Posted on 10/17/2008 8:17:11 PM PDT by markomalley
BB&T Corp. Chief Executive John Allison is calling for short-term fixes and long-term reforms to address the financial crisis.
Addressing a gathering of the Winston-Salem Chamber of Commerce Friday morning, Allison said the initial efforts of the federal government to rescue the economy were misguided and served to increase public anxiety. However, he said he supported the latest move to inject taxpayer funds directly into banks.
“It is necessary, given the unnecessary government-caused panic,” Allison said.
His views are influential because he leads a bank that has weathered the financial crisis better than many, in the eyes of industry analysts. This week, BB&T (NYSE:BBT) reported profits of $358 million in the third quarter, down 19 percent from a year ago.
In his hour-long discussion, Allison traced the roots of the financial crisis to government efforts begun under the Clinton administration to promote affordable homeownership using the government-sponsored mortgage backers Fannie Mae and Freddie Mac.
That contention has many detractors, who note the share of subprime loans held by the government-backed entities declined substantially during the height of the housing boom, relative to private investment banks. But Allison laid the primary blame at the feet of Democrats who, he said, failed to properly control Fannie and Freddie.
“I think George Bush has been one of the worst presidents in history, but this is not his fault,” Allison said.
Other factors contributing to the problem, he said, include the use of “fair-value accounting” that forced banks and others to have to dramatically undervalue assets; “pick-a-payment” loans that put borrowers underwater on their mortgages; the trend toward lenders selling their mortgages to others, making them less careful in their underwriting; and the failure of rating agencies to accurately assess the risks of mortgage-backed securities.
The inability of the market to understand the risks of such assets and confidently price them for sale contributed to the failure of the initial government bailout efforts to loosen frozen credit markets, Allison said.
The only way to solve the fundamental problem weighing down the economy, he suggested, is to clear the nation’s housing market of its inventory of unsold homes. To do that, he proposed a 10 percent tax credit for buyers on all real estate transactions for a limited period of time. The credit would apply only to houses that already existed as of a certain date.
The housing market generally remains overvalued, Allison said, so such a tax credit could move buyers into the market quickly at prices both they and sellers would accept. He suggested that would be a better use of the $750 billion Congress recently set aside to buy toxic mortgage assets from the lenders themselves.
Longer term, he said Fannie Mae and Freddie Mac should be eliminated once the market has corrected, and Federal Reserve and Federal Deposit Insurance Corp. policies should be reformed to encourage more responsible behavior by lenders and borrowers.
He predicted some level of economic recovery in late 2009 or 2010, and said he does not expect the economy to fall into a 1930s-style depression. But he said it is questionable how long any recovery would last without fundamental reforms.
Allison, who is known for his enthusiastic admiration for the free-market objectivism of author Ayn Rand, also urged the audience to read her book Atlas Shrugged, saying it accurately predicted current events.
The economy needs “less regulation, not more,” he said.
BB&T is based in Winston-Salem. |
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Ping!
it’s a very general article, with no specifics, but
in the main, correct.
but i don’t agree that bush has been one of the worst presidents in history.
Yeah. If you listen to the Obamedia, it's all the fault of John McCain and Sarah Palin. Gotta blame it on someone. The public is too stupid to figure out on their own that the 'RATS put us in this predicament.
Meanwhile, the car he sponsors is headed towards taking the NASCAR Nationwide Series championship! This guy is a winner who knows what he's doing.
Objectivist hooey, AFAIC.
Good article. Note that he says “sustainable recovery”. I really doubt a Democrat majority will bring about any real reforms, but they can keep the economy in the duldrums.
I bank with BB&T and since I moved to cash, about half my savings are with them.
I feel more comfortable after reading this article, thank you for posting it.
But, nowadays, I’m mostly investing in food and bullets.
I think we have a civil war coming.
I don't. There are too many brainwashed sheeple out there. Frankly, this country gets the government she deserves.
“”””I don’t. There are too many brainwashed sheeple out there. Frankly, this country gets the government she deserves. “”””
I hope you are correct, I’m too old for war.
But it does seem that collectivism is going to drive us all into dismal oblivion together, or the perceived winners of this mess will be attacked be the perceived losers.
And then toss in all the racial animosity this political contest is causing.
I don’t think is is wise to bet on peace.
Oh, I don't.
But, it is inappropriate to start with the apocalyptic musings until Nov 5th (regardless of who wins).
ping
“”””But, it is inappropriate to start with the apocalyptic musings until Nov 5th (regardless of who wins). “””
You sorta make my point.
Factions have even developed here at FR among we who mostly agree.
The Doomsayer Tribe vs. The Non-Doomsayer Tribe. LOL
Our world has gone nuts and scared.
And probably neither one of us knows how to properly spell ‘cumb-bye-yall’.
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