Andrew Young: Regulators should go easy on Georgia community banks

A U.S. House subcommittee looking into the banking and real estate crisis met for a solid three hours in the state Capitol this afternoon,

Because the chairman was Dennis Kucinich (D-Ohio), the witness list was weighted heavily toward more liberal Democrats. The first was state Sen. Vincent Fort of Atlanta, who about soaring foreclosure rates and the predatory lenders feasting on Atlanta neighborhoods.

Fort was followed by former mayor, U.N. ambassador and former congressman Andrew Young, now 77. People forget that Young, while socially liberal, has always been surprisingly conservative on economic policy.

Young’s testimony delighted Republicans in the packed room. First, the former civil rights leader damned the drift away from the gold standard, then urged Congress to use a light hand when dealing with the many overextended community banks in Georgia.

The gist from Young:

“If you close these banks because of an academic or theoretical reason, by and large you’re throwing the country into more debt, and you’re throwing people into more debt.”

Here’s the larger context in which he spoke:

In ‘73, in the [House] banking committee, we suddenly ended the gold standard, broke up the Breton Woods agreement, and allowed the dollar to float.

The thing about that was, nobody asked any questions. I was the last member of the committee and always committed to ask dumb questions, and I said, “If the dollar is not anchored to something, won’t people play politics with the dollar?”

[Then-Fed chairman] Arthur Burnes took a puff on his pipe and said, “Young man, you’ll soon that the dollar doesn’t need you to protect it.”

But it sparked my mind to figure out what was going on. I thought the Congress had made a decision that they did not understand. Now, normally we would go back and revisit that. But Watergate broke a couple weeks after that.

Twenty-five years later, [Fed chairman] Paul Volcker, who was there with Arthur Burns and [treasury secretary] George Shultz, wrote a book saying he and Arthur Burns and George Shultz had not discussed this question before they came over to testify before the House Banking Committee. That they got word from the White House that they were to testify to this effect.

That bothers me. Because nobody understood what was going on, not even the people who were testifying. And we never went back to look at that.

We shifted from an economics that had been thought through for years, in the Second World War, by John Maynard Keynes. We suddenly shifted to the economics of Milton Friedman. I’m not an economist, I’m a preacher. …

That Friedman economics launched us into a period of systematic deregulation at a time when the economy was being increasingly globalized. The price of oil at that time was $3 a barrel. In six months, it was $30 a barrel. In 10 months, it was $50 a barrel.

We’ve been on an economic rollercoaster ever since, that I think the Congress put us in it.

“…..In spite of all that you hear, Georgia has a very healthy economy. These banks are relating to small businesses and farmers. Yes, they were extended by values, but many of them are not predatory lenders. Many of them are community banks serving their communities very well.

And our communities are thriving. Look at our airport. We have almost 3,000 flights a day coming in here. Atlanta has grown from about 2 million when I was mayor, in the metropolitan area, to as of the other day, we had 5,595,000 people come in. We’ll be 6 million people before long.

So we are not a sick community. Given a little time and a little flexibility, I think a lot of the good people who are running our small banks would be able to work these problems out without handicap.

If you close these banks because of an academic or theoretical reason, by and large you’re throwing the country into more debt, and you’re throwing people into more debt, and there are no winners if we keep on going the way we’re going now.

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