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Stabilizing real estate is key

Photo

Kevin Morley / Times-Dispatch

BB&T Chairman John A. Allison IV (left) spoke yesterday with Buford Scott (center) chairman of Scott & Stringfellow, and L.H. Ginn III, retired chairman of First Virginia Bank-Colonial.

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EMILY C. DOOLEY TIMES-DISPATCH STAFF WRITER
Published: January 13, 2009

VIDEO: World Affairs Council

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."

Contact Emily C. Dooley at (804) 649-6016 or .

Reader Reactions

Posted by ( Transplant ) on January 13, 2009 at 4:49 pm

Oh by the way, foreclosure properties are largely being bought by specs hoping to flip them at a profit in a year or two. Foreclosures have nothing to do with the overbuilding done by greedy developers and municipalities who allowed them.

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Posted by ( Transplant ) on January 13, 2009 at 4:47 pm

James, what makes you think ordinary people can afford the types of homes that comprise the vast majority of unsold new home construction? Staring price in the $350,000 area do not mean affordability to the average Richmond wage earner regardless of any tax credits, etc applied. If you ain’t making it, you cant spend it. SIMPLE.

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Posted by ( Dave ) on January 13, 2009 at 3:21 pm

james—People who had no business taking out mortgages in the housing market did so 1) out of ignorance, 2) politically-correct government housing and mortgage regulations or 3)profit-hungry lenders skewing the system to fill their pockets. Now we who have met our obligations and done the right thing are expected to right their wrongs with our money. Where’s their sacrifice? If your version was correct, then why didn’t they suggest this months ago - before the bailout boodle ‘spread the wealth’? I won’t attempt to insult others by asking if they understand.

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Posted by ( james ) on January 13, 2009 at 3:02 pm

Some of you, like Transplant, don’t get it. So here’s the Sesame Street version.

There are too many new homes on the market, for whatever reason. As long as those homes don’t sell, local governments don’t collect property tax revenue on them. Without that revenue, everything suffers. So you need to sell those homes.

Why aren’t those homes selling? Because there are so many foreclosure homes available right now that people are buying them instead. They cost less. So what do you do? Encourage people to buy new homes by making them cost less, which is what the tax credit does. This way you pump more money into local government and they can provide the services people need. Then when they have enough money we won’t need $700 billion bailouts!

Everybody understand?

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Posted by ( Transplant ) on January 13, 2009 at 12:45 pm

Oh yes ... and this gem: “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.“

See what I mean? A bailout for developers and bankers financing them.

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Posted by ( Transplant ) on January 13, 2009 at 12:44 pm

... and where were the calls for reason and stability when housing prices were shooting higher and higher going evermore beyond the reach of ordinary homebuyers? I have no sympathy whatever for a bunch of bozos who one year ago were telling us Richmond was “insulated” from a real estate price drop. Self serving weenies looking for a bailout of their own.

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Posted by ( Dave ) on January 13, 2009 at 10:22 am

...so the answer to the credit crisis is to—- extend more credit….We are delaying the inevitable. We are not ‘solving’ anything - we are only hoping we can put it off until we are in our graves and then our children and grandchildren get left holding the bag.
It is unethical and immoral, but we ‘extend credit’ on those things too these days.

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Posted by ( zerro ) on January 13, 2009 at 9:54 am

,,what you need to do is stop ripping us off ,,60 yrs ago when you borrowed to buy a house ,,for every dollar$ you borrowed you paid the banks 50 CENTS,,today for every dollar $$ you pay the bank 4.00- 5.00 $$ ,,and you still go broke !!and break us and keep us from building equity and giving our kids anything,,you are all CROOKS !!,,so no more 350 billion,,instead ,,give each usa citizen 1-BILLION ,,it would be only 330 billion,,and guess what,,the state and feds would get a 50 % tax check for 500 mil a person(and be in the black overnight),,we would buy our homes,,cars ,,yatch,,and pay all college cost ,medical cost, and still have money left over,,,i say think outside of the box,,and get this TRICKLE up eco going !!no more bail-out,,(stop rewarding the failure of the rich !))again if it did,nt work 70 yrs ago it aint gonna work now,,and all you r doing is setting us up for another failure in 70 yrs !!case and point,,houses are still failing,,and the credit card rates arent going down,,wherezz the $$ BANKS,,off-shore,,??,,no way,,no how,,no-more!!

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