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-- so many big banks receiving secret aid from the Federal Reserve right turn to my next guest to ask how much.
His bank benefited from these bailouts here with a very unique answer and a different story.
Former CEO and -- -- BB and C John Allison John.
As always it's a pleasure welcome back -- -- much you wanna I have discussed this before the feds came calling and said mr.
Allen here's your loan and you said.
I'm not gonna take alone I don't want it -- bank doesn't need it thank you leave us alone.
What happened after you said that.
Well you're basically had been opposed to open and we did I've written congress I thought it was really.
Bad long -- for public policy and I'm absolutely convinced now that it has been bad for public policy.
But that the leaders the Federal Reserve warned the healthy banks to participate in TARP.
Because also -- they would be obscured the fact that they were trying to.
The save a -- unhealthy banks.
And I haven't always strong and large banks participate they couldn't use the story that we're encroaching living in the economy when really they were trying to bail out some some failing institutions and you were not running.
A neighborhood savings and loan deviancy at the time was in -- topped one.
In terms of assets in the United States of America are are you surprised -- were you surprised.
When we learned over Thanksgiving weekend John Allison.
But the Federal Reserve created out of thin air and -- -- below market rates seven point seven trillion dollars.
To its favorite big banks in the eight month period between September 08.
And April 09 and that those banks earned thirteen billion in interest on that nearly free.
Created out of thin -- money.
Yeah I was surprised that the magnitude but it but we knew that was going around and there's the argument that the -- was very concerned about liquidity in the economy right so they offered line's basically interest free.
But to support some banks that were having financial problems but also to encourage healthy banks to put extra cash into the economic system and this goes back to.
-- -- they did with kids belief that.
A liquidity problem with the mine probably in the economy would really -- was a solves the problem where a lot of bad debt loans that were made important what the liquidity she -- get any bids -- onto the top person -- we ought to have a private banking system.
I'd get rid of the fit with if our -- -- -- -- -- second only to congress in destroying wealth and wellbeing.
In the US economy.
I -- that members of congress would that would accept your wisdom on this.
Anything good come from -- all this force feeding the banks money.
The big banks crime poverty and in public while they're receiving trillions in cash under the table which I think -- a form of fraud that any good -- Did they lend it out did -- -- liquidity did it save people from going down the told us predicted just enrich the people don't know was distributed.
I recognize that some financial institutions keep -- vital but I don't think that's good.
You know we have a bankruptcy system the United States probably every by watching -- shows -- -- of bankrupt airlines and you didn't.
Didn't realize -- when -- key companies in business.
That have been making bad investments that is Mike -- investments for the long term in my career Citigroup -- bio -- -- every time they've been bailed out every kind of gotten bigger more.
And the reason for that if you have an implicit government guarantee the the incentive to take excessive risk in the good time to teach.
And that that'll happen again in fifteen to twenty years Citi -- -- again.
Unless we change instances at at the outset of the -- this really even worse that power.
You have some band -- institutions the good institutions get hurt as bad as -- don't go out of business -- hate doing the Dunst -- me and the good institutions get penalized with me very destructive law.
And like -- Fries and and the taxpayers taxpayers and businesses semi nationalized got you know they talk about the current administration being social I don't think they're really socialists are much more status.
-- -- -- the term fashion is has a lot of extra added context -- -- there really -- And the reason is if -- -- -- that you owe them a cut the unit that do you -- for but if you knew in the back room -- if you -- things if something goes -- you can -- the bank.
The and it's actually -- her from a from a government perspective.
One of the things that's really under disgusted Dodd-Frank is the consumer compliance aspect -- under this consumer implies there's been this a radical change.
Banks can not only have to get new products approved but the government can required the bank to banks to introduce new products.
That's -- will but the main reason were in the mess we are in -- -- government forced banks into the sub prime lending business it blew up in the -- about takes.
They're gonna force banks in the sub prime consumer limit the ending some -- but also the all -- policies that by the government that's just blow up in the -- blame the banking industry.
John -- control look at an economy control the allocation of capital.
And that's exact dude in the background where nobody knows what's happening that gives you enormous power back -- production and -- -- you don't get blind when things don't work got it thanks very much for joining us.
The factor where you -- talking about tax hikes.