No enemies here

EDITORIAL Comment

Bankers, real estate brokers can work together

Confrontation was the last thing on his mind when American Bankers Association President-elect Jim Smith went to San Francisco recently to persuade a gathering of real estate brokers that they have nothing to lose and much to gain from banks getting into the real estate business. In an address titled "Cooperation, Not Competition," Smith said he hoped when he finished his audience would see bankers as partners, not competitors.

First, he called for a change in the nature of the debate by opening the doors to communication between the two industries. "Let's put aside rhetoric," he urged. "Let's build on our common strengths. Let's focus on the core issue. And that is the ability of banks to obtain real estate privileges." Then he made a persuasive case.

Smith, who is chairman and CEO of Citizens Union Bank & Trust Co. in Clinton, Mo., doubted that bankers will run out and get real estate licenses if they are allowed to do so. "You have very different skills than bankers, and we respect that," he told attendees at the Inman Real Estate Conference. What bankers really want, he explained, is to work with real estate brokers, perhaps through joint ventures and contracts. Smith added, "We're going to buy a few of you, perhaps at a very healthy premium. We're even, in some cases, going to see our banks bought by you."

No "takeover" of the real estate industry is in the cards, Smith said. Even though half the states allow state-chartered banks to sell real estate, few actually do, he pointed out. What the banking industry wants, he emphasized, is for nationally chartered banks and the rest of the state banks to be on a competitive par with other financial institutions.

Relating his experience with insurance agencies following passage of Gramm-Leach-- Bliley in 1999, Smith told the real estate brokers that he had been approached by several agencies seeking buyouts or joint ventures. "But that's the opposite of what I used to hear from insurance agent groups," he said. "They thought banks were going to do them in if we were ever able to sell insurance." But there was a happy ending. Insurance agencies are happy because banks created joint ventures with them, contracted with them and bought them at healthy premiums.

Banks have provided a lot more capital, a broader market and many more opportunities for insurance agents, Smith pointed out. "And then - and this is important - we've let them alone to do business as they think best because we bankers acknowledge and respect their expertise."

The ABA president-elect sees the same thing happening with real estate. "Some of you may even find yourselves getting higher salaries and bigger sales premiums," he told the real estate brokers. "So I don't think you should be concerned about your future as agents. Why would we want to replace you when we can work with you, learn from you and - in the end - help both of us?"

This "cross-fertilization" is going to happen one way or another, Smith concluded. "It's going to happen because the market is driving it. Many large real estate and financial firms already offer a huge array of financial products. Let's make sure the benefits of this cross-fertilization will also be yours and mine. They can be - if we build on each other's strengths and recognize each other's unique skills."

Smith's plea to the real estate brokers in San Francisco to cool the rhetoric on both sides and think about how the two industries can work together for their mutual benefit is exactly what was needed to put this issue in perspective. But, his articulate interpretation of the banking industry's position notwithstanding, bankers still need to make their views known to their Congressional representatives. According to reports, the number of letters being received in Washington from real estate brokers far exceeds the number of letters from bankers. That won't get the job done.

[Author Affiliation]

Bill Poquette, Editor