I Am John Galt by Donald Luskin, Andrew Greta Read Free Book Online

others, it becomes a wall that prevents them from hearing the feedback they need. Allison says, “If you really want to change people’s behavior, you’ve got to take them through a process where they can honestly look at their negatives.”
    For every single employee, from tellers to executive vice presidents, every single day, the Ayn Rand–inspired BB&T philosophy is the cultural glue the holds the far-flung organization together—and has kept it from getting into trouble while other banks have spectacularly blown themselves apart.
    Every employee is encouraged to read Atlas Shrugged. Every employee is given a printed copy of the BB&T philosophy embodying Allison’s Randian value system. Every year Allison, and now CEO Kelly King (a longtime Allison intimate), gives a one-hour presentation before all employees renewing the bank’s commitment to the philosophy.
    Where the rubber really meets the road is through semiannual performance appraisals, in which every employee from top to bottom is evaluated in terms of whether he or she successfully lived the BB&T philosophy.
    The bank’s purpose—to create value for shareholders—is only the jewel in the crown of the philosophy. Supporting it are 10 values that every employee is expected to bring to life every day on the job.
    Value #1: Reality
    Huh?
    Isn’t every business based on reality? In fact, isn’t everything based on reality?
    Actually, no. Lehman Brothers, Bear Stearns, AIG (American International Group), IndyMac, Washington Mutual, Countrywide, and all the other banks that blew themselves to smithereens in 2008 weren’t basing their businesses on reality. They were basing their businesses on sheer fantasy, wish, and whim—and an unhealthy dose of greed, the most unrealistic thing of all. They believed the housing market would always go up. Credit markets would never be illiquid. People with no jobs could pay back their mortgages.
    As the mortgage credit bubble was inflating in the mid-2000s, Allison could see that it was all underpinned by a single key denial of reality. According to Allison, at the peak, by any normal metric of affordability, housing prices were 30 percent above any historical experience. Housing prices were simply too high, and at a certain point they just couldn’t go any higher—so they had no place to go but down. 3
    That was reality. And it was denied at almost every bank but BB&T. Every subprime mortgage, every exotic mortgage, every mortgage derivative—they were all based on the same denial.
    It seems obvious in retrospect, but while it was happening the denial of it was a subtle and complicated thing. In Allison’s view, politicians have for years overpromoted housing in the United States, distorting economic incentives with subsidies and tax breaks to favor home building and home ownership over other forms of investment. And in the early 2000s, these distortions were amplified by the Federal Reserve’s keeping interest rates artificially low. 4
    Allison tells the story 5 of a meeting with Barney Frank, the powerful chairman of the House Financial Services Committee and leading defender of the overleveraged government-sponsored housing lenders Fannie Mae and Freddie Mac, which did so much to put Americans into homes they couldn’t really afford (we’ll meet Frank again in Chapter 6, “The Central Planner”). For Allison, Fannie and Freddie were “a disaster you could see happening.”
    He told Frank, “I know housing’s a good thing, but . . . getting them into a home they can’t afford isn’t necessarily a good thing. If that were so, then next time somebody commits a crime, instead of putting them in jail, why don’t we give them a house?” How did Frank react to Allison’s sarcasm? Allison recalls the moment, rocking with laughter: “He looked at me like it was a serious proposal.”
    For the private