EMILY C. DOOLEY TIMES-DISPATCH STAFF WRITER
Published: January 13, 2009
Stabilizing the real estate market is key to ending this financial crisis, a banking executive told the World Affairs Council of Greater Richmond.
John A. Allison IV, chairman of BB&T Corp., spoke to about 200 people at the Omni Richmond Hotel last night.
Allison, 60, spoke about the financial crisis, its causes and possible cures.
"Nothing is as important as stabilizing residential real estate," Allison said.
He said government policies -- from the Federal Reserve, Fannie Mae, the Securities and Exchange Commission and others -- were at the root of the problem.
Other contributors: A lack of market discipline and a policy of increasing homeownership, which led to a spike in subprime lending.
"We built too many homes, we built too many big houses, we built houses in the wrong places," Allison said.
And when big investment firms, mortgage companies and banks began to fail, the $700 billion bailout inflated concerns, affecting matters more.
"We needed a correction," he said. "What we didn't need was a panic."
Allison, a native of Charlotte, N.C., started with BB&T in 1971. He retired as chief executive at the end of last year, after 19 years at the helm. During his tenure, the firm made more than 60 acquisitions to become the 14th largest financial holding company in the nation, according to BB&T.
The banker said one way to clear the real estate market would be to create tax credits open to all, no matter the income level.
He suggested the creation of a $150 billion tax credit that allows homeowners to take deductions for deflation, Allison said.
He also advocated a 10 percent tax credit on real estate purchases, available on a first-come, first-served basis for a limited time. Only newly completed or homes under construction would be eligible. The goal would be to clear the housing glut, he said.
Mortgage lenders also should go back to originating loans and holding onto them, rather than selling them off to be lumped into bigger pools of debt.
"When people take the risk and hold the risk, they have better accountability," Allison said.
He also said more accountability is needed, from individuals, corporations and the government.
"We need to restore discipline," he said. "Save more, spend less."
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