BB&T chief exec slams bailout planBaltimore Business Journal
A significant and immediate tax credit for financial institutions to purchase homes would be a more effective solution for the financial crisis than the proposed $700 billion federal bailout, said BB&T CEO John Allison.
The federal government should also buy homes, and not securities backed by mortgages, he wrote in a Sept. 23 letter to the U.S. Congress.
“This is a housing value crisis,” Allison wrote. “It does not make economic sense to purchase credit card loans, automobile loans, etc. The government should directly purchase housing assets, not real estate bonds.”
In his letter, Allison questions how the government will pay the proper price for distressed real estate assets. Overpaying will harm taxpayers, while underpaying will hurt real estate markets. He also believes allowing homeowners to use the bankruptcy to restructure their loans will “force losses on banks.”
He adds the primary beneficiaries of the proposed rescue are Goldman Sachs Group Inc. (NYSE:GS) and Morgan Stanley (NYSE:MS). The U.S. Treasury, he says, is “totally dominated by Wall Street investment bankers,” and “cannot be relied on to objectively assess all the implications of government policy on all financial intermediaries.”
Allison also said it is “inappropriate that the debate is largely being shaped by the financial institutions who made very poor decisions.”
He pins the responsibility for the crisis on Freddie Mac and Fannie Mae.
Winston-Salem, N.C.-based BB&T is the fifth-largest commercial lender in Greater Baltimore and ranks No. 6 for deposits, according to Baltimore Business Journal research.
BB&T is a $136 billion banking company with 1,500 branches. Although the company (NYSE:BBT) has been hurt by the slowing real estate markets, it continues to turn a profit. It posted second-quarter net income of $428 million, or 78 cents per diluted share. It made $458 million, or 83 cents per share, in the second quarter of 2007.
Allison is scheduled to retire at the end of the year.
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