In a major victory for Realtors and a considerable setback for the banking industry, the U.S. Treasury secretary has put off a decision on whether to allow banks to get into the business of real estate brokerage and property management.

Treasury Secretary Paul O’Neill announced last week that the government has postponed until 2003 making a decision on a proposed regulation that would allow banks to enter the real estate business.

Banks are seeking permission to sell and manage real estate through a regulation before the Federal Reserve Board and the U.S. Treasury Department. But real estate groups are campaigning against the measure, even pushing to get a bill passed that would prevent banks from entering the real estate industry.

“I think it’s a victory for the Realtors and a victory for the consumers out there,” said David S. Drinkwater, president of the Massachusetts Association of Realtors, referring to the postponed decision.

Drinkwater, along with MAR Executive Vice President John Fridlington and several other Bay State Realtors, met with the Congressional members from Massachusetts about two weeks ago in Washington, D.C., to discuss the issue.

Realtor groups have been working hard to educate the public and lawmakers about the issue, said Drinkwater.

“We believe it is absolutely essential for our federally elected lawmakers to decide what’s best for the American consumer, not the two agencies charged with regulating banks,” he said. “We’re asking Congress to get involved to stop this effort to dismantle the firewall between banking and commerce.”

“This is not about competition. It’s about unfair competition,” added Drinkwater, who maintains that FDIC-insured banks would not face the same risks as other real estate companies handling transactions.

The National Association of Realtors argues that locally owned and operated real estate companies would be forced to close if big banking conglomerates with federally insured deposits and other protections were allowed sell and manage real estate because it would create “unfair competition.”

Realtors also contend that allowing banks to enter real estate would violate the intent of the Gramm-Leach-Bliley Act passed in 1999. The act lowered a longstanding firewall between various financial services providers. But the banking industry maintains that the Gramm-Leach-Bliley Act allows banks to expand into real estate and would create healthy competition.

NAR leaders have urged Congress to support the Community Choice in Real Estate Act, a bill that would prevent the proposed regulation under consideration by the Federal Reserve Board and Treasury Department from taking effect.

More than 220 representatives and 10 senators have sponsored the bill, according to NAR.

After the treasury secretary’s announcement, NAR President Martin Edwards Jr. called on the banking lobby to withdraw its request to enter real estate brokerage and property management.

The announcement comes after NAR launched a multimillion-dollar ad campaign to keep banks out of the business.

Not all Realtors, however, have backed NAR’s efforts to block the banks. Members of The Realty Alliance, a Dallas-based group that represents some of the nation’s largest independent real estate firms, have spoken out against efforts to keep banks out of real estate. Some say it’s hypocritical to prevent banks from selling real estate when some real estate companies offer financial services such as mortgages and insurance.