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John Allison, the man who built BB&T Corp. into a powerhouse, is still an outspoken champion of free markets and small government. But it's been an uphill and sometimes lonely battle, as the government's power over the banking industry has grown progressively stronger in the past year.
The plain-speaking Allison, who stepped down as BB&T's chief executive last year but remains chairman, is known as much for his bank as he is for his philosophy. His opinions often break from what the federal government considers conventional wisdom. Let banks - even big ones - fail, Allison says, if they don't deserve to survive. Let foreclosures go forward. In other words, let the markets work through their problems.
In an interview with the Observer, before his induction this week into the N.C. Business Hall of Fame, Allison said he's "a little disappointed" that he seems to be one of the few CEOs who's publicly advocating small government.
"I think it's a combination of fear, and maybe some of them don't feel like that's the arena that they're very effective in," Allison said. "Now, there's a fair number of economists that defend my position, but they don't seem to get out there in the public. I guess they're writing little notes to each other."
Since relinquishing the CEO role 10 months ago, Allison has been watching his Winston Salem-based bank mostly from the sidelines as the industry continues to undergo momentous changes. He said he misses BB&T and the people there, but the timing of his retirement was part of a succession plan that he and other executives had crafted years before.
Though he remains the bank's chairman, he'll hand that position over to CEO Kelly King at the end of the year. This summer, under King, BB&T jumped from the country's No. 14 bank by assets to No. 10 after scooping up a failed Alabama bank.
Allison, meanwhile, has been hitting the lecture circuit, teaching business students at Wake Forest University, and working on a couple of books. He talked with the Observer about Barney Frank, payday lending, and what went wrong with the banking system. Questions and answers have been edited for clarity and length:
Q. Do you think ego was a big problem for the CEOs of other banks? Did that contribute to the current financial crisis?
I don't use the term "ego" as much as I use the term "emotionalism." I think some of these people, very bright in many ways, got caught up in emotional issues because they wanted their bank to be bigger than the other guy's bank and didn't impose self-discipline.
Q. What advice would you give to the CEOs of other big banks right now?
It's really important, especially in difficult times, that an organization be clear about what its purpose and vision are. We're trying to focus on doing our absolute best to help clients through the tough times. We're (also) trying to create an environment where our employees have some type of security, because if your employees aren't confident themselves, the client is going to sense that. And that's going to create apprehension in the client's mind.
Q. You mean job security?
Job security, and security that the organization knows what it's doing. Ambiguity creates fear. ... The biggest thing is being very open and very transparent.
Q. Do you still have an office at BB&T?
No. I thought it was real important for Kelly not to have me standing over his shoulder. He's doing a fantastic job.
Remember, we spent five years working on this (succession) plan. You see a number of cases where you have a good CEO and then he leaves, and two years later the company is not doing well. I think CEOs ought to partially be evaluated by what happens five years after they leave. CEOs really should take responsibility for being sure the organization survives (after) them.
Q. That takes some humility, though, to plan for what the company will do when you leave.
I've always wanted to have people better than me working for me. That makes me better.
Q. I know you're a free market guy, but should we break up banks that are too big to fail?
I have generally been opposed to anti-trust laws. Being big by itself is not bad.
But on the other hand, if the government has decided these companies are too big to fail, they almost have to break them up because they're going to undermine the marketplace. In my career, Citigroup has failed three times, and each time they've gotten bigger and worse. I don't believe they are too big to fail, by the way. You can have a failure process just like you have bankruptcy laws.
Q. So what do you propose?
I would set a much higher capital standard for banks - sometime in the future, over a reasonable period of time, so they have time to raise the money. The banks that are healthy would be able to raise capital. The banks that aren't would be forced to shrink.
Q. Are there any banking practices that the government should just condemn in order to protect consumers? Is there anything that bothers you on a moral level, like payday lending?
They should prohibit or punish fraud, which they do. But when you actually look at some of these (other) practices, you're making judgments for people who may be in very different economic circumstances.
For example, if you close down payday lending, people end up going to loan sharks - who collect with a stick. Maybe we need to have a better education system and all that stuff, but as bad as payday lending may seem to be, people still want the money and they'll go to loan sharks.
Q. Have you been in touch with Barney Frank (the Massachusetts Democrat who runs the House Financial Services Committee)?
I haven't talked to Mr. Frank since I retired as CEO, and that's fine with me. It's kind of amazing that he's the one trying to lead the cure.
If you had to say who's the single biggest person who caused the housing crisis, it would be Barney Frank and his irresponsible defense of Fannie Mae and Freddie Mac.
Q. You've said before that you guys used to talk.
We talked. I never convinced him of anything.
Q. When will we get out of this recession? What will it take?
I believe we are in the beginning of a recovery and we're going to see some positive comparisons, but that's partly because last year was so bad.
There are two reasons (for the recovery): I think we do have a very resilient economy and we do have a lot of economic stimulus (from the government). However, many of the stimulus actions we've taken will reduce our standard of living in the long term. ... It's so tempting because it sounds good in the short term: "We're going to spur growth now."
Q. What are you talking about? Cash for Clunkers and that sort of thing?
Right. You were encouraging people to take perfectly good cars and not use them anymore. Now, how does that raise your standard of living?
It's like when someone comes in and throws a brick through your window: It raises the standard of living because it gives some guy a job to fix your window. But the problem is, that money can't be used to buy bread.
If you look at the deficits we have ... you can run the numbers on the United States and see that if we don't change, then in 25 years we're in trouble.
Q. Are you going to run for office?
No. I'm not a political person. (But) I've had a lot of people ask me that.
