Home Depot’s proposed purchase of a federally insured bank could create potential conflicts of interest, pose risk to the nation’s financial system and discourage competition in financial services, the National Association of Realtors told the Federal Insurance Deposit Corp. today.
NAR President Thomas Stevens and other trade group representatives in a letter to John Carter, San Francisco regional director of the FDIC, reiterated concern over the potential dangers of mixing banking and commerce that would result from the acquisition of EnerBank by Home Depot.
In February, Stevens raised similar objections to Wal-Mart’s application to the FDIC for federal deposit insurance for a Utah-chartered industrial bank.
“NAR and its 1.3 million members are extremely concerned about the inevitable conflicts of interest, the harm to the competitive landscape, and the risks to the U.S. financial system. Banks must be honest brokers of financial services and not be swayed into making credit and other business decisions based on their affiliation with commercial firms or projects,” Stevens said.
NAR last month said it would press for a “permanent ban” on banks entering real estate. The national trade group has been fighting to keep banks out of the real estate brokerage business for several years and has placed the issue high on its list of legislative priorities.
Stevens today said that Home Depot’s proposed business plan is an example of why banking and commerce should not be mixed. “It creates an inherent conflict of interest because the company will have an incentive to channel credit through unsecured home improvement loans to customers of home improvement contractors who are Home Depot customers.”
NAR and its 54 state and territorial associations asked the FDIC to disapprove the proposed acquisition. If the FDIC cannot disapprove the request immediately, NAR asked the agency to hold a public hearing on the application for FDIC coverage, as it did for Wal-Mart’s application.
NAR will continue to encourage Congress to examine the ILC loophole that permits commercial firms to own this type of bank, said Stevens.
NAR has also asked acting FDIC Chairman Martin Gruenberg to oppose a proposed rule by the Federal Reserve Board and the Department of the Treasury that would permit financial holding companies and financial subsidiaries of national banks to engage in real estate management and brokerage, and recent opinions of the Office of the Comptroller of the Currency that go beyond statutory authority and permit banks to own and develop real estate.
After a meeting with NAR officials in February, the U.S. Comptroller of the Currency said he has no intention of expanding the agency’s “limited authority” to breach the separation of banking and commerce.
John C. Dugan, Comptroller of the Currency, made the statement following a meeting with NAR representatives to discuss three recent interpretive letters from the Office of the Comptroller of the Currency.
The three December OCC rulings allowed three of the largest national banks in the nation to invest in the development of office buildings, hotels, residential condominiums and a windmill farm.
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