BB&T Corp. (BBT) Chairman John Allison said his bank, one of the few major recipients of government capital to boost lending in the fourth quarter, was having difficulty eking out new loan business from its existing clients.

Allison said the bank was grabbing business from weaker competitors, as the better borrowers have become extremely cautious.

"The truth is we're mostly moving market share, because a number of our competitors are under pretty severe duress, so we're picking up clients," he told Dow Jones Newswires Thursday.

"It's not that we wouldn't lend to our own clients," he added. "They're just not borrowing."

He said he was extremely worried about the unemployment rate climbing above 10%, a level that he said would be economically destructive "for almost all businesses."

Allison, who just stepped down as BB&T's chief executive at the end of last year, made the comments after a speech in Washington, in which he argued the government, not the private sector, is to blame for the financial crisis. He gave the speech at an event organized by the Ayn Rand Center for Individual Rights.

Allison also took aim at the financial rescue, saying the government efforts to shore up the banking industry had only spread panic among consumers. Had the Fed, the Treasury and the Bush White House not asked for $700 billion to bail out the financial system, "real estate markets would have been recovering right now in my opinion," he contended. "People got scared."

BB&T, based in Winston-Salem, N.C., got $3.13 billion of capital from the Troubled Asset Relief Program, or TARP. The bank has lent nearly $1.6 billion of the money. It was one of only three of the major bank recipients of TARP funds to boost lending during the fourth quarter.

Though he allowed that there have been benefits from the government cash, Allison said that BB&T unwilling agreed to the infusion because it was prodded hard by its regulators. The bank was also moved to apply for the cash for fear of being placed at a competitive disadvantage, he said.

Allison criticized TARP for shoring up a lot of shaky banks. He also argued the nine national banks, including Citigroup (C) and Bank of America (BAC), that were forced to accept government capital infusions last fall now enjoyed a long-term funding advantage because they had been essentially branded "too big to fail" by the government.

Allison proposed a generous residential real estate tax credit - on the order of 10% and applied only to purchases of existing homes - as the cure for the financial crisis.

As for its cause, Allison listed a series of culprits, including the Federal Reserve, the Federal Deposit Insurance Corp., fair value accounting and U.S. housing policy as directed through Fannie Mae (FNM) and Freddie Mac (FRE).

Washington politicians espoused an almost "religious belief in affordable housing" that caused a massive over-investment in housing, while federal deposit insurance spawned a lack of market discipline by making it easy for banks to raise funds.

However, Allison reserved some blame for the rating agencies and allowed that credit default swaps were "misused" by some market participants.

-Jessica Holzer, Dow Jones Newswires; 202-862-9228; jessica.holzer@dowjones.com

Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary. You can use this link on the day this article is published and the following day.