We are in an economic recovery, but not a healthy recovery, according to John A. Allison, the former Chairman of BB&T Corporation, who spoke on campus for the 2012 Burkett Miller Distinguished Lecture Series. The Scott L. Probasco, Jr. Chair of Free Enterprise hosted the event.
During Allison’s tenure as CEO, BB&T grew from $4.5 billion to $152 billion in assets. In March 2009, Allison joined the faculty of Wake Forest University School of Business as Distinguished Professor of Practice.
Allison began his presentation, “The Financial Crisis: Causes and Consequences,” by making five points:
- The current financial crisis was primarily caused by government policy. The financial industry… is the most heavily regulated industry in the U.S. and it’s the one where we’ve had our biggest problem;
- Government policy created a massive “misinvestment,” a bubble in the residential real estate market. That bubble deflated, as all bubbles do… The housing bubble “taught millions of people to do the wrong thing”—homebuilders built too many houses and homebuyers were persuaded to buy more house than they could afford;
- A number of large financial institutions called Wall Street made some very serious mistakes. If he had been in charge, Allison said he would have let those institutions fail;
- Almost everything we’ve done since this crisis started, even if it helps to address it in the short term, will reduce our standard of living in the long term;
- And the real cause of the crisis is philosophical.
Going forward, Allison sees “most likely ‘stagflation’—some growth, higher unemployment, higher inflation.” But it is the long-term prognosis he said students in particular should be very worried about.
“We could go broke in 20 to 25 years,” Allison predicted, unless measures are taken to change direction and address Social Security, Medicare, and other entitlements.
“This is not politics, this is just math,” Allison said.