into real-estate brokerage.

In other words, by NAR hammering (sorry) the issue of separation of business and commerce with Home Depot and Wal-Mart which keeps the issue in the forefront (ie Glass-Steagall Act), the depression era law designed to keep commercial banks out of risky investment activites, thought to be one of the main causes of the depression. As a result, the banking industry has been tied up in a legal morass in Washington for five years.

Whether you agree with the danger of banking in commerce or not, this keeps banking out of the brokerage business for now, thereby reducing competition. Ultimately, I think its only a manner of time before banking gets in the house selling game. There is significant financial incentive because it dovetails nicely with their mortgage business.

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