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Life Is Earnest

No wings for this angel, but Mr. Potter was right.

Dec 26, 2011, Vol. 17, No. 15 • By MEGHAN CLYNE
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Christmas is nigh, and so are the nonstop showings of Frank Capra’s beloved 1946 classic, It’s a Wonderful Life. As they do every year, millions of Americans will take in the tale of small-town mortgagee George Bailey—who, with a little help from his guardian angel, reminds us that true success is measured by the love of family and friends.

Part of what makes It’s a Wonderful Life so affecting is that the endearing Bailey (portrayed by the equally endearing Jimmy Stewart) has a truly sinister foil: Henry F. Potter, played brilliantly by Lionel Barrymore. Potter, a proto-bankster, is introduced by the angel Joseph as “the richest and meanest man in the county.” His ruthlessness and avarice are the antitheses of everything Bailey—and decent society—stand for. And Old Man Potter has certainly incurred society’s loathing: In 2003, the American Film Institute ranked Potter Number Six among all the villains of American cinema.

But while Americans hate Potter, we also love visionaries. And Potter is nothing if not a prescient genius. So this year, might the old miser not deserve another look?

Consider the foresight Potter shows in the field of home financing. George Bailey’s father, Peter, was the founder of the Bailey Building and Loan Association; after his death, Potter—who is on the institution’s board—questions the wisdom of its approach to lending. Potter explains that Peter Bailey

was a man of high ideals, so-called, but ideals without common sense can ruin this town. 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?

A good question. Potter understands that romantic notions about the moral virtues of home ownership are dangerous when decoupled from economic reality. George Bailey slams Potter for saying that people have “to wait and save their money before they even ought to think of a decent home.” But if there had been fewer George Baileys among federal policymakers, and more Henry Potters, the subprime crisis never would have happened.

Of course, that crisis did happen. And one suspects Potter would have known how to deal with it. Earlier in the film, he spars with Peter Bailey, who doesn’t have $5,000 he owes Potter:

Potter: Have you put any real pressure on those people of yours to pay those mortgages?

Bailey: Times are bad, Mr. Potter. A lot of these people are out of work.

Potter: Then foreclose!

Bailey: I can’t do that. These families have children.

Potter: They’re not my children.

Bailey: But they’re somebody’s children.

Potter: Are you running a business or a charity ward?

Potter grasps that artificially keeping delinquent borrowers afloat means unfairly passing the bill on to someone else. One imagines he would have been apoplectic at the notion of cramdown legislation, or at the Obama administration’s “Making Home Affordable” program to prop up underwater homeowners. (These schemes, incidentally, are financed by the charitable institutions known as “taxpayers” and “consumers.”) In the aftermath of the subprime crisis, Potter would surely have let the real-estate market hit bottom, allowing for inventory to be cleared and an economic rebound to begin more swiftly—with beneficial implications for the very working poor Peter Bailey wants to help.

Potter is generally smart about responding to crises. When a run on the bank leads to a credit freeze in Bedford Falls, it’s Potter who steps in to quell the panic: 

George, I’m going all out to help in this crisis. I’ve just guaranteed the bank sufficient funds to meet their needs. They’ll close up for a week, and then reopen. .  .  . I may lose a fortune, but I’m willing to guarantee your people, too. Just tell them to bring their shares over here and I will pay them fifty cents on the dollar.

One firm losing a fortune by taking on another firm’s toxic assets, all to preserve the stability of the financial system? Potter’s proposal wasn’t a shotgun merger forced by the Treasury Department; but one imagines that Bank of America and Merrill Lynch would still recognize the basic concept.

Potter makes other attempts to fold the Building and Loan into his operations. At the board meeting after Peter Bailey’s death, Potter claims the institution is not necessary and moves to dissolve it. Later he takes a more subtle approach, attempting to lure George to work for him (and thereby abandon the Building and Loan). As early as the 1930s, Potter knows that competition among banks is a passing fad. He also knows who really holds the keys to prosperity in the financial kingdom. During a meeting with his rent collector, Potter’s secretary informs him, “Congressman Blatz is here to see you.”

In short, Potter was ahead of two important curves: bank consolidation and crony capitalism. The old man anticipated Dodd-Frank before it was a gleam in the New England lawmakers’ eyes.

Then there’s the film’s climactic dilemma. George’s absent-minded Uncle Billy (Thomas Mitchell) is at the bank to deposit $8,000 in Building and Loan cash; while taunting Potter, Billy folds the cash into his newspaper, shoves it in Potter’s face, and merrily bumbles off to make his deposit. Minutes later, Billy realizes he’s missing the money, and Potter opens the newspaper to discover what’s inside.

One can argue that Potter should have returned the money. But Potter knows that financial firms can’t just go around losing their customers’ cash. As a stockholder and member of the Building and Loan board, he cannot tolerate the Baileys being so reckless with investors’ deposits. When George Bailey comes begging to Potter for $8,000, Potter sees a teachable moment, contacting the state bank examiner and asking for authorities to swear out a warrant for George’s arrest. 

In the end, of course, George’s friends and family bail him out, and not another thought is given to Bailey’s negligence. Even the bank examiner kicks in a contribution. Only Potter stands for responsibility and the rule of law.

And here, too, Potter is ahead of his time. Bailey’s predicament calls to mind former New Jersey senator and governor Jon Corzine, whose bankrupt brokerage firm, MF Global, is “missing” a vast sum of customer money—estimated at $1.2 billion (in Bernanke dollars, the rough equivalent of Bailey’s $8,000). Do most Americans want to see Corzine’s friends in finance and politics get him off the hook? Of course not. We want to call in Potter.

The truth is, whether we want to see fairness, economic good sense, and the rule of law triumph over fuzzy ideology, or whether we welcome (and participate in) the new rule by mega-bankers and their Washington allies, Henry F. Potter blazed a trail for all of us. George Bailey may be a model of some wonderful virtues, but in modern-day America, We Are All Potters Now.

Meghan Clyne is managing editor of National Affairs

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