Former BB&T chief tackles the myth of the deregulated financial sector

If you believe that greedy, reckless bankers caused the financial crisis, you might want to spend some time with Cato Institute president and former BB&T chairman and CEO John Allison. In the latest Forbes magazine, he rebuts common myths about the economic downturn.

The new myth is that the recent financial crisis and failed recovery were caused by banking deregulation and greed on Wall Street. In truth, the banking industry was never deregulated. There was a massive increase in regulation under President Bush, including the Privacy Act, the Patriot Act and Sarbanes- Oxley. The banking industry was misregulated, not deregulated. These new laws fundamentally misdirected banking risk management. 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 finance.

The financial crisis was primarily caused by government policy. We do not live in a free market. We live in a mixed economy. The technology industry is largely unregulated and as a result has performed well through various economic cycles. Financial services is the most regulated industry in the world, and since it is, it’s not surprising that the industry has been so troubled.

The real cause of the financial crisis was a combination of mistakes by the Federal Reserve, along with government housing policy, which was implemented by Freddie Mac and Fannie Mae. Neither would have ever existed in a free market. …

… Ironically, instead of being caused by greed, the philosophical cause of the financial crisis was altruism. Altruism is not benevolence. It is otherism. Everyone is more important than you. As interpreted by statists, altruism means the collective is everything and the individual does not matter.

Everyone has the right to a nice house. Provided by whom? Everyone has the right to free medical care. Provided by whom? My right to free medical care is my right to force a doctor to provide that care or to force someone else to pay for my doctor. All of this runs counter to the traditional American concept of rights. In the latter, each of us has the right to what we produce. We do not have a right to what someone else produces.

The U.S. must radically change direction. The foundation for that change is philosophical. The cure for our problems are the principles that made America great in the first place: Life, Liberty and the Pursuit of Happiness.

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