Last December, the OCC permitted Bank of America in Charlotte, NC, to develop a Ritz Carlton to provide lodging for the bank's out-of-area visitors. But most of the 150 rooms will be used by people who have nothing to do with the bank's business. That same month, the OCC blessed a mixed-use building project in Pittsburgh to be owned by PNC Bank that would provide not just 12 floors of office space for the bank's use but also ground-floor retail and restaurant space; five floors of hotel space (158 rooms); and 32 condominiums units. Finally, the same agency in the same month gave the green light to the Union Bank of California to make an equity investment in approximately 70% an LLC that would operate a wind-energy project. The LLC would purchase wind turbines and interests in real estate needed to generate electricity.

A Ritz Carlton? A windmill farm? Condos? Yogi, you were right. Some say we should not worry about these three projects. Should they fail, the huge financial institutions making the investments can handle the risk. I agree, but that's not the point. There are about 60,000 federally insured branches and bank offices in the United States. Conceivably, all of them could become the springboard for banks to buy or build shopping malls, office complexes, condos, residential developments and resorts.

The precedent is real and the prospects are frightening, not just for the taxpayer but also for the commercial real estate industry. Imagine what your business would be like if your biggest competitors were protected by federal law, had access to capital at rates far below what you could ever hope to find, and no matter how badly they were managed, the federal government would never allow them to fail. Banks have advantages that real estate companies don't have, such as the ability to borrow money in the federal funds market and access to the Federal Reserve discount window. We also believe that when banks compete with commercial firms, it raises conflict-of-interest issues. How can banks stay objective when they are potentially granting loans to the same companies with which it competes? It is important that the Department of the Treasury, the OCC and Congress keep banks as honest brokers in providing financial services, not competitors of real estate agents and commercial firms.

As if these risks are not enough, let's not forget that investing in real estate can be a risky venture as markets change. The OCC should not expand the authority of banks to invest in real estate development because it creates risk. As in the savings-and-loan debacle in the 1980s, the taxpayer will be forced to bail out the banks. Big banks may not admit the risk, but history has taught us otherwise. Simply put, our economy is vulnerable to this threat.

That's why we have written members of Congress more than 200,000 letters urging them to settle this issue, end the debate and protect our nation's economy. Now, more than a dozen members of Congress are starting to ask tough questions about these deals. I hope that we can get the OCC to reevaluate its policies and close a loophole that could lead to a return to the bad old days of 20 years ago.

Thomas M. Stevens is president of the Washington, DC-based National Association of Realtors. He is also SVP of NRT Inc. in Vienna, VA.

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Banks Are Muscling in on Real Estate's Turf

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