Noah asks in his post whether one could trust a Randian banker.
By coincidence, I read Noah’s post on John Allison while I was in the middle of reading Donald Luskin’s through-the-looking-glass book on the characters that allegedly either contributed to or didn’t contribute to the financial crisis: I Am John Galt. It has a whole chapter on Mr. Allison and his leadership at BB&T, and how his Objectivist philosophy informed its policies.
It’s a fascinating tale, actually: Mr. Allison actually went through and rewrote the corporate policies and training programs of BB&T to conform to the ideas of Ayn Rand, while also keeping the vast amount of non-atheists working at the company on board. As a Whittaker Chambers fan, I’m frightened, but as someone studying for a Professional in Human Resources certification, I’m deeply impressed with the trick he pulled off.
And quite honestly, it didn’t hurt the bank. It made it very stodgy. BB&T didn’t go deep into subprime, so it wasn’t in a bad financial position when the crisis hit. When the government took its mandatory share of the company after the TARP, that was when Allison resigned and left.
Now, as to what he said about the GSEs: he was making a general point that Fannie and Freddie were bad actors in the mortgage market, and Goolsbee then made the limited point that they weren’t responsible for a majority of the subprime market. He made the debating mistake at that point of directly contradicting Goolsbee, and one can easily point to a McClatchy editorial that says otherwise (as Noah does).
However, the McClatchy story’s headline (Private sector loans, not Fannie or Freddie, triggered crisis) makes little sense. The whole point of Fannie and Freddie is to buy private sector loans. One can legitimately argue that, whether or not the loans they bought were technically subprime, the ones they bought must not have been very good, considering that they went into conservatorship.
And Austan Goolsbee’s point is valid, but it’s limited. For one thing, there were two kinds of non-prime loans being made: subprime, and alt-A (which is below prime, but above subprime.). The GSEs went more deeply into the latter than they did the former. Secondly, Goolsbee didn’t define his time horizon. Generally, people who argue for the GSEs talk about the numbers from 2001-2008. People who argue against talk about where the GSEs total portfolio stood in 2007 (when the mortgage market started to melt down). The people who argue for the GSEs say they were trying to keep up with private-label mortgage securitizers, and the people who argue against say that the securitizers were trying to keep up with the GSEs. There is actually room for a legitimate difference of opinion here.
At least I think there is.