The Financial Meltdown – What Really Caused It?
Not only have I claimed the meltdown not to be the result of Free-Market Capitalism or having had anything to do with it whatsoever; I’ve provided many an “amateurish” explanation, as well.
So, I was delighted and ecstatic to hear that one of my heroes; John Allison, had just come out with a book on this very topic.
It is entitled, The Financial Crisis And The Free Market Cure. This is an absolutely fascinating look at what really caused the crisis and the thinking/action needed to get us back on the road to liberty and abundance.
Important: This is not about Democrat versus Republican or Conservative versus Liberal; it’s about why free minds and free markets work (if, by work, one means abundance, prosperity and a higher standard of living for all) and why government — when operating outside its legitimate functions of protecting its citizens from force and fraud — does not.
Ask Most People What Caused This Crisis
If you were to ask most people today the main cause of the housing and financial crisis they would answer something like, “unfettered Capitalism”, “deregulation” or “not enough government oversight.” And, as Mr. Allison proves with compelling yet easily-understood facts…they couldn’t be more wrong.
Capitalism? Hardly. That such a large number of people believe it to be the cause in the first place is not only a shame, but perhaps the biggest problem of all. After all, it’s difficult to defend a concept when you don’t understand it and cannot define it. Capitalism is *not* the same as “corporatism”, “cronyism” or, as it’s often called, “crony-capitalism.” (Actually, Crony-Capitalism is to Capitalism what Chinese Checkers is to Checkers…NOTHING. But, I digress.)
There was a high degree of cronyism — not Capitalism — which led to the crisis.
Deregulation? Not one bit. It was not deregulation but horrible — as the author accurately terms it — “MIS-regulation.”
And, it was a huge amount of interference from the government and the government-sponsored entities that operate with government’s full force and backing. The Federal Reserve, several presidents, congressmen, government-sponsored entities, regulators; they all had a huge hand in this monstrosity that took place. And as usual, the fix was more (and all-too-similar) government solutions to the government-caused problems.
Mr. Allison lays it out for the reader in a very logical and easily-understandable fashion.
What Are The Author’s Qualifications for Writing This Book?
That the Harvard Business Review named him one of the decades top 100 most successful CEOs is certainly a nice shot of credibility. More importantly, however, during Mr. Allison’s tenure as CEO, his bank grew from $4.5 billion to $152 billion in assets. And, they were hugely successful during a time when many banks failed spectacularly.
This was accomplished via rational, long-term thinking, a desire to provide exceptional value to customers, employees and shareholders alike, and by acting from a base of uncompromising values.
Key Point: It is interesting to note that BB&T did not participate in sub-prime lending, choosing to write only conventional mortgages.
Having learned of Mr. Allison several years ago and watching some of his lectures, my expectation was that the book would be enjoyable to read and with great knowledge, information and insights that would never be gained from listening to the usual experts. It is that, indeed!
The bonus, however, is that anyone who wants to learn how to become a principle-based leader and a hugely successful individual, both in business and in life itself, can gain a TON of wisdom from reading and studying this book.
But, that is simply the bonus. What this really is…is one’s opportunity to understand why the crisis really happened. If you are already a believer in Capitalism but not sure where to separate fact from fiction regarding the financial crisis, you’ll love this book.
If you tend to want to believe that Capitalism is the enemy and that big government is the friend of the poor, I ask you to read the book, even if you choose to read it with total skepticism. That’s okay. But, at least read it. Then, come to your own conclusion.
I believe this book is a Masterpiece!