John Allison of BB&T Speaks Out

John Allison, CEO of BB&T, on the financial crisis:

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.

It’s an interesting read, albeit it sounds a bit whitewashed. But still, good stuff, and as an Objectivist and a successful banker, Allison can be trusted to make some sense.

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