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Bank CEO Blames Economic Crisis On Government

This story was written by Ibrahim Maali, The Duke Chronicle


The chief executive officer of America's 14th-largest financial institution told an audience in the Duke University Griffith Film Theater Wednesday that, in the end, altruism was to blame for much of the current financial mess.

"Only government could make a mistake of this magnitude possible," said John Allison, CEO and Chairman of BB&T Corp. "The government was meant to decrease volatility in the financial system but it, in fact, increased it."

Allison talked about how government pressure for "affordable housing" pushed banks to write more and more of the risky subprime mortgages that brought down giants Fannie Mae and Freddie Mac along with other institutions. All of this was an example of how bad government altruistic policy brought about the disaster, Allison said.

"It was a vicious cycle that brought this about, even though this was so foreseeable," Allison said.

For the most part, those who heard Allison deliver his address Wednesday said they appreciated his message, and were able to follow his message on altruism's role in the crisis.

"I think the talk began as a great factual assessment of the situation and ended with an equally impressive critique of the social and philosophical standards that gave rise to the crisis," junior Sean Quinn wrote in an e-mail.

In his speech, Allison blamed the federal government and the financial climate it created with its "misregulation" and a host of bad Federal Reserve decisions and policies. He said BB&T was able to weather much of the economic turmoil because it avoided the riskier investments and loans that other banks flocked to.

Allison has more than 20 years of experience at BB&T, said Gary Hull, director of the Program on Values and Ethics in the Marketplace, adding that Allison has taken the bank from the 96th-largest financial institution in the country to its current top-20 rank during his tenure.

"Compare that to the fact that the average CEO tenure is that of an NFL running back-only about four to five years," Hull said in his introduction of Allison.

As the financial meltdown has unfolded over much of the last few months, there are still many who are unsure of the exact causes. Allison presented a detailed explanation of how the financial markets got into the current credit crisis, and offered measures he felt could have been implemented to avert it.

He further listed steps that can be taken now to lessen the blow.

Focus should be put on fixing the housing market, Allison explained.

"You need to stabilize the housing market in order to stabilize the credit markets," Allison said.

He noted that such a strategy would include everything from a 10 percent discount for buyers of existing homes, to a change from mark-to-market accounting and current mortgage lending practices.

Allison also discussed the current bailout. He said bailout measures hurt well-capitalized and successful banks like BB&T by prohibiting them from taking advantage of the free market to buy out rivals who made poor decisions.

Of the 70 or so who attended the talk, many students walked away impressed.

"I think John Allison is someone to admire," said Ari Bar-Mashiah, a freshman. "When lots of bigger companies were going in a certain direction, he stuck to his principles and was able to come out of the crisis better than many of his peers."

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