Bankruptcy of U.S. is ‘Mathematical Certainty,’ Says Former CEO of Nation's 10th Largest Bank
Thursday, November 04, 2010
By Terence P. Jeffrey
Sen. Chris Dodd, Rep. Barney Frank, President Barack Obama
Senate Banking Chairman Chris Dodd (D.-Conn.) and House Financial Services Chairman Barney Frank (D.-Mass.) with President Barack Obama. (Associated Press photo)
(CNSNews.com) - John Allison, who for two decades served as chairman and CEO of BB&T, the nation's 10th largest bank, told CNSNews.com it is a “mathematical certainty” that the United States government will go bankrupt unless it dramatically changes its fiscal direction.
Allison likened what he sees as the predictable future bankruptcy of the United States to the problems at Fannie Mae and Freddie Mac, whose insolvency he also said was foreseeable to those who studied their business practices and financial situation.
“I think the first thing we have to realize is where we’re going and to face it objectively,” Allison told CNSNews.com, when asked about the trillion-dollar-plus deficits the federal government has run for three straight years, the more than $13 trillion in federal debt, and the $61.9 trillion long-term shortfall the government faces (according to the analysis of the Peter G. Peterson Foundation) if the government is to pay all the benefits it has promised through entitlement programs.
“If you run the numbers, on all those numbers that you just talked about, which I think are accurate, very accurate, in 20 or 25 years, the United States goes bankrupt,” said Allison. “It’s a mathematical certainty.
“It reminds me very much of that story I told you about Freddie Mac and Fannie Mae,” said Allison. “We were running the numbers, and Freddie Mac and Fannie Mae went bankrupt, and we got there. In 20 or 25 years, the United States goes bankrupt.
“Now, countries don’t go bankrupt the way companies do,” said Allison. “They don’t file bankruptcy. They usually hyper-inflate. They print a bunch of paper money, or they become Third World economies like Argentina--unless we change direction. So, we absolutely have to change direction. And the irony of that is it requires an interesting combination. It requires both discipline, but it also requires a focus on growing our economy. And it means a fundamental philosophical change from where we are today, from the idea of redistributing wealth to the idea of creating wealth.”
In his interview with CNSNews.com Allison said that when belonged to the Financial Services Roundtable they examined Fannie Mae and Freddie Mac and determined they were going bankrupt. Congressional leaders, however, did not heed their analysis.
“I was on a committee, a Financial Services Roundtable, for nine years trying to do something about Freddie Mac and Fannie Mae,” said Allison.
“You couldn’t help but see it coming,” he said. “You ran the numbers, particularly the last several years, and it was mathematically certain Freddie and Fannie were going bankrupt.”
“We met with Congress. We met with [House Financial Services Chairman] Barney Frank and [Senate Banking Chairman] Chris Dodd and they absolutely wouldn’t see it,” said Allison.
Allison became president of BB&T in 1987 and was elected chairman in 1989. He remained CEO through 2008. He is now distinguished professor of practice at the Wake Forest University Schools of Business. By 2009, according to rankings done by SNL Financial, BB&T had grown into the nation's 10th largest bank.