Senate panel OKs ban on banks in real estate

Reuters
Senate panel OKs ban on banks in real estate

WASHINGTON (Reuters) - The Senate Appropriations Committee on Thursday approved legislation that would permanently ban U.S. banks from engaging in real estate activities, a protection long sought by the real estate industry.

The permanent ban, pushed by Senate Banking Committee Chairman Richard Shelby, an Alabama Republican, was attached to a fiscal 2007 bill funding transportation and housing programs as well as the Treasury Department.

It is unclear when the legislation will be considered by the full Senate.

The National Association of Realtors (NAR) has been pressing the issue on Capitol Hill for months following letters issued by the U.S. Office of the Comptroller of the Currency (OCC) that let two banks make real estate investments that involved hotels and a third to develop and partially own a wind-energy project.

NAR in May said that it would press for a permanent ban on banks entering real estate. Last year, the Senate appropriations committee approved a one-year prohibition.

The real estate group said banks should be barred from investing in potentially risky commercial investments like hotels or apartment buildings.

But banks and the regulator often dismiss the Realtors' concerns, saying banks' real estate investments are well founded in precedent and do not involve brokerage activities.

U.S. law restricts banks' real estate activities, and U.S. banks do not develop or own properties beyond those associated with their business operations.