Amazon Exclusive: Post-Election Commentary from Author John A. Allison
The 2012 election has reinforced for me that the U.S. has a simple choice – return to the principles that made us great or face economic decay and social unrest. One of the reasons I wrote my book is because it seemed to make sense to have someone who had an inside and comprehensive understanding of the causes of our financial problems to comment on the issue. In the aftermath of the recent election, it’s even more important for the public and policy makers to understand what drove the financial crisis and what choices we must make to revitalize our economy.
The media and other statists have created a myth that the financial crisis was caused by banking deregulation and greed on Wall Street. However, banks were not deregulated. In fact, three major new regulations were passes during the Bush Administration: The Privacy Act, The Patriot Act, and Sarbanes-Oxley. Banks were misregulated, not deregulated. Also, there has always been plenty of greed (and fear) on Wall Street. However, there is not one shred of evidence there was a greed plague that swept the Street.
The financial crisis and failed recovery were primarily caused by government policy. The two main culprits were errors made by the Federal Reserve and government housing policy, specifically as executed by Freddie Mac and Fannie Mae, the giant government-sponsored enterprises that would never have existed in a free market.
My book, The Financial Crisis and The Free Market Cure covers this and other economic myths and misunderstanding such as the “shadow” banking system, fair value accounting, Pick-a-Payment mortgages and the like. However, as interesting as the economic discussion is, the real solution for our financial problems is philosophical and the cure was espoused by Thomas Jefferson in the Declaration of Independence: “Life, Liberty, and the Pursuit of Happiness.”
People on all sides of the political spectrum defend liberty, but few people understand why liberty is essential to human well-being. Government regulations put “balls and chains” on innovators and entrepreneurs and thereby, slow and eventually stop progress. Given man’s nature, socialism and communism are doomed to failure.
So, again, I say, the US has a simple choice: The laws of mother nature and human nature are not subject to popularity or political whim. Capitalism or decline. You choose.
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Most Helpful Customer Reviews
But this book is so good that it's worth reading. Mr. Allison brings to the table both a free-market perspective and firsthand experience as a bank executive (CEO of BB&T) during the crisis. Few if any of the journalists, economists, and government officials who have written that bookshelf-full of other books on the topic have that to offer.
Here are some examples of things that I was unaware of until I read Mr. Allison's book, even though I have already read a lot of other books, reports, and articles and watched a lot of congressional hearings and commission meetings about the financial crisis:
*When the FDIC took over Washington Mutual, it paid uninsured depositors in full using money that would have gone to bondholders. Writes Mr. Allison: "This was in complete contradiction to past practice. The bondholders suddenly realized that there is no rule of law when government regulators are involved...The decision to treat WaMu bondholders this way closed the capital markets for banks."
* "Banks spend hundreds of millions of dollars hedging mortgaging servicing rights," which are "an accounting fiction." He writes, "I once had a highly ranked partner at one of the biggest accounting firms tell me that no more than 10 people understood all the interconnections among mortgage servicing rights, mortgage origination income, and derivatives valuation. I think he exaggerated. I do not think anyone understood."
* "The Patriot Act represents a practically impossible regulatory environment for banks because it is in direct conflict with the Privacy Act (which was also passed during the Bush administration).Read more ›
Examples pile up: the Federal Reserve caused a housing bubble through artificially low interest rates; Fannie Mae and Freddy Mac drove Savings and Loan Associations out of the mortgage market then made massive quantities of loans to people who could not afford them and which could never be repaid; the SEC forced banks to shrink their reserves against bad loans; FDIC insurance and the Fed's low interest rates lulled depositors and investors alike into neglecting the soundness of banks; government-sanctioned rating agencies inflated the grades of mortgage-backed securities; erratic bailouts of crony-favored institutions like Countrywide, Washington Mutual, General Motors, and General Electric destroyed the rule of law and drove the panic deeper.
But Allison does more than identify that the root financial cause of the crash was government intervention in the economy. He names the political ideas and specific steps necessary to effect a cure: full laissez-faire capitalism, starting with deregulation, disengagement, and sound money.
Allison then - in what are my favorite chapters in the book - describes the moral values and virtues that each of us can practice to make our lives rational, productive, confident, and happy.
The Financial Crisis and the Free Market Cure: Why Pure Capitalism is the World Economy's Only Hope is a diagnosis and prescription for moving off the road to ruin and back to the vision America was founded on, a path of prosperity and personal happiness.
Had the book been 100 pages, which I think it probably should have, it would have been a remarkable manifesto. Instead, Allison loses any focus on a thesis and resorts to firing a proverbial flamethrower in the direction of any and all government organizations: the Fed, the SEC, FDIC, OTC, etc. His good nature gradually is consumed by bitterness, at which point his playful sarcasm morphs into downright angry condescension. Underscoring this change in tone is the fact that he repeats himself on so many topics so frequently, constantly littering in rejoinders like "as we already discussed" or "as I said earlier." The book deteriorates so badly that by its conclusion, I pictured him telling his story on a bar stool, drunk as hell, yelling at strangers who are unwitting participants in his angry rant.
For me, the biggest miss in the book is that he really offers no viable solution. He spends 80-90% of each chapter belittling the government but offers only brief, incoherent recommendations as antidotes.Read more ›
Most Recent Customer Reviews
It is so blatantly biased and offers little substantiated argumentation but a lot of blusterPublished 21 days ago by sanjam sethi
Too many unsupported claims and dubious "facts". While I agree with many things in the book, it has a hard time properly linking causes and effects.Published 21 days ago by RustyCP
Well written an insightful book by an industry expert. I enjoyed this book.Published 25 days ago by Amazon Customer
There is not greater absurdity in the world today than that pure capitalism can solve anything. There certainly is no evidence that this is the case, though there is a gimmick in... Read morePublished 1 month ago by Robert Moore
I give this book five stars for its ideas. Unfortunately, I only give it one star for the writing. John Allison badly needs an expert to re-write this rambling,... Read morePublished 1 month ago by Chelsea Holm-Nielsen
Want to know what caused the collapse in explicit, undeniable detail straight from the pen of BB&T's former president? Look no farther. Read morePublished 2 months ago by C. M. Woodward