NAR president: 'Congress is watching the OCC'

NAR President Tom Stevens, of Vienna, Va., said that the association opposes mixing banking and commerce, whether it is banks seeking to engage in commercial activities such as real estate or commercial firms, such as Wal-Mart, seeking to enter banking.

Stevens spoke at the Regulatory Issues Forum at the Realtors Midyear Legislative Meetings & Trade Expo in Washington.

Stevens said that since January, NAR has been urging Congress to block OCC actions that permit banks to engage in commercial real estate development and merchant banking. Many members of Congress agree and have written to OCC to express their objections and urge OCC to pull back. “We know the banking industry is listening. You may have noticed that JP Morgan Chase withdrew its application to OCC to invest in an oil and gas project,” Stevens said in a news release. “That application didn’t involve real estate development by the bank, but the decision to withdraw the application is a sign that the banking industry is being more cautious about pushing into activities that are far a field of banking.”

NAR has objected to three recent decisions by the OCC allowing banks to develop and own real estate.

In December 2005, the OCC approved Bank of America’s plans to build and own a $65 million Ritz Carlton Hotel in Charlotte, N.C., to provide lodging for the bank’s out-of-area visitors. The bank indicated that only 37.5 percent of the 150 rooms would be used by persons related to the bank’s business. Bank officials expect the hotel to generate profit of up to $2.6 million by its third year, according to previously published reports.

That same month the OCC also approved plans by PNC to build and own a $170 million mixed-use building in downtown Pittsburgh that would include ground floor retail and restaurant space, five floors of hotel space for 158 rooms and four floors of residential condominiums that would be sold when completed. The bank expects to occupy only 25 percent of the office space and 10 percent of the hotel rooms.

Union Bank of California received OCC approval late last year for an equity investment in 70 percent of a wind energy project, which would allow the bank to take advantage of federal tax credits. The company intends to purchase wind turbines and land in order to generate electricity. Despite Union Bank’s claim that the deal is structured as an investment rather than a loan only to take advantage of the tax credits, the OCC is not requiring the windmill company to repay the principal, and periodic payments are conditioned on revenues generated by the company.

Stevens said NAR would continue pushing for a permanent ban on banks entering real estate, predicting that NAR would soon prevail.

“The bottom line is banks should stick to banking and to limited, congressionally authorized other activities, such as community and economic development investments. Banks should not invest in speculative, potentially risky, run-of-the-mill commercial investments like hotels and condos,” he said.[[In-content Ad]]