How the Fed Caused the Crisis
John A. Allison IV is the former CEO of and acting Chairman of BB&T, one of the largest banks in America. Allison was recently named one of the best CEOs of 2008 by MorningStar as his banking principles are largely seen as the reason behind his bank's relative success during the financial crisis. A graduate of the University of North Carolina with an MBA from the Fuqua School of Business at Duke University, he has a wife and three children.
Question: What bank regulatory mechanisms, if any, might have prevented the crises? (Dan Indiviglio, The Atlantic Business Channel):
John Allison: In my opinion, the crisis was primarily created by government policies, specifically the Federal Reserve putting in too much money under Greenspan where we had negative real interest rates for two years. And then Bernanke inverted interest rates, which created terrible pressure on bank margins. We couldn’t have had a bubble in the economy if the Fed hadn’t printed too much money. It ended up in the housing market because of Freddie Mac and Fannie Mae, these two giant government sponsored enterprises. So it wasn’t really the regulatory structure that created the problems, it was government policy from the Fed and through Freddie Mac and Fannie Mae.
What is irony is the perception that the banking industry was de-regulated. In fact, the regulatory environment during the bubble, was the worst in my career, it was just mis-regulation, it was a huge amount of focus on—you see a huge amount of focus on the Patriot Act, and no focus really on traditional risk management. So they contributed to the crises more in an indirect way, but the real cause of the misallocations in the economic system came from the Federal Reserve and Freddie Mac and Fannie Mae.
Question: What was your experience in dealing with the Treasury’s bank bailout?: (Dan Indiviglio, The Atlantic Business Channel)
John Allison: I was very opposed to the TARP program. In fact, I wrote congress and tried very hard to keep TARP from happening. Unfortunately, however, once TARP was approved by Congress, there was significant regulatory pressure placed on all the large financial institutions to participate in TARP, particularly on all the $100 billion and over banks. The pressure was based on Bernanke’s study of the Great Depression, where Roosevelt tried to bail out individual companies and the market reacted when he did that. At the time that TARP was instituted, there were three large financial institutions that were under stress, but Bernanke didn’t want to bail those three out, because it’d be obvious he was helping them, so he used regulatory, I mean, intense regulatory pressure, to encourage all the $100 billion and over institutions to participate.
TARP was really a negative for the financial institutions, we didn’t need the capital, we had to pay very high interest rates. They got warrants. And so it was really a subsidy for the unhealthy institutions at the expense of the healthy institutions. BB&T was one of the first banks to pay back TARP, we paid it back as quickly as we possibly could.
Question: Why was TARP so costly to BB&T?
John Allison: All the large financial institutions, the $100 billion-plus institutions were basically strongly encouraged, effectively forced to participate in TARP because the Federal Reserve didn’t want the market to know the specific institutions that were being bailed out and by encouraging everybody, including the strong institutions, to participate, they obscured the fact that certain institutions were being saved. If you didn’t need the capital, the fact that you had to pay a very high interest rate and give warrants to the government was very expensive. In our case, that was several hundred million dollars, probably, and it turned out when they did the stress test, we really didn’t need the capital anyway. So I thought it was a redistribution from the healthy institutions to the unhealthy institutions and not good government policy, although they had created such a panic, they may have needed to do something, but I don’t think TARP was the answer.
Question: What do you feel will be the long-term consequences of TARP?
John Allison: I think the long-term consequences are very negative and the classic example is GMAC. GMAC is the automobile finance arm of General Motors. GMAC contributed a lot to the problem we have in the automobile business, in order to sell automobiles a number of years ago, they invented the 100 percent car loan, payable over seven years. And what that meant is most people owed more on their car than it was worth after three or four years so they can’t go buy a new car. And now, and of course, GMAC got a lot of cars back and had huge losses in that regard. And now the government keeps pouring money into GMAC, keeping them in business under the theory that there’s no financing for automobiles, which is not true. People like us are in the car business, we just aren’t going to do the dumb stuff that GMAC is doing. You can’t misallocate capital, invest in things that shouldn’t be done, and raise your standard of living in the long term, and that’s what government policy is doing. So poorly run institutions need to fail and then that capital gets reallocated to better-run institutions. That’s the way markets work. You have to have a down side. And I do think that the healthy institutions have definitely been hurt, hurt badly by keeping the unhealthy institutions in business because these unhealthy competitors are continuing to do things that drive down margins of profitability for the healthy institutions. You could see healthy institutions in trouble because of keeping the unhealthy in busines
After years of poor policies, sponsorship of two reckless enterprises, and a bumbling mismanagement of the housing bubble, the blame for the crisis lies squarely with the government.
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Eating veggies is good for you. Now we can stop debating how much we should eat.
- A massive new study confirms that five servings of fruit and veggies a day can lower the risk of death.
- The maximum benefit is found at two servings of fruit and three of veggies—anything more offers no extra benefit according to the researchers.
- Not all fruits and veggies are equal. Leafy greens are better for you than starchy corn and potatoes.
The famous cognition test was reworked for cuttlefish. They did better than expected.
- Scientists recently ran the Stanford marshmallow experiment on cuttlefish and found they were pretty good at it.
- The test subjects could wait up to two minutes for a better tasting treat.
- The study suggests cuttlefish are smarter than you think but isn't the final word on how bright they are.
Proof that some people are less patient than invertebrates<iframe width="730" height="430" src="https://www.youtube.com/embed/H1yhGClUJ0U" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture" allowfullscreen></iframe><p> The common cuttlefish is a small cephalopod notable for producing sepia ink and relative intelligence for an invertebrate. Studies have shown them to be capable of remembering important details from previous foraging experiences, and to adjust their foraging strategies in response to changing circumstances. </p><p>In a new study, published in <a href="https://royalsocietypublishing.org/doi/10.1098/rspb.2020.3161" target="_blank" rel="noopener noreferrer">The Proceedings of the Royal Society B</a>, researchers demonstrated that the critters have mental capacities previously thought limited to vertebrates.</p><p>After determining that cuttlefish are willing to eat raw king prawns but prefer a live grass shrimp, the researchers trained them to associate certain symbols on see-through containers with a different level of accessibility. One symbol meant the cuttlefish could get into the box and eat the food inside right away, another meant there would be a delay before it opened, and the last indicated the container could not be opened.</p><p>The cephalopods were then trained to understand that upon entering one container, the food in the other would be removed. This training also introduced them to the idea of varying delay times for the boxes with the second <a href="https://www.sciencealert.com/cuttlefish-can-pass-a-cognitive-test-designed-for-children" target="_blank" rel="noopener noreferrer">symbol</a>. </p><p>Two of the cuttlefish recruited for the study "dropped out," at this point, but the remaining six—named Mica, Pinto, Demi, Franklin, Jebidiah, and Rogelio—all caught on to how things worked pretty quickly.</p><p>It was then that the actual experiment could begin. The cuttlefish were presented with two containers: one that could be opened immediately with a raw king prawn, and one that held a live grass shrimp that would only open after a delay. The subjects could always see both containers and had the ability to go to the immediate access option if they grew tired of waiting for the other. The poor control group was faced with a box that never opened and one they could get into right away.</p><p>In the end, the cuttlefish demonstrated that they would wait anywhere between 50 and 130 seconds for the better treat. This is the same length of time that some primates and birds have shown themselves to be able to wait for.</p><p>Further tests of the subject's cognitive abilities—they were tested to see how long it took them to associate a symbol with a prize and then on how long it took them to catch on when the symbols were switched—showed a relationship between how long a cuttlefish was willing to wait and how quickly it learned the associations. </p>
All of this is interesting, but what use could it possibly have?<img type="lazy-image" data-runner-src="https://assets.rebelmouse.io/eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJpbWFnZSI6Imh0dHBzOi8vYXNzZXRzLnJibC5tcy8yNTcxNzY2MS9vcmlnaW4uanBnIiwiZXhwaXJlc19hdCI6MTY2MTM0MzYyMH0.lKFLPfutlflkzr_NM6WmnosKM1rU6UEIHWlyzWhYQNM/img.jpg?width=1245&coordinates=0%2C10%2C0%2C88&height=700" id="77c04" class="rm-shortcode" data-rm-shortcode-id="7eb9d5b2d890496756a69fb45ceac87c" data-rm-shortcode-name="rebelmouse-image" data-width="1245" data-height="700" />
A diagram showing the experimental set up. On the left is the control condition, on the right is the experimental condition.
Credit: Alexandra K. Schnell et al., 2021<p> As you can probably guess, the ability to delay gratification as part of a plan is not the most common thing in the animal kingdom. While humans, apes, some birds, and dogs can do it, less intelligent animals can't. </p><p>While it is reasonably simple to devise a hypothesis for why social humans, tool-making chimps, or hunting birds are able to delay gratification, the cuttlefish is neither social, a toolmaker, or is it hunting anything particularly <a href="https://gizmodo.com/cuttlefish-are-able-to-wait-for-a-reward-1846392756" target="_blank" rel="noopener noreferrer">intelligent</a>. Why they evolved this capacity is up for debate. </p><p>Lead author Alexandra Schnell of the University of Cambridge discussed their speculations on the evolutionary advantage cuttlefish might get out of this skill with <a href="https://www.eurekalert.org/pub_releases/2021-03/mbl-qc022621.php" target="_blank" rel="noopener noreferrer">Eurekalert:</a> </p><p style="margin-left: 20px;"> "Cuttlefish spend most of their time camouflaging, sitting and waiting, punctuated by brief periods of foraging. They break camouflage when they forage, so they are exposed to every predator in the ocean that wants to eat them. We speculate that delayed gratification may have evolved as a byproduct of this, so the cuttlefish can optimize foraging by waiting to choose better quality food."</p><p>Given the unique evolutionary tree of the cuttlefish, its cognitive abilities are an example of convergent evolution, in which two unrelated animals, in this case primates and cuttlefish, evolve the same trait to solve similar problems. These findings could help shed light on the evolution of the cuttlefish and its relatives. </p><p> It should be noted that this study isn't definitive; at the moment, we can't make a useful comparison between the overall intelligence of the cuttlefish and the other animals that can or cannot pass some variation of the marshmallow test.</p><p>Despite this, the results are quite exciting and will likely influence future research into animal intelligence. If the common cuttlefish can pass the marshmallow test, what else can?</p>
An open letter predicts that a massive wall of rock is about to plunge into Barry Arm Fjord in Alaska.
- A remote area visited by tourists and cruises, and home to fishing villages, is about to be visited by a devastating tsunami.
- A wall of rock exposed by a receding glacier is about crash into the waters below.
- Glaciers hold such areas together — and when they're gone, bad stuff can be left behind.
The Barry Glacier gives its name to Alaska's Barry Arm Fjord, and a new open letter forecasts trouble ahead.
Thanks to global warming, the glacier has been retreating, so far removing two-thirds of its support for a steep mile-long slope, or scarp, containing perhaps 500 million cubic meters of material. (Think the Hoover Dam times several hundred.) The slope has been moving slowly since 1957, but scientists say it's become an avalanche waiting to happen, maybe within the next year, and likely within 20. When it does come crashing down into the fjord, it could set in motion a frightening tsunami overwhelming the fjord's normally peaceful waters .
The Barry Arm Fjord
Camping on the fjord's Black Sand Beach
Image source: Matt Zimmerman
The Barry Arm Fjord is a stretch of water between the Harriman Fjord and the Port Wills Fjord, located at the northwest corner of the well-known Prince William Sound. It's a beautiful area, home to a few hundred people supporting the local fishing industry, and it's also a popular destination for tourists — its Black Sand Beach is one of Alaska's most scenic — and cruise ships.
Not Alaska’s first watery rodeo, but likely the biggest
Image source: whrc.org
There have been at least two similar events in the state's recent history, though not on such a massive scale. On July 9, 1958, an earthquake nearby caused 40 million cubic yards of rock to suddenly slide 2,000 feet down into Lituya Bay, producing a tsunami whose peak waves reportedly reached 1,720 feet in height. By the time the wall of water reached the mouth of the bay, it was still 75 feet high. At Taan Fjord in 2015, a landslide caused a tsunami that crested at 600 feet. Both of these events thankfully occurred in sparsely populated areas, so few fatalities occurred.
The Barry Arm event will be larger than either of these by far.
"This is an enormous slope — the mass that could fail weighs over a billion tonnes," said geologist Dave Petley, speaking to Earther. "The internal structure of that rock mass, which will determine whether it collapses, is very complex. At the moment we don't know enough about it to be able to forecast its future behavior."
Outside of Alaska, on the west coast of Greenland, a landslide-produced tsunami towered 300 feet high, obliterating a fishing village in its path.
What the letter predicts for Barry Arm Fjord
Moving slowly at first...
Image source: whrc.org
"The effects would be especially severe near where the landslide enters the water at the head of Barry Arm. Additionally, areas of shallow water, or low-lying land near the shore, would be in danger even further from the source. A minor failure may not produce significant impacts beyond the inner parts of the fiord, while a complete failure could be destructive throughout Barry Arm, Harriman Fiord, and parts of Port Wells. Our initial results show complex impacts further from the landslide than Barry Arm, with over 30 foot waves in some distant bays, including Whittier."
The discovery of the impeding landslide began with an observation by the sister of geologist Hig Higman of Ground Truth, an organization in Seldovia, Alaska. Artist Valisa Higman was vacationing in the area and sent her brother some photos of worrying fractures she noticed in the slope, taken while she was on a boat cruising the fjord.
Higman confirmed his sister's hunch via available satellite imagery and, digging deeper, found that between 2009 and 2015 the slope had moved 600 feet downhill, leaving a prominent scar.
Ohio State's Chunli Dai unearthed a connection between the movement and the receding of the Barry Glacier. Comparison of the Barry Arm slope with other similar areas, combined with computer modeling of the possible resulting tsunamis, led to the publication of the group's letter.
While the full group of signatories from 14 organizations and institutions has only been working on the situation for a month, the implications were immediately clear. The signers include experts from Ohio State University, the University of Southern California, and the Anchorage and Fairbanks campuses of the University of Alaska.
Once informed of the open letter's contents, the Alaska's Department of Natural Resources immediately released a warning that "an increasingly likely landslide could generate a wave with devastating effects on fishermen and recreationalists."
How do you prepare for something like this?
Image source: whrc.org
The obvious question is what can be done to prepare for the landslide and tsunami? For one thing, there's more to understand about the upcoming event, and the researchers lay out their plan in the letter:
"To inform and refine hazard mitigation efforts, we would like to pursue several lines of investigation: Detect changes in the slope that might forewarn of a landslide, better understand what could trigger a landslide, and refine tsunami model projections. By mapping the landslide and nearby terrain, both above and below sea level, we can more accurately determine the basic physical dimensions of the landslide. This can be paired with GPS and seismic measurements made over time to see how the slope responds to changes in the glacier and to events like rainstorms and earthquakes. Field and satellite data can support near-real time hazard monitoring, while computer models of landslide and tsunami scenarios can help identify specific places that are most at risk."
In the letter, the authors reached out to those living in and visiting the area, asking, "What specific questions are most important to you?" and "What could be done to reduce the danger to people who want to visit or work in Barry Arm?" They also invited locals to let them know about any changes, including even small rock-falls and landslides.
Three lines of evidence point to the idea of complex, multicellular alien life being a wild goose chase. But are we clever enough to know?
- Everyone wants to know if there is alien life in the universe, but Earth may give us clues that if it exists it may not be the civilization-building kind.
- Most of Earth's history shows life that is single-celled. That doesn't mean it was simple, though. Stunning molecular machines were being evolved by those tiny critters.
- What's in a planet's atmosphere may also determine what evolution can produce. Is there a habitable zone for complex life that's much smaller than what's allowed for microbes?
Protozoa—a term for a group of single-celled eukaryotes—and green algae in wastewater, viewed under the microscope.
Credit: sinhyu via Adobe Stock<p>Another way the story of life on Earth might not get repeated elsewhere in the cosmos relates to the composition of planetary atmospheres. Our world did not begin with its oxygen-rich air. Instead, oxygen didn't show up until almost two billion years after the planet formed and one billion years after life appeared. Earth's original atmosphere was, most likely, a mix of nitrogen and CO2. Remarkably it was life that pumped the oxygen into the air as a byproduct of a novel form of photosynthesis invented by a novel kind of single-celled organism, the nucleus-bearing eukaryotes. The appearance of oxygen in Earth's air was not just a curiosity for evolution. Life soon figured out how to use the newly abundant element and, it turns out, oxygen-based biochemistry was supercharged compared to what came before. With more energy available, evolution could build ever larger and more complex critters.</p><p>Oxygen may also be unique in allowing the kinds of metabolisms in multicellular life (especially ours) needed for making fast and fast-thinking animals. Astrobiologist <a href="http://faculty.washington.edu/dcatling/Catling2008CatalystMag.pdf" target="_blank" rel="noopener noreferrer">David Catling</a> has argued that only oxygen has the right kind of chemistry that would allow for animals to form on any world.</p><p>Atmospheres may play another role in what can and can't happen in the evolution of life. In 1959, <a href="https://astro.uchicago.edu/alumni/su-shu-huang-1949.php" target="_blank" rel="noopener noreferrer">Su-Shu Huang</a> proposed that each star would be surrounded by a "<a href="https://www.nasa.gov/ames/kepler/habitable-zones-of-different-stars" target="_blank" rel="noopener noreferrer">habitable zone</a>" of orbits where a planet would have temperatures neither too hot nor too cold to keep life from forming (i.e. liquid water could exist on the planet's surface). Since then, the habitable zone has become a staple of astrobiological studies. Astronomers now know that the outer part of the habitable zone will be dominated by worlds with lots of greenhouse gases like CO<em>2</em>. A planet in a location like Mars, for example, would require a thick CO2 blanket to keep its surface above freezing. But all that CO2 could present its own problems for life. Almost all forms of animal life on Earth, including sea creatures, die when placed in CO2-rich environments. This has led astronomer <a href="https://eschwiet.github.io/" target="_blank" rel="noopener noreferrer">Eddie Schwieterman</a> and colleagues to propose a <a href="https://iopscience.iop.org/article/10.3847/1538-4357/ab1d52" target="_blank" rel="noopener noreferrer">habitable zone for complex life</a>: A band of orbits where planets can stay warm without requiring heavy CO2 atmospheres. According to Schwieterman, animal life of the kind we know would only be able to form in this much thinner band of orbits. </p>