John Allison isn’t your typical bank executive. For one thing, when he retired at the end of last year as CEO of BB&T — a North Carolina–based bank with more than 1,500 branches managing $143 billion in assets — he had recently shepherded it through the worst banking crisis since the Great Depression, leaving it in fairly good shape. He’s certainly seen as a success where many others in his field have failed miserably as of late.
But there’s another thing that makes Allison far from typical. When he discusses his profession, he doesn’t talk about numbers; he talks about values and principles. In fact, when you go on BB&T’s website, you will find a section entitled “Our Philosophy”:
In a rapidly changing and unpredictable world, individuals and organizations need a clear set of fundamental principles to guide their actions. At BB&T we know the content of our business will, and should, experience constant change. Change is necessary for progress. However, the context, our vision, mission and values, are unchanging because these principles are based on basic truths.
While a lot of financial companies indulge in such boilerplate because it sounds good in annual reports, Allison can credibly assert that living up to that philosophy is one reason BB&T has been able to ride out the current economic crisis. The company made tough decisions consistent with its philosophy, rather than chasing after the latest — and, it turned out, ephemeral — sources of financial innovation.
“We didn’t do negative-amortization mortgages,” Allison told NRO, “and to the degree we’ve had more successes, I believe it’s because we’ve had a long-term integrated philosophy. We’re very much a principle-driven organization, and those principles we adhered to in the good times and the tough times are an example of the reason we didn’t do the negative-amortization mortgages.” Further, it’s worth noting that while troubled banks went looking for handouts, Allison slammed the government bank-bailout program.
The fact that BB&T didn’t dive head-first into the shallow pool of subprime mortgages certainly goes a long way toward explaining the relative health of BB&T as an institution. But how was BB&T able to resist chasing after all that new mortgage money?
The answer is simple: Subprime mortgages were bad for the people who took them out. That went against BB&T’s philosophy — not for reasons of altruism but because it would have been poor strategy. “We’re obviously a for-profit company, but we don’t think that it’s good business in the long term to do bad things to your clients, even if you make a profit doing it,” Allison said. “So we chose not to do negative-amortization mortgages because we knew it was going to get a lot of people in financial trouble.”
In retrospect, the wisdom of this approach might seem obvious. However, Allison navigated through the overheated mortgage market and the ensuing banking crisis by relying, in large part, on a philosophy that many others are now turning to: “I got interested in [Ayn] Rand in the late 1960s. I read Capitalism: The Unknown Ideal. I had already been interested in economics, and as I finished college, I got interested in finance. I saw the banking system as central to a capitalist economy.”
Rand’s seminal work, Atlas Shrugged, is currently #42 on the Amazon bestseller list in paperback and #135 in hardcover. That’s pretty remarkable for a novel that was first published 52 years ago. Allison calls it “the best defense of capitalism ever written” and made it required reading at BB&T. Since 2005 the BB&T charitable foundation has given millions of dollars to dozens of universities to establish academic programs devoted to Rand’s philosophy.
These grants have not always been well received by the faculty. Last year a sociology professor at Marshall University objected to BB&T’s gift to the school. Rand’s Objectivist philosophy, the professor told NPR, “goes against the collective wisdom of the human race, I think, pretty much everywhere. I think it’s a curious interpretation of philanthropy to use corporate money to promote, really, an extreme philosophy.”
Allison holds the exact opposite view. While aspects of Rand’s philosophy might legitimately be called controversial, Allison points out that she is misunderstood more often than not. Rand is often viewed as “extreme” because her defenses of capitalism and “rational self-interest” are seen as promoting greed and selfishness. Yet Allison is quick to note that the strong values and ethics that Rand’s philosophy promotes allowed BB&T to steer clear of shortsighted and greed-driven decisions.
“A lot of people miss the fact that Rand has a very strong ethical system,” he observes. “Rand says you can derive ethics from reality. If anything, Rand is more rigorous in her ethical system than most codes are. If you’re dishonest, you are disconnected from reality, and that has consequences.”
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