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VINE VOICEon October 5, 2012
I was pretty much of the belief that the last thing America needed was yet another book on the financial crisis.

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). The Privacy Act requires banks not to violate your privacy. The Patriot Act requires that banks violate your privacy." Banks spend hundreds of millions of dollars mailing Privacy Act notices each year. Mr. Allison says one bank CEO ran a test to see if anyone reads the notices and sent out thousands of the notices with a last line offering a $100 prize if the recipient returned the notice to the bank. Only one customer did.

As the comments on the Patriot Act and the Privacy Act indicate, Mr. Allison does not go easy on President George W. Bush. "The panic atmosphere during the recent financial crisis was totally the result of massive mishandling of the financial system by government policy makers in the Bush administration," he writes. "When the head of the Federal Reserve, the Treasury, and the president announced that Western civilization would end unless Congress approved a $700 billion bailout, people panicked."

Mr. Allison's prescriptions for policy cures are similarly direct. "The most fundamental cure for this crisis and future financial crises would be to eliminate the Federal Reserve," he writes. He also wants to reduce federal spending, including on the military: "It is clear that the defense budget of the United States could be cut at least 25 (and probably 50) percent while making the United States better defended than it is today." He also wants "to eliminate the minimum wage, or at least reduce the minimum-wage rate back to its prerecession level of $5.15 per hour." (He writes that the minimum wage, which has been increased to $7.25 an hour, is "the primary cause of the high unemployment levels in the United States today," pushing jobs to China that would otherwise have been done in America. He suggests eliminating bank loan loss reserves and instead have banks take loan losses when they occur. And he suggests eliminating government deposit insurance and replacing it with a private system.

As for the big picture, Mr. Allison writes that the "fundamental cause" of the financial crisis is the philosophy taught in American liberal arts colleges. "The long term key to success is to recapture the elite universities from the Left," he writes.

I'm not endorsing all of Mr. Allison's analysis or conclusions. But he's succeeded at something that isn't easy: writing a new must-read book on the financial convulsions and their aftermath.
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on October 2, 2012
This is the first and clearly the best book to explain the causes of the financial crisis. John Allison reports not just from the outside but from the inside. BB&T which he led for 20 years gave him access to what happened not only in his bank and markets but in Washington. He shows that the crisis was caused primarily by the Fed (the number one villain), the FDIC, govt housing policy, Fannie and Freddie, TARP, and boatloads of insane and harmful regulations. He shows also that crony capitalism (actually crony socialism)played a key role from beginning to end. He shows that the government's goal of expanding home ownership caused a massive misallocation of capital (from production to consumption.) He is not afraid to name names. He demonstrates that the fundamental cause of crises such as this are philosophical. He argues convincingly that the only real solution to diaasters like this (including the destruction of our economy) is pure capitalism backed by the philosophy of self interest guided by reason. This is a brillaint and heroic book that I recommend everyone read if you want America to survive.
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on September 30, 2012
John Allison give a uniquely from-the-inside look at the recent financial crisis and shows that the cause was government manipulation of the economy, which provided strong incentives for irrational behavior, coupled with government regulation, which obstructed rational thought and action.

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.
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on October 21, 2012
Mr. Allison covers a lot of ground with this book.

He dances from Aristotelian philosophy to Austrian economic thoughts to government growth and interference to over-regulation. He dances quite well.

Although I admit that I agree with Mr. Allison on practically every issue he discusses, I must say that he documents his thoughts and conclusions very well. There is no doubt about what caused the financial crisis, however he accurately points out and addresses the current myths that it revolve around the big banks.

More disturbingly he charts the trajectory to the future. He maintains that the 'solutions' to the crisis will create another, worse crisis in the future.

An excellent book.
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on January 7, 2014
For about 100 of the 250 pages, Allison held my interest steady. I agree in principle with limited government, so understanding his views flowed naturally. Moreover, I found his first-hand accounts of the perils of government regulation -- especially the Clinton Administration's effort to manufacture the existence of racist lending practices that plainly did not exist, as well as the evolution of Fanny/Freddie -- to be both insightful and infuriating, as he obviously intended. His writing is by no means professional, but in earlier parts of the book can be very enjoyable because it is -- for example -- comical, sarcastic, or patronizing. He clearly deserves to write in this tone given his travels on the topic he is discussing.

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.

I have no doubt that John Allison is a genius and a tremendous financial services executive. Had he had a little more experience writing narrative, or just the patience to construct a viable literary piece of work, I would encourage him to tell his stories more frequently. But as this book sits, I would not recommend it.
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on September 30, 2012
When it comes to men of character and principle, they don't get any better than John Allison. And when it comes to a proper, informed analysis of the Great Recession and its causes, there's none more enlightening than his. He warned of the coming crisis before it occurred, saw it unfold from within the system, and now provides us with what we need to know to prevent it from happening it again. I just cannot recommend this book too highly. It is THE definitive work on the subject and understandable to the intelligent layman. -- Lawrence W. Reed, president, Foundation for Economic Education (FEE).
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on November 25, 2012
This book is a fairly convincing argument about the causes of our current financial problems and how to get out of them. Conventional wisdom would have us believe that deregulation is the cause of our current financial woes. Not so, argues Allsion - it is MISREGULATION. The Bush administration greatly increased regulations and the Obama administration is doing the same.

Allison is one of the country's most prominent libertarians (he was president of the Cato Institute) and he does a pretty good job of promoting their philosophy. The book is exhausting in its detail - perhaps too exhausting for the casual reader. The first nineteen chapters of the book are a nuts-and-bolts examination of everything that went wrong, all the bad decisions that were made, and what is currently wrong with US policy. The most interesting parts of the book are the final chapters, in which Allison passionately argues that it is only Libertarianism - personal freedom, morality, and the free market - that can save America.

Will his ideas be acted upon? Probably not.
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on March 3, 2013
In engineering, we respond to failures with a *root cause analysis*, finding the underlying causes. If the batteries on
your new airplane are overheating, patching the wings does not fix the problem. When you gather evidence about failures
you start with those closest to the problem, the pilots and the flight mechanics, not with an FAA regulator, a reporter,
or a Congressman.

This book is a clearly written and well reasoned root cause analysis of the financial crisis that began the Great Recession,
written by one of America's most experienced bankers. Mr. Allison worked his way up to CEO of BB&T, a major bank.
In twenty years as CEO he increased the bank's size thirty-fold while avoiding financial fads that would be bad for its
customers, like negative amortization mortgages. BB&T remained financially strong while many other banks failed.

This book is enlightening and well worth reading even if you followed the unfolding crisis closely in news reports.
Allison explains in detail how government regulations that seem superficially reasonable, like mandating "fair value"
accounting, were ruinous in practice. He sheds light on little known aspects of the financial crisis, as in when
regulators took funds that should have gone to Washington Mutual bondholders and directed the funds to uninsured
depositors; the bond market realized there was no more rule of law and avoided new financing for banks.

The book's coverage of government interference in the financial sector is extensive, including the Federal Reserve,
FDIC, SEC, and government interference in the mortage markets notably via Fannie Mae and Freddie Mac.

Finally, Allison's book is not only a "macro" analysis. He goes into specific examples where individual lives were
ruined because of government mandates, often because government rules have coercively replaced banker judgments.
He makes clear how government policies have created major injustices for individuals as well as our overall economy.
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on October 1, 2012
A lot has been written about the Financial Crisis, but nothing comes closer to an analysis of all the factors and their relative contribution to the crisis. What is more, John Allison's book is easy to read and understand for anyone with or without a background in finance and offers solutions that would prevent a recurrence.

You will be surprised to learn that the top 3 culprits aren't the ones touted by the pols and the media, but if you really think about it, you'll agree.
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on October 14, 2012
Too many Americans blame the recent financial crisis on "corporate greed" and capitalism without taking the time to learn and assess all of the facts. As former CEO of BB&T, John Allison is uniquely qualified to unravel the complexities of failed economic policies and incentives. Allison presents a compelling and detailed case for the government's role in the debacle from both economic and philosophical perspectives. If you're interested in investigating and understanding the root causes of the financial crisis (and economic stagnation in general), then this book is an essential read.
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