Wait a minute - Was George Bailey a Sub-Prime Lender???

Portofilo Magazine posits an interesting question - was George Bailey of "It's A Wonderful LIfe" a sub-prime lender? Was Mr. Potter really the good guy, trying to prevent the mortgage crisis?

One example Portofilo cites makes me think maybe, just maybe, Potter knew something..

POTTER

Peter Bailey was not a businessman. That's what killed him. Oh, I don't mean any disrespect to him, God rest his soul. He was a man of high ideals, so-called, but ideals without common sense can ruin this town. (Picking up papers from table.) Now, you take this loan here to Ernie Bishop...You know, that fellow that sits around all day on his brains in his taxi. You know...I happen to know the bank turned down this loan, but he comes here and we're building him a house worth five thousand dollars. Why?

GEORGE

Well, I handled that, Mr. Potter. You have all the papers there. His salary, insurance. I can personally vouch for his character.

POTTER

(Sarcastically) A friend of yours?

GEORGE

Yes, sir.

POTTER

You see, if you shoot pool with some employee here, you can come and borrow money. What does that get us? A discontented, lazy rabble instead of a thrifty working class. And all because a few starry-eyed dreamers like Peter Bailey stir them up and fill their heads with a lot of impossible ideas. Now, I say...

O.K., so Potter wasn't right. Affordable housing helped create the middle class, and one could even argue that the G.I. Bill after WWII helped create the modern suburb.

Still, making loans to those that can't afford them is never sound policy.

Banking Lessons and Bedford Falls

I used to teach U.S. History and Consumer Economics before I switched to World History. And when we came to the topic of banks and the FDIC and why banks fail, I'd usually pull out a copy of "It's a Wonderful Life" and show the bank run scene. It's as good an explanation as any I've seen for the mess we're in.

"You're thinking of this place all wrong. As if I had the money back in a safe. The money's not here. Your money's in Joe's house...right next to yours. And in the Kennedy house, and Mrs. Macklin's house, and a hundred others. Why, you're lending them the money to build, and then, they're going to pay it back to you as best they can. Now what are you going to do? Foreclose on them?...Now wait...now listen...now listen to me. I beg of you not to do this thing. If Potter gets hold of this Building and Loan there'll never be another decent house built in this town. He's already got charge of the bank. He's got the bus line. He's got the department stores. And now he's after us. Why? Well, it's very simple. Because we're cutting in on his business, that's why. And because he wants to keep you living in his slums and paying the kind of rent he decides. Joe, you lived in one of those Potter houses, didn't you? Well, have you forgotten? Have you forgotten what he charged you for that broken-down shack? Here, Ed. You know, you remember last year when things weren't going so well, and you couldn't make your payments? You didn't lose your house, did you? Do you think Potter would have let you keep it? Can't you understand what's happening here? Don't you see what's happening? Potter isn't selling. Potter's buying! And why? Because we're panicky and he's not. That's why. He's picking up some bargains. Now, we can get through this thing all right. We've got to stick together, though. We've got to have faith in each other."

Of course, now the problem is, the money didn't just go into Joe's house. Joe's mortgage got bundled with a bunch of other mortgages, some good, some bad. And then insurance companies sold insurance on those bundled mortgages. And when a portion of the mortgages went bad, and the investors who bought the insurance went to collect, the financial markets went down, and AIG and the rest starting going hat in hand to Congress.

If we had been just putting money's in Joe's house, well, if Joe defaulted on his mortgage, the bank could handle that. They always have. Even in the 1970s energy crisis, the 21% interest rates of the late 1970s, and even the recession in the early 1980s.

Now? Now, we're handing out more than $7 TRILLION to companies, and the only one's we're asking for a plan or any sort of accountability is the auto industry. Because it's all the fault of minorities getting mortgages and auto workers making $73 an hour. Yup, that's the problem.

January 20 can't get here fast enough.