Donald Luskin

by I Am John Galt

  A new Public Editor, Byron Calame, took Okrent’s place. And my Krugman Truth Squad was ready to take our battle for columnist corrections to the next level.

  Putting Krugman in the Correctional Facility—for Life

  In August 2005, Krugman claimed in a Times column concerning the disputed 2000 Florida presidential election:

  Two different news media consortiums reviewed Florida’s ballots; both found that a full manual recount would have given the election to Mr. Gore.69

  On the same day, on my blog I called him out on what was an egregious lie.70 The Times itself was a member of one of the consortiums, and said in 2002 that “Mr. Bush would have retained a slender margin over Mr. Gore if the Florida court’s order to recount more than 43,000 ballots had not been reversed by the United States Supreme Court.”71 I immediately started a dialogue with new Public Editor Byron Calame to force Krugman to correct it. It should have been a slam dunk, but it took many weeks, and many e-mails and phone calls to Calame.

  Over the ensuing weeks, Krugman pulled every possible trick to avoid making a correction. In his next Times column three days later on August 22, he wrote about the “outraged reaction” about his original claim.72 He used this column, as new Public Editor Calame would later complain on his blog, only “to explain the misstatement without admitting any errors. . . . absent a formal correction, the information didn’t get appended to his flawed Aug. 19 column.”73

  Then, four days later in his August 26 column, Krugman added a new correction that was itself erroneous.74 Calame exploded, “It was wrong on the results of the Miami Herald statewide manual recounts. And it didn’t deal with the fact that the original Aug. 19 generalization, the Aug. 22 column and the formal correction all erred in describing the findings of the other news media consortium (in which The Times was a participant).”75

  What was so tricky about it was that Krugman’s error had come, in part, from reliance on an erroneous story in the Miami Herald (which had performed the recount for the media consortium) in which one of the scenarios where Bush won was omitted. I ran this down personally by locating and contacting a former Herald editor who had since moved to Washington, D.C., and who at my insistence went up to his attic to obtain the records necessary to establish the facts—which I passed on to Calame.

  Calame’s complaints were posted on his blog on September 2, which drove Krugman to post later the same day a statement on the Times web site—but not in print—acknowledging his original error, but blaming it on the Miami Herald, and asserting that it didn’t matter anyway.76

  There it remained for two weeks, with no formal and complete in-print correction. I kept hectoring Calame. Then on September 16, Calame wrote a blog post protesting,

  Mr. Krugman still hasn’t been required to comply with the policy by publishing a formal correction. Ms. Collins hasn’t offered any explanation. . . .

  All Mr. Krugman has offered so far is a faux correction. . . . Mr. Krugman has been allowed to post a note on his page that acknowledges his initial error, but doesn’t explain that his initial correction of that error was also wrong.77

  Finally, two weeks later, Calame announced on his blog that a new columnist corrections policy would be forthcoming from Collins.78 No longer would corrections be appended only to future columns. Instead, they would be appended in the archives to the original columns in which the errors appeared, so that readers doing Web-based searches, or using services like LexusNexus or Factiva, would be informed that the articles they were viewing had been subsequently corrected.

  Several days later, on October 2, Collins revealed the policy, saying that Krugman “asked if he could refrain from revisiting the subject yet again in print.” We can just imagine that conversation—the word “asked” is probably not entirely accurate. Whined? Pleaded? Begged? Whatever—Collins’s column concluded with a full and formal correction of Krugman’s multiple errors, misrepresentations, and evasions about the Florida election, and the same text is now appended to all the Krugman columns involved.79

  The same day’s editorial page carried another correction under the new policy—a particularly telling and funny one.80 Three (count ’em: three!) of the Times’s columnists had to recant a single falsehood that all of them had made in the attempt to portray cronyism in the Bush administration—with Krugman having made it twice!

  Op-Ed columns by Paul Krugman (Sept. 5 and 9), Maureen Dowd (Sept. 10) and Frank Rich (Sept. 18) said Michael Brown, the former FEMA director, was a college friend or college roommate of Joe Allbaugh, his predecessor. They went to different colleges and later became friends.

  Cut Down to Size

  Several years have passed since then. I’ve stopped posting to my blog, The Conspiracy to Keep You Poor and Stupid, and I haven’t written a Krugman Truth Squad column for many months. I decided that it was time to declare victory. And what do you know—that book of mine finally got written. Or at least a version of it, which you are reading right now.

  With all I and my fellow Krugman Truth Squad members did to expose Krugman’s lies, and with a new columnist corrections policy that imposes a formal reputational cost on Krugman if he keeps on lying, it seems that Krugman has nothing to say—at least nothing that has the power to influence the national debate, as his columns once did. It turns out that it’s a lot harder to convince people when you have to stick to the truth.

  Need proof? Just think how Krugman must have felt in late 2010, when the 2003 Bush tax cuts he did so much to oppose—including embroiling himself in the humiliating divide-by-10 contretemps—were extended by a Democratic president and a Democratic Congress. Impotence just doesn’t get any more humiliating than that.

  At the same time, Krugman has become a victim of his own success. His vicious cycle of ever looser and ever coarser discourse has reached a dead end, and left him facing a new generation of competitors as loose and as coarse as he is. He just doesn’t stand out anymore.

  There are other victims. It may be that Krugman’s vicious cycle has reached a dead end in a tragically literal sense, with the January 2010 shootings in Tucson of a congresswoman and several bystanders. There’s never been any evidence that the shooting was politically motivated, but before the blood was dry Krugman had published a post on his Times blog instantly leaping to the conclusion that “odds are that it was,” and asserting that she had been targeted because “she’s a Democrat who survived what was otherwise a GOP sweep in Arizona.” He went on to blame “the rhetoric of Beck, Limbaugh, etc.” for creating a “climate of hate.”81

  Barack Obama disagrees. When he spoke in Tucson the following week, Krugman no doubt felt personally dressed down when the president said, emphatically, regarding whether the “lack of civility caused this tragedy,” that “It did not.”82

  But if it did, then by Krugman’s own theory of a “climate of hate,” this assassination attempt could be seen as the deadly fruit of seeds he himself had sown years before when he began to use the Times—America’s “newspaper of record”—as a platform for personal destruction of his enemies.

  Chapter 3

  The Leader

  John Allison as John Galt, the man who walked away after building America’s strongest bank

  “He turned and answered, ‘I will stop the motor of the world.’ Then he walked out. We never saw him again. We never heard what became of him. But years later, when we saw the lights going out one after another, in the great factories that had stood solid like mountains for generations . . . and the world was crumbling quietly, like a body when its spirit is gone—then we began to wonder and to ask questions about him. . . . You see, his name was John Galt.”

  —Atlas Shrugged

  Who is John Galt?

  Ayn Rand’s magnum opus Atlas Shrugged is set in a time of a growing economic, cultural, and political crisis. We hear over and over a slang expression adopted by people from all walks of life to capture their despair and resignation: “Who is John Galt?”

  It turns o
ut that John Galt is an actual person, and that he has deliberately fomented the crisis. He is a brilliant young scientist who conceived a breakthrough invention—a motor that could be driven without fuel, something of incalculable economic value that today would be called green technology. Yet he walks away from his invention, and his career.

  Galt’s abdication—his “mind on strike”—is triggered when the factory that employs him adopts a managerial model based on the Marxist maxim “From each according to his ability, to each according to his need.” He believes that this collectivist philosophy, which would punish the competent and reward the incompetent, is both immoral and a recipe for economic collapse. The only moral response is to refuse to participate in such immorality—which would have the side effect of hastening the collapse.

  But Galt takes his strike one big step further. He sets about persuading other men of ability to go on strike, too, giving up their work as industrialists, businessmen, financiers, teachers, artists, and doctors. He recruits them to his strike by explaining to them the fundamental moral basis of capitalism, and the inherent immorality of a culture that expropriates their talents, turning their own virtues against them.

  At the climax of the book, Galt takes to the radio, revealing himself to the world and explaining his strike and the philosophy behind it. Galt’s speech is the key reference documenting Rand’s philosophy of “Objectivism.”

  In November 2008, 30 days before his scheduled retirement, John Allison sat atop a black office tower in Winston-Salem, North Carolina, preparing to sign away his life’s work.

  He’d spent 37 years, his entire career, at BB&T (or, more formally, Branch Banking and Trust Company). When he arrived in 1971, it was an obscure farm bank with 250 employees and $250 million in assets. Allison became president in 1987 and chief executive in 1989, and by 2008 he was the longest-serving bank CEO in the United States. Under his leadership BB&T had grown into a bank holding company with 1,800 branches sprawling over 12 Southern states and Washington, D.C., among the top 10 banks in all but one of those markets. BB&T has 30,000 employees and over $150 billion in assets, making it the 12th largest U.S. bank.

  Now he was being forced to give substantial control of it to the U.S. government.

  And not because BB&T had failed, as so many other banks had in the terrifying banking crisis of 2008. No, BB&T was being punished because it had succeeded.

  BB&T had made no subprime mortgage loans. While other banks blew themselves up with high-fee negative amortization and “pick-a-payment” loans that supported a cancerous housing bubble, BB&T resisted temptation and wrote only conventional mortgages.

  Yet after Congress enacted the Troubled Asset Relief Program (TARP), banking regulators forced even healthy banks to take government money, that is, to accept the government as a shareholder. That meant committing to pay the government hundreds of millions in preferred dividends, and giving up valuable warrants so that the government could later purchase common stock at fire-sale prices. Adding insult to injury, Allison had to sign a waiver that allowed the government to unilaterally change the terms of his compensation from the company he’d served for 38 years.

  But he had no choice. BB&T was a strong bank, with more than enough capital and more than enough liquidity to see it through the crisis, and a strong loan portfolio. Yet his banking examiner from the federal government told him that the rules had suddenly changed.

  According to Allison, “They called us and said, ‘Okay, we’ve had these capital rules forever, and you guys got a lot more capital based on those rules. But we’ve decided we’re going to have some new capital rules. And based on these new capital rules, we don’t think you have enough capital. Now, we don’t know what the rules are, but we’re confident that if you don’t take the TARP money, you won’t have enough capital.’”1

  Allison knew that the bank examiner was just a messenger boy for his bosses in Washington, D.C., where the Federal Reserve under chairman Ben Bernanke was desperate to save a few insolvent megabanks, even if the entire banking system had to pay the bill do it.

  Allison says, “There were three large financial institutions in serious trouble in the capital markets.” Presumably he means Citigroup, Bank of America, and General Electric Credit. But Bernanke didn’t want to reveal to the public how weak these three really were—so all banks would be forced to take TARP money. “He felt like if he forced all the large banks, all the $100 billion banks and over, to participate, the market couldn’t figure it out. . . . It was a huge rip-off for healthy banks.”

  Allison signed. He had to. He had adamantly opposed TARP when it was being debated. He thought it was wrong. He thought it was unfair. He thought it was unnecessary. But he had to sign. A Southerner who often expresses himself in gracious understatement, Allison says, “To be forced to do that with 30 days left in your career, on something you were adamantly opposed to in the first place, was not much fun.”

  For Allison, it all had a certain sense of déjà vu. Specifically, as he puts it, “It is right out of Atlas Shrugged. I mean, it’s eerie. It is eerie. It is eerie.”

  And Allison should know. All his life he has been inspired by Atlas Shrugged and the other works of Ayn Rand. He explicitly created BB&T’s management philosophy on Randian principles of Objectivism, and for decades he has required all BB&T executives to read Atlas Shrugged.

  BB&T is the bank that Atlas built. Its success, and its durability in a crisis that destroyed so many other banks, is testimony to the real-world, real-money impact of Rand’s value system: purpose, reason, and self-esteem. The crisis itself is testimony to the real-world consequences of the philosophy of Rand’s villains—the looters, the power seekers, and the altruists.

  Like Rand’s greatest hero, John Galt, Allison chose to walk away from the looters’ world at the height of his powers. He started eyeing the exit after the 2002 passage of the Sarbanes-Oxley Act. He says, “That was kind of a precipitating event, where you were considered to be a criminal if you were in business, and that things were considered fraud that were just honest business mistakes. I mean just the whole tone changed—criminalization of honest business activity.”

  Retiring at a young and vigorous 58 years old amid a crumbling banking system, Allison has left behind the bank that Atlas built. Like Galt, he’s devoting himself no longer to business, but instead to evangelism for the morality of capitalism.

  Discovering Rand

  No one would have predicted that John Allison, born in Charlotte, North Carolina, and raised in a deeply religious family, would turn out to be an Ayn Rand devotee, and certainly not the real-world embodiment of Rand’s great hero. As with so many Rand-heads, the conversion happened in college.

  Allison was at the University of North Carolina, Chapel Hill, majoring in business administration. In his economics classes, he says, “even though my professors were largely left-wing, they actually pushed me to the right because I didn’t agree. Their ideas just didn’t make any sense. They weren’t my experience in life. So it’s funny: I think they intended to indoctrinate me to the left, and they ended up pushing me right.”

  Then, between his junior and senior year, he discovered Ayn Rand.

  Most people start with the fiction, The Fountainhead or Atlas Shrugged, seduced into Rand’s philosophy as they are swept away in the heady romanticism of these compelling stories and their mythic heroes. Not Allison. He started with Rand’s nonfiction masterpiece, Capitalism: The Unknown Ideal (published in 1966), stumbling upon it by chance in a bookstore.

  Allison says, “I was really impressed with particularly the first part of the book where she talks about the principles underlying capitalism.” Though Rand’s philosophy was aggressively secular, it appealed to Allison’s religious instincts. “I was raised in a very religious background which put a premium on values, and derived in a religious way, so I guess in a certain sense I’ve always been interested in the issue of principles—how you really should live your life.”


  He was hooked. He says, “Then from that I read Atlas Shrugged, read The Fountainhead, and then basically read everything I could get of her materials and every book she recommended.”

  After getting his master’s degree in management from Duke University, in 1971 Allison went to work for BB&T in the small farm bank’s loan administration group. Amid a group of stodgy older executives, Allison’s boss was a bright young go-getter who put Allison into the bank’s management development program. But that consisted pretty much of just slumming on the teller line for a while to see how the other half lived. After 10 months, Allison’s bright young boss figured out that Allison himself was a bright young man, and challenged him to create a real management development program.

  It turned out that Allison and his boss were both Rand fans. So the first thing they did in the new program was give everyone a copy of Atlas Shrugged. Allison remembers, “We got a lot of the future leadership to read Atlas. . . . It wasn’t officially required, but it was officially encouraged. . . . A lot of the best people did read it.”

  By 1973 four other bright young men had showed up at BB&T, and joined Allison in what would turn out to be the leadership nucleus of a Rand-based build-out of the sleepy farm bank into a colossus. They all read Atlas and they all were transformed. Allison says, “Anybody that reads Atlas Shrugged—that comes with a general business background in particular—it does change their worldview. They may say, ‘Well, I reject this aspect of Rand,’ or ‘I reject that aspect,’ but . . . the particular thing I think almost everybody gets out of it is the destructive role of government.”