John Allison's Worldview
November 13, 2014 7:27 AM
BB&T's retired CEO has a new book, "The Leadership Crisis and the Free Market Cure." Allison, who now heads the Cato Institute, still has thoughts on banking to share and criticism to sling. Here are some highlights.
Standing Up To Giants
Allison asserts that predecessors to Bank of America and Wachovia had longstanding interests in buying BB&T. "The only way I was able to keep either organization from making an unfriendly offer was to play them against each other," he writes.
Image: Fotolia
Wachovia's Near Play for BB&T?
Wachovia CEO Ken Thompson invited Allison to play in a golf tournament around the time that Wachovia was negotiating its fateful purchase of Golden West. "I am fairly certain that he intended to put a hard press on
to purchase BB&T," Allison claims. "If Wachovia had bought BB&T instead of Golden West, the financial industry would look very different today."
An Intimidating Chief
Allison has complimentary things to say about former NationsBank CEO Hugh McColl Jr., though he was convinced that the hard-nosed chief coveted BB&T. "I personally like Hugh because he is straightforward and transparent even when he scares you to death," he writes.
Rebukes for Frank, Dodd
Lawmakers Barney Frank and Chris Dodd "evaded the consequences of their completely irrational support for subprime home lending because they 'wanted' subprime lending to work long after the evidence was clear it would lead to economic failure," Allison claims.
Image: Bloomberg News
Working with Regulators
The book often discusses the role of "community" in running a company, and Allison makes it clear that bankers need to work hard on relationships with regulators. "We define community in a broad context," he says. "Suppliers and even regulators are part of the community."
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Marathon Mentality
"BB&T's mission is optimizing shareholders returns, not maximizing," Allison writes. "In the real world, maximizing tends to be a short-term concept. BB&T's mission also focuses on creating a safe and sound investment."
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High Standards for M&A
Allison makes it clear that BB&T was a conservative acquirer. "While BB&T grew rapidly, growth was never an end in itself. Quality in the broadest context was the goal. BB&T made numerous acquisitions, but none of them was high risk in the Bank of America context."
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Frontline Advantage
Everyone at BB&T has a role in its success, and the company even provides training to its tellers, Allison says. Those workers "are in the economic success and financial security business; they do not just cash checks," he says.
Image: iStock
Slap at Citigroup
Allison has never held back his disdain for how Citigroup was run under former CEO Charles Prince. "I guarantee that before any of us knew there were problems in the subprime lending market, the geniuses in the backroom at Citigroup saw the problem," he writes. "What did they do? They evaded."
Image: Bloomberg News
Ripping the Ratings Agencies
Credit ratings agencies also receive a fair dose of criticism in the book. "One reason BB&T did better than many of our competitors during the financial crisis is that we did not buy financial instruments based solely on S&P's, Moody's and Fitch's ratings."
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Importance of Self-Discipline
BB&T made decisions assuming the world "would know what we did and why we did it," Allison writes. During the financial crisis, BB&T "made some decisions that had negative outcomes, but we had not made any decisions for which we needed to apologize from an ethical perspective."
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Freudian Strategy
BB&T bought a psychological consulting firm - Farr Associates - to tap into employees' subconscious potential. BB&T learned about the firm from an employee who later confessed to embezzling from the bank. "Did he confess because of what he learned in the psychological training?" Allison wonders.
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Required Reading
BB&T's internal "university" includes certification training that reaches all the way down to its tellers. Participants in its leadership development program are required to read Ayn Rand's Atlas Shrugged.
Image: Wiki
Regulatory Concerns
Allison claims that standardization, including stress testing, increases the financial system's risk by encouraging banks "to take the same supposedly politically correct risk." He also asserts that Sarbanes-Oxley, by discouraging companies to go public, increases the risk of fraud.
Image: Wiki
Handling Layoffs
After BB&T bought the failed Colonial Bank from the FDIC in 2009, it voluntarily paid $25 million in severance to displaced workers. "Employees who stay will very closely observe how you treat the employees who leave," Allison writes.
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