Following the 2008 financial crisis, many found the perfect scapegoat in Wall Street, whose lust for profit, they believe, nearly destroyed the economy and upended the lives of ordinary Americans. John Allison, a former CEO of BB&T Bank, disputes that notion, arguing that misguided government policy led to the collapse and weak recovery. According to Allison, only unfettered free markets can bring long-term prosperity, a point of view gained from his time as leader of a large bank holding company. While some may find his arguments often rambling, with many dizzying leaps in logic, Allison does make points worth considering about too-big-to-fail institutions and the plight of small US community banks.
Those looking to understand an ailing US economy can find the answers in six core tenets.
Pundits attribute the Great Recession to Wall Street greed, exotic financial instruments and capitalism, but other forces bear responsibility. In fact, irrational government policies shoulder an immense responsibility for the financial crisis and subsequent malaise. Six “causes, consequences and cures” lie at the heart of the matter:
1. “Government policy is the primary cause of the financial crisis.”
Capitalism produces business cycles consisting of contractions and expansions. These fluctuations are at the core of a free market economy that constantly churns through a process of replacing old ways of doing business with the new. Many economists, politicians and regulators speak of the imperfection of markets, which they translate into government action to provide guardrails against unfettered market chaos. But the Federal Reserve, US Treasury Department and other federal government institutions during the George W. Bush administration all had a hand in creating distortive incentives that ...
About the Author
John A. Allison, CEO of BB&T from 1987 to 2010, is a director of Moelis & Company.