BB&T CEO John Allison Blames 'Religious Belief' in Affordable Housing for Financial Crisis
Instead, BB&T CEO John Allison pointed the finger at government creations like the Securities and Exchange Commission (SEC), Federal Deposit Insurance Corporation (FDIC) and Fannie Mae and Freddie Mac, the two government-sponsored enterprises that failed last year. Allison was giving a lecture in Washington, D.C. Jan. 29 for the Ayn Rand Center for Individual Rights.
Allison cited a "religious belief in affordable housing" that led the government to institute the Community Reinvestment Act of 1977 (CRA) and later, during the Clinton years, to a huge expansion of Fannie and Freddie.
"In my opinion, I'm certain without Freddie Mac and Fannie Mae we could not have had the magnitude of misinvestment - we'd a had misinvestment but nothing like what we've had today," Allison said.
Allison also targeted so-called Fair Value Accounting (FVA) rules, which require that assets be marked-to-market (listed in a balance sheet at whatever value they could be sold for). That creates problems when no one is willing to buy that asset. He said FVA rules were a "major cause" of the liquidity crisis because they violate the basic laws of supply and demand, and assume that assets must be sold.
"If we had had Fair Value Accounting in 1990 the U.S. financial system would have collapsed," Allison said before pointing out that banks have to follow a government accounting system run by the SEC rather than a private accounting system.
Allison took the media to task for seeking negative news and not exposing the government's role in the crisis. "I think the news media unfortunately has been quite willing to jump on the criticism of capitalism and not the [government]," Allison said.
The media has said very little about the FDIC, and it has a poor understanding of FVA, according to Allison. "How much of that is political bias and how much is ignorance? I don't have an answer for that ... What I find the most bias from the news media is they love to have bad news."
In Allison's opinion, the media's search for bad news "helped make it worse."
The Business & Media Institute has tracked the media's economic pessimism for years finding that even when the economy was strong, the media predicted a coming recession. In 2008, the news media leaped from talking about recession to making hundreds of comparisons to the Great Depression.