When outsiders enter academia, they discover just how insular it really is. “There are no conservative universities and there are no private ones, except for Hillsdale,” John A. Allison said at the monthly Newsmakers lunch that Americans for Tax Reform sponsors.
Allison, who headed the BB&T Corporation, went on from there to serve as a professor at Wake Forest University. He is also the author of The Financial Crisis and the Free Market Cure: Why Pure Capitalism is the World Economy’s Only Hope.
“I thought it would be interesting to have someone who knew what he was talking about writing about it as opposed to the academics and commentators who don’t know what they’re talking about,” Allison said. For one thing, “Lots of government regulations force businesspeople to think like 2+2=5,” he avers. Add trillion to the numbers and you have the banking crisis.
Indeed, though the administration of George W. Bush was characterized by “thought leaders” as one hell-bent on deregulation, the very reverse was the case. Allison notes that during the Bush years, Congress passed three laws that led to a wave of banking regulations:
• The Privacy Act;
• Sarbanes-Oxley; and
• The Patriot Act.
Moreover, he claims, “Our biggest mistake was that we invested $3 trillion in real estate.”
“At the economic level, housing is a consumption investment. The housing bubble started in the 1990s. The culprits were the Federal Reserve, the Federal Deposit Insurance Corporation and government housing through Fannie Mae and Freddie Mac.” The latter made the housing bubble burst at the seams when “President Clinton in September 1998 demanded that half of all bank loans be in affordable housing.”
“Fannie Mae and Freddie Mac took over the business that the thrifts used to do. When they failed, they lost $5 trillion.”
In the meantime, “Fannie Mae and Freddie Mac became the single largest contributor to the Democratic Party and one of the largest to the Republican Party.”
Malcolm A. Kline is the Executive Director of Accuracy in Academia.
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