Skip to content

Dollars & Crosses

Roots of the Financial Crisis

Alex Epstein on the roots of the financial crisis:


Too Big To Bail (March 18, 2008)
We need to phase out “too big to fail” and replace it with a free market in banking, which would reward sound long-term lending and borrowing practices and punish irresponsible ones. Otherwise, the next financial market fiasco is just a matter of time. Any doctrine that encourages overly-risky investing, and punishes sound risk-taking is unfair and destructive. We need to phase out “too big to fail” and replace it with a free market in banking, which would reward sound long-term lending and borrowing practices and punish irresponsible ones. Otherwise, the next financial market fiasco is just a matter of time.

Subprime Meltdown and Project Lifeline: Collaboration or Intimidation? (March 9, 2008)
What today’s market desperately needs is for lenders and borrowers to bear the full consequences of their own bad decisions, and for the government to stop manipulating the market, violating property rights, and inviting future disasters.

Take Responsibility for Your Decisions: An Open Letter to Borrowers and Lenders (June 5, 2008)
Throughout the housing crisis, we have heard demands from spokesmen for desperate homeowners, banks, and investors for every variety of government bailout. But there is one group from whom the nation has not heard: the millions of Americans who, like me, had nothing to do with the crisis, who entered into mortgage contracts they could meet or who refused to buy at exorbitant prices, but who will be forced to pay the bills for these bailouts. If we had a spokesman, this is what I wish he would say.
 
The Injustice of “Doing Something” about Subprime (November 7, 2007)
As we witness large numbers of defaults on subprime loans–loans extended to those with no credit or bad credit–many are calling for the government to do something to stop the suffering. At the same time, many recognize that a bailout of struggling homeowners would be wrong. Thus, we see a growing list of proposed solutions that purport to save the day without a bailout: “borrower assistance” programs to refinance defaulting mortgages, crackdowns on “predatory lending” practices, or laws restricting mortgages the government deems too risky. In fact, regardless of how these proposals are described, all embody the essence of a bailout: they absolve individuals of responsibility for their bad decisions–and force those who did nothing wrong to pay the price.
 

Key Points on a “Rescue” Plan From A Healthy Bank’s Perspective

Here is a letter by John Allison, President & CEO of BB&T, that was sent to every member of Congress.



Dear Senator/Congressman/Representative:


BB&T is a $136 billion multi-state banking company. We have 1,500 branches throughout the mid-Atlantic and southeast states. While we have been impacted by the real estate markets, we continue to have healthy profitability and a strong capital position.


We think it is important that Congress hear from the well run financial institutions as most of the concerns have been focused on the problem companies. It is inappropriate that the debate is largely being shaped by the financial institutions who made very poor decisions.


Attached are the issues that we believe are relevant from the perspective of healthy banks. Your consideration of these issues is greatly appreciated.

[Signature]



Key Points on a “Rescue” Plan From A Healthy Bank’s Perspective



  1. Freddie Mac and Fannie Mae are the primary cause of the mortgage crisis. These government supported enterprises distorted normal market risk mechanisms. While individual private financial institutions have made serious mistakes, the problems in the financial system have been caused by government policies including, affordable housing (now sub-prime), combined with the market disruptions caused by the Federal Reserve holding interest rates too low and then raising interest rates too high.
  2. There is no panic on Main Street and in sound financial institutions. The problems are in high-risk financial institutions and on Wall Street.
  3. While all financial intermediaries are being impacted by liquidity issues, this is primarily a bailout of poorly run financial institutions. It is extremely important that the bailout not damage well run companies.
  4. Corrections are not all bad. The market correction process eliminates irrational competitors. There were a number of poorly managed institutions and poorly made financial decisions during the real estate boom. It is important that any rules post “rescue” punish the poorly run institutions and not punish the well run companies.
  5. A significant and immediate tax credit for purchasing homes would be a far less expensive and more effective cure for the mortgage market and financial system than the proposed “rescue” plan.
  6. This is a housing value crisis. It does not make economic sense to purchase credit card loans, automobile loans, etc. The government should directly purchase housing assets, not real estate bonds. This would include lots and houses under construction.
  7. The guaranty of money funds by the U.S. Treasury creates enormous risk for the banking industry. Banks have been paying into the FDIC insurance fund since 1933. The fund has a limit of $100,000 per client. An arbitrary, “out of the blue” guarantee of money funds creates risk for the taxpayers and significantly distorts financial markets.
  8. Protecting the banking system, which is fundamentally controlled by the Federal Reserve, is an established government function. It is completely unclear why the government needs to or should bailout insurance companies, investment banks, hedge funds and foreign companies.
  9. It is extremely unclear how the government will price the problem real estate assets. Priced too low, the real estate markets will be worse off than if the bail out did not exist. Priced too high, the taxpayers will take huge losses. Without a market price, how can you rationally determine value?
  10. The proposed bankruptcy “cram down” will severely negatively impact mortgage markets and will damage well run institutions. This will provide an incentive for homeowners who are able to pay their mortgages, but have a loss in their house, to take bankruptcy and force losses on banks. (Banks would not have received the gains had the houses appreciated.) This will substantially increase the risk in mortgage lending and make mortgage pricing much higher in the future.
  11. Fair Value accounting should be changed immediately. It does not work when there are no market prices. If we had Fair Value accounting, as interpreted today, in the early 1990’s the United States financial system would have crashed. Accounting should not drive economic activity, it should reflect it.
  12. The proposed new merger accounting rules should be deferred for at least five years. The new merger accounting rules are creating uncertainty for high quality companies who might potentially purchase weaker companies.
  13. The primary beneficiaries of the proposed rescue are Goldman Sachs and Morgan Stanley. The Treasury has a number of smart individuals, including Hank Paulson. However, Treasury is totally dominated by Wall Street investment bankers. They do not have knowledge of the commercial banking industry. Therefore, they can not be relied on to objectively assess all the implications of government policy on all financial intermediaries. The decision to protect the money funds is a clear example of a material lack of insight into the risk to the total financial system.
  14. Arbitrary limits on executive compensation will be self defeating. With these limits, only the failing financial institutions will participate in the “rescue,” effectively making this plan a massive subsidy for incompetence. Also, how will companies attract the leadership talent to manage their business effectively with irrational compensation limits?

And in a report by Bloomberg on “Allison’s Alternative”:



Allison is retiring in December after 19 years leading BB&T, the 14th-biggest U.S. commercial bank, with assets of $136.5 billion. BB&T avoided subprime lending, option adjustable-rate mortgages and complex debt securities that have slammed Wachovia Corp., Washington Mutual Inc. and other lenders. Still, BB&T more than tripled the money it set aside for loan losses in the second quarter, mainly because of loans to builders and developers in Georgia, Florida and the Washington, D.C., metropolitan area.


Rather than buying distressed assets, the U.S. government could offer a “significant” tax credit for home purchases, or even purchase vacant lots or houses under construction, Allison said. The market should be allowed to eliminate “irrational competitors,” he said. “There were a number of poorly managed institutions and poorly made financial decisions during the real estate boom,” Allison wrote. “It is important that any rules post-`rescue’ punish the poorly run institutions and not punish the well-run companies.”


He said the mortgage crisis was caused primarily by Freddie Mac and Fannie Mae. The government-chartered companies, which own or guarantee more than 40 percent of the $12 trillion of U.S. home loans, “distorted normal market-risk mechanisms,” and were abetted by a Federal Reserve that made the wrong decisions on interest rates, Allison wrote.

Why Big Government Is Back, and How to Shrink It to Its Proper Size

Washington, D.C.–In a talk delivered last week at the Costa Mesa Hilton in Orange County, California, Yaron Brook, executive director of the Ayn Rand Center for Individual Rights, explained the reasons for the resurgence of big government in America and called for a moral revolution to reduce government to its proper size and function.
 
According to Dr. Brook, the current level of government involvement in the economy is almost unprecedented in American history. As Dr. Brook noted, even though the current housing and financial crisis was brought about by government regulations, controls, and widespread interference with the markets, all we hear from the left and the right are calls for more government regulations, controls, and interference with the markets.


In Dr. Brook’s view, these calls for bigger and bigger government are due, not to any alleged failures of the market, but to a longtime cultural hostility to its moral basis: the selfish pursuit of profit.


Capitalism and markets, observed Dr. Brook, are all inherently about self-interest and the pursuit of profit. Capitalism encourages and enables selfishness, and as long as our culture looks at profit and self-interest as vices, he argued, big government will always be preferred to free markets.


Dr. Brook also made the point that capitalism has always been defended pragmatically, on the basis that it creates wealth and economic growth–which it does; but it’s time, he said, to defend capitalism on principle, on the basis of its morality, on the basis that it protects the rights of individuals to pursue their own values and allows them freedom to act in their own self-interest.


As Dr. Brook explained, the current crisis is indisputable evidence that we need a massive reduction in the size of government, in the number of regulations and in the level of taxation. But first, he said, we will have to reject the morality of altruism, which holds that self-sacrifice, not self-interest, is the good–and adopt a new morality of rational self-interest, one that says that pursuing our own personal values and goals under freedom is a good thing; and that only a morality compatible with capitalism and private markets will save us from this crisis and prevent an even worse one in the future.


Dr. Brook’s talk is available for free at: http://www.aynrand.org/site/PageServer?pagename=reg_ls_big_government

The Monopoly Myth: The Case of Standard Oil

Most of us were taught in school that laissez-faire capitalism was tried in the 1800s–and failed. Without government regulations and antitrust law, we learned, businessmen used “anti-competitive” tactics to become giant, unchallengeable monopolies. The most famous monopoly was John D. Rockefeller’s Standard Oil Trust, which supposedly used its “market power” to squelch innovative competitors and jack up consumer prices at will. But did this really happen? Did laissez-faire really fail? No, argues Alex Epstein. In this talk Epstein will tell the real story of Rockefeller’s rise to market dominance–and explain how his success was the result not of shady practices, but of his company’s incredible ability to bring the cheapest, best oil to millions of Americans. Epstein will argue that the case of Standard Oil raises many questions about Americans’ commonly held beliefs on monopolies, competition, and government. Is antitrust law really necessary to protect us against monopolies and promote competition? Was the government right to punish Microsoft for “monopolization,” and is it justified in investigating Google and Yahoo for “anti-competitive” behavior? Epstein will address these questions and more in his 45-minute talk, followed by a question-and-answer period.


What: a talk in defense of laissez-faire capitalism that will tell the real story of Rockefeller’s rise to market dominance in the oil industry


Who: Alex Epstein, fellow at the Ayn Rand Center for Individual Rights, a division of the Ayn Rand Institute


Where: Smith Building Room 105. Georgia Tech Campus, Georgia Institute of Technology, Atlanta, Georgia 30332


When: Monday, September 29, 2008, at 8 pm


Alex Epstein has a BA in Philosophy from Duke University and is an analyst focusing on business issues at the Ayn Rand Center for Individual Rights. He was the editor and publisher of The Duke Review for two years. He is a contributing writer for The Objective Standard, a quarterly journal of culture and politics. His Op-Eds have appeared in such publications as the Detroit Free Press, Houston Chronicle, San Francisco Chronicle, Philadelphia Inquirer, Chicago Sun-Times, Atlanta Journal and Constitution, Arizona Republic, Canada’s National Post, Indianapolis Star, Orange County Register, Tampa Tribune, and the Washington Times. Mr. Epstein has been interviewed on numerous nationally syndicated radio programs on business topics such as income inequality, media and internet regulation, oil industry profits, social security and the FDA.

New Report Reveals Which States Have Most Economic Freedom

South Dakota is most free, New York most economically oppressed

San Francisco – The Pacific Research Institute (PRI), a free-market think tank based in California, today released the U.S. Economic Freedom Index: 2008 Report, a ranking of economic freedom in the 50 states. Published in association with Forbes, the Index scores states based on 143 variables, including regulatory and fiscal obstacles imposed on businesses and residents.

South Dakota, which ranked 15 in 2004 (the last time the Index was published), has assumed the notable spot as the nation’s most economically free state, while New York consistently remains the most economically oppressed state, ranking 50 in all three editions of the Index.

The net migration rate for the 20 freest states was 27.36 people per 1,000, while it was a low 1.17 people per 1,000 for the 20 most economically oppressed states. “People are moving to the freest states and fleeing the least free states as our market-based migration metric of economic freedom predicts,” said Lawrence J. McQuillan, Ph.D., director of Business and Economic Studies at PRI and director of the project. “By measuring economic freedom and studying its effects, people will gain a fuller appreciation of the important imprint it makes on the economic and political fabric of America and will encourage new state legislation that advances economic liberty.”

The U.S. Economic Freedom Index: 2008 Report, by Lawrence J. McQuillan, Ph.D., Michael T. Maloney, Ph.D., Eric Daniels, Ph.D., and Brent M. Eastwood, Ph.D., updates the 2004 and 1999 editions using recent data that reflect changes in state policies. The Index score ranges from 1 (most free) to 50 (least free), and state rankings were derived from the index scores. The Index collected and ranked 143 indicators comprised of 209 underlying variables from five sectors (fiscal, regulatory, judicial, size of government, and welfare spending) for each state to measure how friendly, or unfriendly, each state’s government policies are toward free enterprise and consumer choice.

The Results




  • South Dakota is # 1
    As the most economically free state, South Dakota has no corporate income tax, no personal income tax, no personal property tax, no business inventory tax, and no inheritance tax. South Dakota’s business climate is thriving and companies are relocating and opening plants in the state. In 2007, the Small Business Survival Foundation ranked South Dakota as the best business climate for entrepreneurs. In 2008, Forbes magazine ranked Sioux Falls as the best smaller metro area for business and careers. Moreover, the state has faired well in other indexes measuring items such as inbound migration (United Van Lines) and the cost of doing business in the state (Milken Institute).

  • Great Plains and Rocky Mountain States Most Free
    South Dakota, Idaho, Colorado, Utah, Wyoming, Nevada, and Oklahoma rank among the top 10 most economically free states in the nation.

  • Northeast States Most Economically Oppressed
    The states that are the least economically free are clustered in the densely populated states of the Northeast including Pennsylvania, New Jersey, Rhode Island, and New York.

  • Most Improved States in the Upper Midwest
    An economic-freedom renaissance has been undergoing in the Upper Midwest. South Dakota made a big leap in relative economic freedom from 2004 to 2008 advancing 14 places, even bigger were Minnesota, Illinois, and Wisconsin, jumping 18, 19, and 20 places, respectively. Lawrence J. McQuillan, Ph.D., explains that “when one state reforms it puts pressure on its neighbors to improve or be at a competitive disadvantage for attracting people and capital.”

  • States with Biggest Drops
    States heading in the wrong direction include Texas which fell 14 spots; Alaska, Delaware, and North Carolina each dropping 12 spots; and Arizona falling by 10 places.

You can download the entire document here.

McBama: Who to Vote for in the 2008 Presidential Elections?

Writes Craig Biddle in 2008 Presidential Elections: McBama vs. America:
 

As the 2008 presidential election nears, and while John McCain and Barack Obama struggle to distinguish themselves from each other in terms of particular promises and goals, it is instructive to observe that these candidates are indistinguishable in terms of fundamentals.


On the domestic front, McCain promises to “take on” the drug companies, as if those who produce and market the medicines that improve and save human lives must be fought; he promises to ration energy by means of a cap-and-trade scheme, as if the government has a moral or constitutional right to dictate how much energy a company may purchase or use; he promises to “battle” big oil, as if those who produce and deliver the lifeblood of civilization need to be defeated; he promises to “reform” Wall Street, as if those who finance the businesses that produce the goods and services on which our lives depend are thereby degenerate; he seeks to uphold the ban on drilling in ANWR, as if the government has a moral or constitutional right to prevent Americans from reshaping nature to suit their needs; and so on.


Obama promises to socialize health care (under the tired euphemism of “universal health care”), as if insurance companies, doctors, and patients have no right to use or dispose of their property or to contract with one another according to their own judgment; he promises to increase the minimum wage, as if employers and employees lack those same rights; he promises to pour taxpayer money into “alternative energy,” as if the government has a moral or constitutional right to confiscate money from productive citizens in order to subsidize tilting windmills; he promises to force oil companies to fund government handouts to Americans, as if the owners of oil companies have no right to their property or profits; he promises to bail out homeowners who cannot pay their mortgages, as if the government has a moral or constitutional right to make some people pay for the financial mistakes or hardships of others; he promises to “incentivize” students to do “community service” by offering them taxpayer-funded college tuition, as if the government has a moral or constitutional right to do so; and so on.


Read the rest here.

Advertisers vs. the Free Market

Washington, D.C.—The Association of National Advertisers, a trade association representing 400 companies, has asked the Justice Department to use antitrust law to halt a proposed Google-Yahoo search advertising partnership. The deal, the group claims, will “diminish competition,” increase Google and Yahoo’s “market power,” and “raise prices.”


“This call to prevent Google and Yahoo from collaborating is an attack on the free market,” said Alex Epstein, an analyst at the Ayn Rand Center for Individual Rights. “Google and Yahoo, individually or combined, have no power to force anyone to advertise with them; their only power is the power to continually persuade advertisers that their services are the best use of advertisers’ money.


“If the members of the Association of National Advertisers object to the advertising options offered under a new Google and Yahoo partnership, there is a simple solution: don’t advertise with them. But they have no right to dictate to Google and Yahoo how to run their businesses.”

The Real Lesson of the Great Depression

Washington, D.C.–Many of those calling for greater government control over the economy in response to the current financial crisis point to the Great Depression, arguing that it provides a clear example of the crucial need to curb the “excesses” of the free market through government intervention.
 
“The Great Depression does have something to teach us about the current crisis,” said Yaron Brook, executive director of the Ayn Rand Center for Individual Rights, “but it’s not that we need more government control over the economy.
 
“Most people believe the Great Depression was caused by an ‘excessively’ free market–and they regard the massive expansion of government intervention under FDR as its cure. But as many economists have demonstrated, it was government intervention that caused and exacerbated the Depression–from the massive tariffs of Smoot-Hawley to a series of disastrous interest rate hikes by the Federal Reserve to antibusiness measures such as the National Recovery Act.
 
“Few acknowledged this at the time, however. The Great Depression–a failure of government intervention–was called a failure of capitalism, and was used to justify even more government intervention. We are seeing this same process repeat itself today.

“There is overwhelming evidence that our current crisis is the result primarily of government intervention in the economy, from the Fed’s inflationary policy of keeping interest rates artificially low to the creation and regulatory coddling of Freddie Mac and Fannie Mae to the government’s quasi-official policy of bailing out large financial institutions deemed too big to fail. But despite such evidence, this crisis is being blamed on too little government control of markets, and is being used to justify an even greater expansion of the state’s control over financial markets.
 
“It’s time we learn the real lesson of the Great Depression: that instead of rushing to blame capitalism and businessmen for an economic crisis, we should work to discover its real cause–and its real cure.”

Amendment 48 Is Still Anti-Life

In case you missed it don’t forget to read the 6 part series by Ari Armstrong and Diana Hsieh on Amendment 48 which seeks to define a fertilized egg as a person with full legal rights in Colorado’s constitution.

Amendment 48 Is Anti-Life: Why It Matters That a Fertilized Egg Is Not a Person (Part 1 of 6) (September 1, 2008)
Amendment 48 seeks to define a fertilized egg as a person with full legal rights in Colorado’s constitution. If fully implemented, it would profoundly and adversely impact the lives of sexually-active couples, couples seeking children, pregnant women, doctors, and medical researchers, subjecting them to severe legal restrictions, police controls, protracted court battles, and criminal punishments.
 
Amendment 48 Is Anti-Life: Amendment 48 and Birth Control (Part 2 of 6) (September 2, 2008)
The most obvious and severe effect of Amendment 48 would be a total or near-total ban on abortion. Perhaps more importantly, it would profoundly affect the day-to-day sex lives of couples by restricting birth control.

Amendment 48 Is Anti-Life: Fertility Treatment and Medical Research (Part 3 of 6) (September 3, 2008)
In the name of “respecting life,” the advocates of Amendment 48 would impose a death sentence on the real people whose lives might be saved through such research.

Amendment 48 Is Anti-Life: Amendment 48 and Abortion (Part 4 of 6) (September 4, 2008)
Amendment 48 would ban all abortion, except perhaps in cases of extreme risk to the mother’s life. As a result, the measure would cause permanent injury or death to some at-risk women. It would also force a woman to bring any pregnancy to term, regardless of her judgment about her best course in life.

Amendment 48 Is Anti-Life: Personhood and the Right to Abortion (Part 5 of 6) (September 5, 2008)
Amendment 48, if fully implemented, would outlaw all or nearly all abortions involving concerns of health, and definitely all abortions for rape, incest, and other reasons.

Amendment 48 Is Anti-Life: Morality and Abortion (Part 6 of 6) (September 6, 2008)
Much of the popular opposition to abortion stems from a faulty analysis of the morality of abortion. Contrary to the critics of abortion, the termination of even a healthy pregnancy can be a morally responsible choice.

Opposition to Wall Street Bailout Plan

Writes South Carolina Senator Jim DeMint in a recent press release:


DeMint Opposes Wall Street Bailout: Plan does not solve the problems that caused the current credit crunch, and could make them much worse

September 22, 2008 – Washington D.C. – Today, U.S. Senator Jim DeMint (R-South Carolina) announced his opposition to the $700 billion plan proposed by the Bush Administration to bailout Wall Street.

“After reviewing the Administration’s proposed bailout plan, I believe it is completely unacceptable. This plan does nothing to address the misguided government policies that created this mess and it could make matters much worse by socializing an entire sector of the U.S. economy. This plan fails to oversee or regulate the government failures that led to this crisis. Instead it greatly increases the role for Secretary Paulson whose market predictions have been consistently wrong in the last year, and provides corporate welfare for investment firms on Wall Street that don’t want to disclose their assets and sell them to private investors for market rates. Most Americans are paying their bills on time and investing responsibly and should not be forced to pay for the reckless actions of some on Wall Street, especially when no one can guarantee this will solve our current problems.”

“This plan will not only cause our nation to fall off the debt cliff, it could send the value of the dollar into a free-fall as investors around the world question our ability to repay our debts. It’s also very likely that this plan will extend the cycle of bailouts, encouraging other companies to behave in reckless ways that create the need for even more bailouts, triggering an endless run on our treasury. This plan may make things look better for Wall Street in the next couple months, but the long-term consequences to our economy could be disastrous.

There are much better ways of dealing with this problem than forcing American taxpayers to pay for every asset some investor doesn’t want anymore. We should start by reforming government policies and programs that created this mess, including the Federal Reserve’s easy money policy, the congressional charters of Fannie Mae and Freddie Mac, and the Community Reinvestment Act. Then Congress should pass a number of permanent and proven pro-growth reforms to encourage capital formation and boost asset values. We need to make permanent reductions in the corporate tax and the capital gains tax rates. We have the second highest corporate tax rate in the world, which encourages companies to take jobs and investment overseas.”

“It’s a sad fact, but Americans can no longer trust the economic information they are getting from this Administration. The Administration said the bailout of Bear Stearns would stop the bleeding and solve the problem, but they were wrong. They said $150 billion in new government spending using rebate checks would solve the problem, but they were wrong again. They said new authority to bailout Fannie Mae and Freddie Mac would solve the problem without being used, but they were wrong again. Now they want us to trust them to spend nearly a trillion dollars on more government bailouts. It’s completely irresponsible and I cannot support it.”


While we disagree with his views on the relationship between religion and the state and his opposition to open immigration, the above makes sense to which we would further add: the government needs to establish the gold standard in banking and abolish the FED. It is the outlawing of the free market bank system that has led us to this mess in the first place.

Multiculturalism Watch: The Cultural Barbarism of Islamic Tradition in the 21st Century

NBC News reports:


In a tangle of bushes and trees outside a remote village in southwest Pakistan, six close male relatives of three teenage girls dug a 4-foot wide by 6-foot deep ditch, on a sweltering night in mid-July, and allegedly buried the girls alive. The girls’ crime: they dared to defy the will of their fathers and the customs of their tribe and choose their own husbands. The mother of one of the girls and the aunt of another were shot and killed while begging for the girls’ lives, according to local media reports. … “This action was carried out according to tribal traditions,” said Israrullah Zehri, a senator representing Balochistan in the upper house of Pakistan’s parliament in the capital Islamabad. “These are centuries-old traditions and I will continue to defend them,” he said.

To which Ari Armstrong rightfully comments:

These murders in the name of “tradition” are a sickening reminder of the widespread cultural barbarism altogether too prevalent in and surrounding the Middle East. Note that this is not merely vigilante injustice; it is sanctioned and endorsed by the “government.”
 
When will we see the Muslim world rise up against such horrific crimes with a tenth, with a hundredth, of the intensity that it rises up for censorship of cartoons?

Speaking of cartoons, from Cox and Forkum:

 


 

Business Hero: BB&T’s John Allison

WINSTON-SALEM, N.C., — BB&T Corporation (NYSE: BBT) today said that longtime Chief Executive Officer John A. Allison will retire as CEO on Dec. 31, 2008. He will continue as chairman of the BB&T Corporation board of directors until Dec. 31, 2009.


The board on Tuesday voted unanimously to promote Chief Operating Officer Kelly S. King, the No. 2-ranking executive manager at BB&T since 2004, to succeed Allison as CEO and president. King was also elected to the board. BB&T will name a successor to King as COO at a later date.


Allison’s decision to step down as chief executive, a position he has held since 1989, is the latest step in a five-year executive management transition plan at BB&T. Since the plan began in 2003, six new executive managers have joined the executive team while four have retired or announced pending retirements, including Allison and Chief Credit Officer Ken Chalk, whose last day at BB&T is Friday.


“This is the next-to-last step in a systematic succession plan we’ve had in place for some time now,” said Allison, who plans to continue to serve on the BB&T corporate board after he steps down at the end of next year as chairman. “But it’s still an announcement that comes with a lot of mixed emotions when you consider the integral role that BB&T has played in my life for nearly 40 years now.”


Allison, a 60-year-old Charlotte, N.C., native, has presided over BB&T’s storied transformation into one of the largest — and highest performing — financial services companies in the nation.


After 60 bank and thrift acquisitions since 1989, the former eastern North Carolina farm bank has grown to become the nation’s 14th largest financial holding company. Assets have increased from about $275 million in 1971 when Allison’s career at BB&T began to $136.5 billion today.


As it has grown, BB&T has steadily climbed the ranks in key measures of performance such as client service, profitability, capital strength, credit quality, operating efficiency and fee-income generation.


“I’m extremely proud of all that we’ve accomplished and the meaningful impact we’ve had on the lives of so many clients, employees and shareholders,” Allison said. “I will certainly miss my close relationships with so many friends and business associates. However, for BB&T and for me personally, this is the right time to move forward. Nearly 20 years is certainly a long time for anyone to serve as CEO.”


Allison is the longest serving chief executive at the 25 largest financial holding companies in the nation.


After joining BB&T and completing its Leadership Development Program, he served as the program’s manager for two years before being named regional loan administrator in 1973. Allison joined BB&T’s executive management team in 1980, the same year he was promoted to Business Loan Administration manager.


A year later, he was named manager of the BB&T Banking Group. In 1987, Allison became president, a position he held until succeeding the late Vincent Lowe as chairman and CEO on July 11, 1989. At the time, BB&T had $4.5 billion in assets.


Allison orchestrated a merger of equals with the former Southern National Corporation in 1995, which moved the BB&T corporate headquarters from Wilson, N.C., to Winston-Salem, N.C., and kicked off a decade-long growth spurt unmatched in the industry.


“I was a board member before John became CEO and I’ve seen firsthand the development of the bank throughout his tenure,” said lead corporate director James Maynard, co-founder and chairman of the Golden Corral restaurant chain. “He established and nurtured a corporate culture of the highest integrity. His leadership is unique and unprecedented in the financial industry. Our company has seen profitable growth for more than 20 years.”


Allison is a board member of the Wake Forest University Medical Center, the Fuqua School of Business at Duke University, the Kenan-Flagler Business School at the University of North Carolina at Chapel Hill and the Clemson Institute for the Study of Capitalism. He also is a member of the American Bankers Association and the Financial Services Roundtable.


Allison earned a bachelor’s degree in business administration from the University of North Carolina at Chapel Hill and master’s in business administration degree from Duke University. He also holds honorary doctorates from East Carolina University, Mount Olive College, Clemson University and Marymount University. He is a graduate of the Stonier Graduate School of Banking at Rutgers University.


King, 59, joined BB&T in 1972 and has been a member of BB&T’s executive management team since 1983.


He said BB&T will continue in the same “strategic direction” after he’s CEO. “There is no reason to change course. Our mission, service culture, operating strategy and values have only been reaffirmed during the current down cycle in the economy. BB&T’s best days have always been ahead of us. We will continue to execute on our vision of creating the best financial institution possible.”


After completing BB&T’s Leadership Development Program, King served in management positions in the North Carolina cities of Statesville, Charlotte, Wilson and Raleigh.


In 1987, King was named manager of Branch Administration and, a year later, was named manager of the BB&T Banking Network. He was named president of BB&T Corporation in 1996, and succeeded Henry Williamson as chief operating officer in 2004.


“Kelly has been involved in every significant strategic decision we’ve made at BB&T for over 25 years,” Allison said. “He is a proven leader and firmly committed to BB&T’s culture and vision and the corporate values that have made us successful. He will do an outstanding job as CEO.”


The Raleigh native is a member of the Financial Services Roundtable and serves as chairman of the Piedmont Triad (N.C.) Leadership Group. He is a member of the (N.C.) Triangle Community Foundation Leadership Council and a board member of the N.C. Chamber of Commerce.


King is past chair of the United Way Tocqueville Leadership Society, and a former board member of the American Bankers Association and the N.C. Citizens for Business and Industry. He has served as chairman of numerous boards, including the N.C. Rural Economic Development Center, the N.C. Bankers Association and the East Carolina University Board of Visitors.


“The board is totally confident in Kelly’s leadership and long-term commitment to our company,” Maynard said. “Kelly knows BB&T as well as anyone. He knows the culture and knows the values and will keep both intact as CEO. We are extremely fortunate to have someone with Kelly’s talents and abilities ready to step into this job.”


King earned his bachelor’s and master’s in business administration degrees from East Carolina University. He is a graduate of the Stonier Graduate School of Banking at Rutgers University.


“I respect and appreciate the phenomenal job that John Allison has done in leading our company the past 20 years,” King said. “I have mixed feelings because we’ve worked so closely together for so many years and I’ve truly enjoyed our relationship. But I’m also happy for John and his family. He’s still young and healthy and will have the time now to pursue interests that are very important to him.”


King will assume the helm at BB&T as the last remaining member of the “original five” executives widely credited for transforming BB&T from one-time farm bank to one of the largest and well-run financial institutions in the country (along with Allison, retired COO Williamson, outgoing CCO Chalk, and retired Chief Financial Officer Scott Reed).


“Our five-year plan was about a generational change to systematically add six relatively young, yet very tenured leaders to our executive management team,” Allison said. “We have a proven team in place now that will provide the necessary foundation to compete — and remain independent — in a rapidly changing world.”


Electronic Delivery Channel Manager Barbara Duck, 41, and Chief Marketing Officer Steve Wiggs, 50, were added to the executive team in August 2003. Banking Network Manager Ricky Brown, 52, and Chief Financial Officer Chris Henson, 47, joined in June 2004. Chief Credit Officer Clarke Starnes, 49, and Deposit Services Manager Donna Goodrich, 45, were added in December 2006. All joined BB&T’s Leadership Development Program out of college and have at least 20 years of experience with BB&T. The six newest members are joined on the executive team by Chief Administrative Officer Rob Greene, 58, and Operations Manager, Leon Wilson, 53, who have 36 and 31 years with BB&T, respectively.


For Allison, in addition to his immediate role as chairman of BB&T Corporation followed by continued service as a corporate board member, he plans to spend his retirement writing books about two of his passions: the role of values in effective leadership and the evolution of the financial system in the United States.


Allison already is the author of the BB&T Values, a 30-page handbook that outlines the company’s 10 core principles, which include “reason” and “justice.” As much philosopher as businessman, he spends a week each year at a philosophy conference and has long encouraged senior managers at BB&T to read a thoughtful, nonfiction book each month.


Allison also plans to work with colleges and universities participating in BB&T’s Moral Foundations of Capitalism program, which provides grants for the study of the moral and intellectual underpinnings of capitalism and free enterprise.


With $136.5 billion in assets, Winston-Salem, N.C.-based BB&T Corporation (NYSE: BBT) is the nation’s 14th largest financial holding company. It operates nearly 1,500 financial centers in 11 states and Washington, D.C. More information about the company is available at BBT.com.

Greens Against Renewable Energy

Washington, DC–Green activists have been pushing for “renewable energy” for decades, even though it shows little promise–after billions of dollars in government subsidies–of ever being practical and inexpensive. Nevertheless, plans are springing up all over the country for large-scale solar, wind, and geothermal projects.


But now, in addition to their enormous technical obstacles, these green power projects are facing fierce opposition . . . from environmentalists.


The Bureau of Land Management has reportedly received more than 130 proposals to build solar power plants on federal lands in the Southwest. New transmission lines to carry the power from the sun-baked deserts to places where electricity users actually live are also under consideration.


However, the solar applications are mired in environmental impact studies, which one solar industry executive said “could completely stunt the growth of the industry.” And the plans for new transmission capacity are being ferociously protested by environmentalists decrying the “permanent destruction of hundreds of thousands of acres of pristine public lands.”


According to Dr. Keith Lockitch, resident fellow of the Ayn Rand Institute: “This just shows the true objective of green activism. Environmentalists don’t actually want us to find alternative ways of producing energy; they want us to stop using energy altogether.


“The basic premise of environmentalism is to leave nature alone. Capturing and utilizing any source of energy–even ones that are supposedly green and renewable–will necessarily have some impact on nature, and will therefore inevitably be subject to environmentalist attacks and condemnation.


“Since the use of energy is an indispensable component of everything we do in our lives, the greens’ opposition to even such ridiculous, impractical sources of energy as solar and wind reveals their basic animus against human life.

“An exasperated Arnold Schwarzenegger said ‘if we cannot put solar power plants in the Mojave desert, I don’t know where the hell we can put it.’ But that is the whole point. On green philosophy, there is literally no place on earth for mankind.”

For Greens, the Energy Crisis Is Not a Problem, It’s the Solution

Irvine, CA–Two of the problems our presidential candidates are being called upon to solve are the spiraling cost of energy and the “crisis” of man-made global warming. Both Senators McCain and Obama claim to have a unified strategy for tackling both problems.


“The notion that these two issues can be addressed simultaneously is nonsense,” said Dr. Keith Lockitch, resident fellow of the Ayn Rand Institute. “No policy aimed at ‘fighting global warming’ can help solve the energy crisis. An energy crisis is the proposed ‘solution’ to global warming.


“More than 85 percent of the world’s energy comes from carbon-producing fossil fuels. And despite all the propaganda we hear about a ‘new energy economy’ just around the corner, there are no realistic, abundant alternatives available any time soon. Any measures enacted to ‘fight climate change’ can lead only to a worsening of the energy crisis.


“And it is not at all clear that climate change is something that needs to be fought. Even though we are constantly told that global warming is occurring at an accelerating rate, in fact global temperatures have been flat for the last decade. We are told that global warming is causing more frequent and intense hurricanes and a catastrophic rise in sea levels, yet the data don’t support such claims. Global warming alarmism is more environmentalist hype than scientific fact.


“There is no evidence that cutting off our carbon emissions would have any noticeable impact on the world’s climate,” Lockitch said. “Yet it would cause a catastrophic blow to the world’s economy and therefore to people’s lives. Energy use is an indispensable component of almost everything we do every day. And billions of people around the world are suffering right now for lack of abundant energy.


“The only crisis we need to worry about is the unnecessarily high cost of energy–and the solution to that is to remove coercive Green restrictions on oil production, and to start drilling and burning.”

End Censorship on the Airwaves

Irvine, CA–The 3rd U.S. Circuit Court of Appeals threw out a $550,000 indecency fine against CBS Corp. for the infamous Janet Jackson “wardrobe malfunction” during the 2004 Super Bowl halftime show. The Court ruled that the Federal Communications Commission “acted arbitrarily and capriciously” in issuing the fine.


“In fact,” said Don Watkins, a writer for the Ayn Rand Institute, “the government should put an end to the non-objective ‘indecency’ laws that permit the FCC to dictate what Americans can say and hear on the airwaves.


“The Supreme Court has defined ‘indecency’ as speech that ‘depicts or describes sexual or excretory activities and organs in terms patently offensive as measured by contemporary community standards.’ But which Americans count–and don’t count–as part of the community? Why are they king? And how are broadcasters to divine their supposedly shared standards?


“As the history of the government’s anti-indecency regime has shown, these questions are unanswerable. The only way for broadcasters to play it safe is to engage in self-censorship, cutting any material regulators might declare indecent.


“And once the government becomes the enforcer of ‘community standards,’ no speech is safe. How long until the courts start rubber-stamping the Bible Belt’s efforts to suppress the theory of evolution on the grounds that it is offensive, corrupts young minds, and undermines community values?


“It’s time for the government to stop telling Americans what we can say and hear on the airwaves, and to protect our Constitutionally guaranteed right to free speech.”

Creeping Christianity in the U.S. Military

Irvine, CA–An active-duty soldier has sued the Department of Defense, alleging discrimination by the U.S. Army on the basis of his atheism. Specialist Jeremy Hall claims that, for example, he was ostracized by Christian soldiers when he refused to hold hands around the table and join in a Christian prayer at Thanksgiving. His federal lawsuit asserts he was also kicked off the promotion track for lacking religious faith.


“This lawsuit highlights one aspect of the insidious process by which the religious right’s ‘faith-based’ agenda is corrupting American institutions,” said Thomas Bowden, an analyst at the Ayn Rand Institute. “In the faith-friendly atmosphere of the Bush administration, religionists are taking big swings at the wall of separation between church and state. The allegations in this suit are consistent with recent controversies over evangelical proselytizing at the Air Force Academy and mealtime prayers at the Naval Academy.


“The military is duty-bound to actively shield its soldiers from ostracism and persecution such as that alleged in Specialist Hall’s suit. Servicemen, like all Americans, are legally and morally entitled to exercise freedom of thought, which includes the freedom to accept or reject religion according to their own best judgment.


“In their interactions, soldiers should be required to cooperate based on their common values–a patriotic commitment to America’s self-defense and to carrying out the specific tasks that goal requires. Religious dogma only undermines such rational cooperation, as centuries of faith-based warfare and persecution demonstrate.


“The religious right must be put in its place before it irreparably damages the wall between church and state. Americans are entitled to expect that the military, the courts, and the President will unite in protecting the First Amendment rights of all citizens. That means opposing, not promoting, attempts to inject religion into American institutions such as the armed forces.”

Obama’s Bushisms

Michelle Malkin has compiled a partial list of Obama’s Bushisms:



  • CURRENT EVENTS: Last May, he claimed that Kansas tornadoes killed a whopping 10,000 people: “In case you missed it, this week, there was a tragedy in Kansas. Ten thousand people died — an entire town destroyed.” The actual death toll: 12.
  • GEOGRAPHY: Earlier this month in Oregon, he redrew the map of the United States: “Over the last 15 months, we’ve traveled to every corner of the United States. I’ve now been in 57 states? I think one left to go.”
  • BIOGRAPHY: […] Last March, on the anniversary of the Bloody Sunday march in Selma, Alabama, he claimed his parents united as a direct result of the civil rights movement: “There was something stirring across the country because of what happened in Selma, Alabama, because some folks are willing to march across a bridge. So they got together and Barack Obama Jr. was born.” Obama was born in 1961. The Selma march took place in 1965.
  • FOREIGN POLICY: […] And in perhaps the most seriously troubling set of gaffes of them all, Obama told a Portland crowd over the weekend that Iran doesn’t “pose a serious threat to us”–cluelessly arguing that “tiny countries” with small defense budgets can’t do us harm– and then promptly flip-flopped the next day, claiming, “I’ve made it clear for years that the threat from Iran is grave.”

Read the rest here.