John A. Allison is the former chairman and CEO of BB&T Corporation, where he started working in 1971. Under Mr. Allison's leadership, BB&T grew from $4.5 billion in assets to $152 billion, becoming America's 10th largest financial services company and earning the bank's chairman a spot on Harvard Business Review's list of top 100 most successful CEOs in the world. Currently a distinguished professor at Wake Forest University's School of Business, Mr. Allison is also a leader for Job Creators Alliance, a group of entrepreneurs who promote pro-growth policies to support small business. You can find out more at jobcreatorsalliance.org.
Decker: You told me you couldn't create your company in today's environment. That's quite a startling statement about such a successful business. Why not?
Allison: BB&T grew through local decision-making and personalized service focused on small businesses and the middle market. The current regulatory environment not only imposes extraordinary cost on smaller financial institutions, it makes it difficult to treat each customer as a special individual. Personalized service is now considered by the regulators to be "disparate" treatment. Small-business lending is part science and part art. It is extraordinarily difficult to execute a personalized value proposition with bank examiners micromanaging every decision.
Decker: Banks are used as whipping boys to impute blame for the collapse of the housing market, but government played a central role in the mortgage crisis. Can you explain how Washington intervention manipulated the market with such disastrous results?
Allison: Government policy is the primary cause of the financial crisis. The Federal Reserve "printed" too much money in the early 2000s to avoid a mild recession, which led to a massive misinvestment. The misinvestment was focused in the housing market due to the affordable housing (subprime) lending policies imposed by Congress on the giant Government Sponsored Enterprises (Freddie Mac and Fannie Mae), which would never have existed in a free market. When Freddie and Fannie failed, they owed $5.5 trillion and had $2 trillion in subprime loans. Because Freddie/Fannie had such a dominate share of home-mortgage lending in the United States (75 percent), they drove down the lending standards for the whole industry.
Decker: Government regulation is spurring a massive consolidation in the financial-services industry in which some institutions are deemed "too big to fail." Doesn't this empower the federal bureaucracy more than ever? What are the consequences of such a centralizing dynamic in this important sector?
Allison: If you want to centrally manage an economy, control the allocation of capital. Dodd-Frank is a dramatic move toward statism (i.e., crony socialism) as government bureaucrats can practically decide which industries, companies and consumers have available credit. Dodd-Frank encourages more consolidation in the banking industry and instead of eliminating "too big to fail," makes this practice a permanent public policy. It is easier for the centralized government authorities to control a few large institutions than many small companies.
Decker: As it stands, Obamacare will foist untold costs onto the backs of U.S. businesses and taxpayers. There is a debate over whether it can be fixed by tinkering with some elements of it while keeping large chunks of the law. What's your view of this policy and the greater context of the expanding dependency state in this country in relation to national competitiveness?
Allison: Obamacare should be completely repealed. It will materially raise health care costs and result in federal administrators rationing care. We need to totally privatize medical care for those under 45, which will re-introduce price competition into medicine. It is important to realize that when Medicare (the predecessor to Obamacare) was introduced, the U.S. health care system was far more efficient and at least as fair as today. The health care system had not failed. Medicare was introduced to "buy" votes for the Democratic Party, as the first Medicare participants received a huge subsidy and voted accordingly. Unless there is a radical overhaul, Medicare/Medicaid/Obamacare will ultimately bankrupt the United States. (We will need to continue to subsidize current Medicare participants and those over 45 who are locked into the system.)
Decker: The Obama administration talks an awful lot about an economic recovery, yet the unemployment rate is still high, record numbers of Americans are on food stamps and the national debt continues to mount. What does such an anemic recovery say about the real state of our economy?
Allison: This is the slowest recovery in U.S. history. We have almost 5 million less jobs than when the recession began, despite running massive government deficits. Destructive public policy is the cause of this failed recovery. There has been a massive increase in regulatory oversight reducing productivity gains and stifling innovation. Also, business leaders know our current fiscal policies are unsustainable and yet there is not a meaningful plan to deal with this issue. While businessmen do not want to personally pay higher taxes, at a deeper level, they know that increasing taxes on millionaires is not a serious solution to our massive deficits. They want to see a credible plan to radically reduce government expenditures and roll back the regulatory state, thereby returning the U.S. government to financial stability. Entrepreneurs want a return to limited government, individual rights and free markets. Until they see this trend, business leaders, who are the job creators, will be hesitant to invest.
Brett M. Decker is the editorial page editor of The Washington Times. He is coauthor of "Bowing to Beijing" (Regnery, 2011).
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