This last Wednesday, September 14th, Harvard Law School hosted an event in which John Allison gave his talk on the U.S. Financial Crisis: Causes and Consequences. He is a retired Chairman and CEO of BB&T Corporation, the 10th largest financial services holding company headquartered in the U.S. To read more about his credentials view the following link:He talked about many issues, here are some of the highlights.
The bailouts during the past few years have done nothing to help this crisis. It is a myth that if Goldman Sacks fails then there would be a ripple effect and all other banks would fail.
Allison talked about how the market should have been allowed to correct itself. That bailouts lead to future problems, and they keep companies from going under that SHOULD be going under.
For example, if Chrysler has been allowed to fail, plants would not have been shut down. They would have been taken over by Ford and other car companies. Not only that, other companies would then have learned from Chrysler's mistakes, and become even better. Instead, companies learn that they can pretty much do what they want and the government will bail them out.
He talked about making it a better economy for people to create new jobs and businesses. He said that lowering taxes would be an incentive for people to create jobs and plan for the future. He also talked about how ObamaCare has hurt businesses because it has created ambiguity. Companies are not hiring like they would have before because they are unsure of future health care costs.
Not only is ObamaCare bad for business, it is essentially the opposite of American ideals. Who is paying for this health care? America was built on Life, Liberty and the Pursuit of Happiness. Everyone has the right to work for their own good. The idea behind this is that we will then be naturally kind to other people, without resentment.
John Allison's bottom line is that the "free lunch" (free health care, free housing...etc) mentality we are living in now is leading this country to certain economical disaster. We need to implement changes in order to stop this from happening.
It seems now we are in a vicious cycle. Right now 60% of the country is below the poverty line (this is without counting government financial help). This is greatly due to the failed education system. Many people graduate high school and are not even able to read or write correctly. This country is left with a shortage of highly skilled persons and an abundance of unskilled workers. These unskilled workers are competing with people in other countries who are willing to work harder for less money. One of the things keeping unskilled workers from getting jobs is the regulations. During a recession, minimum wage was raised 40%. So companies who are cuttings costs are going to hire other workers who do not have this restriction. Which in turn leads to more people living below the poverty line.
Allison believes that government needs to take a big step backwards. That 75% of regulations need to be eliminated in the next 6 months (65,000 pages have been added in the last five years alone). We have a massive over regulatory system.
The role of government should get back to three things. A military to protect (as defensive, not out in three wars). Policemen (to get the "bad guys"). An effective Court System ( to enforce contracts). Other regulations should be gotten rid of.
He also spoke about integrity and how we have to do the best we can. Allison said, "when businesses forget their purpose is to make a better place to live, bad things happen."
These are just some points from his talk. It was very thought provoking and has left me with a new perspective, and also with some questions.
Such as, if we no longer have a "free lunch" system, what happens to the people who are getting a free lunch? What would be the steps needed to transfer to a system with less government involvement?
Below is a link to his talk, given at Virginia School of Law this past February
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