Frank Capra’s 1946 masterpiece is a remarkable film for many reasons – it was nominated for five Oscars – but it remains relevant today framing political and social issues that we face seven decades later. Affordable housing, immigration, and social pathologies are intertwined with a brilliant tale of despair and redemption.
The movie celebrates a common man, George Bailey, and a quintessentially American town – Bedford Falls, New York. It was filmed at a time when the Greatest Generation had so much to celebrate having lived through the end of the Depression and World War II. It even includes a charming if awkward love story. All of this is overlaid on a paean to home ownership and mortgage lending – seldom the subject of movies.
The plot is complex but flows quickly hinging on the fate of George Bailey, the reluctant head of Bailey Savings and Loan, as he contemplates suicide due to the imminent failure of his bank due to the carelessness of his Uncle Billy who misplaces critical funds. In an “OK Boomer” moment, I assumed everyone in America has watched this film but I am told that is not the case. Please remedy this situation if you have somehow missed it.
Capra, a man of towering ego and creativity, rose from a poor immigrant family to direct a number of great films in the depression that included Mr. Smith Goes to Washington. Despite the populist nature of his work, Capra was a conservative Republican and opposed FDR.
He draws a number of sharp contrasts that are embodied in George Bailey versus Henry Potter, “The richest and meanest man in town”. The contrasts include:
- Bailey Savings and Loan which efficiently recycles deposits into mortgages for working people and new immigrants versus Potter’s bank that forecloses on them
- Bailey Park, a development of modest, affordable homes and a gateway to the middle class versus Potter’s rent-gouging slums
- Bailey’s desire to help new immigrants such as the Martini family versus Potter’s disparagement of them with an ethnic slur
- George Bailey, as the loving husband and father versus George Bailey, as the angry drunk who contemplates suicide.
The dark side of George Bailey – so emotionally played by Jimmy Stewart – highlights the ultimate contrast in which Bedford Falls becomes Pottersville if Bailey had been granted his wish to have never been born. In this alternate universe, the town sinks into a locus for corruption, alcohol addiction, prostitution and homelessness. All is saved, of course, when Bailey rescinds his wish and embraces his mundane but purposeful existence. And, in contrast to Potter’s taunt, is bailed out by the community of people he helped.
The movie speaks to this writer on a number of levels. The first is that the American middle class has been shrinking for decades, leaving many communities approaching Pottersville. Forty percent of households do not have $400 in the bank to deal with emergencies. Deaths of despair continue to claim many people in their prime working years. Affordable housing has disappeared in major American cities where median home prices approach or exceed seven figures. Finally, some economists advocate that many families should avoid home ownership so they can chase job opportunities anywhere in the country, thus becoming a permanent class of migrant laborers in the Gig economy.
The fragility of our industry is also a concern. The Bailey Savings and Loan model of funding mortgages through deposits is largely gone, supplanted in the 1980’s by securitization which permits global sourcing of funds at low fixed rates for American home-buyers. As demonstrated, it all works fine until it doesn’t, or didn’t a decade ago. The complex value chain that created the toxic mortgages that blew a trillion dollar hole in the global economy was remarkably easy to corrupt. It gave way to a number of small erosions that, in aggregate, permitted massive greed on a scale that Henry Potter could only dream of.
In the lead-up to the crash in 2007, I had the opportunity to talk with many executives and thought leaders in the industry and virtually all had a sense of being on thin ice. We all know the story: bad practices that had proven disastrous in the past had been fully revived and, worse, stacked on top of each other resulting in the well known litany of no’s: no docs, no job, no income, no assets, no credit standards and no money down. These bad loans were then subjected to financial alchemy creating toxic securities marketed as worthy investments. When the crash came, it was far worse than anyone imagined, creating a catastrophe for millions of families and punishing the honest George Baileys in the industry almost as badly as the Henry Potters.
All of this is well known and well documented in the more than thirty books, but it is also a reminder to appeal to our better angels – looking at you Clarence – to be vigilant about protecting the values that Frank Capra espoused: home ownership, community, affordability and decent lending.
Our industry should also stand for extending access to the middle class for people who are born or immigrate into our lowest economic ranks. Today we have less social mobility than most European countries, meaning that, unlike previous generations in America, if you are born lower class you will die there. George Bailey provided a very useful rung on the ladder to the American dream for the families of Bedford Falls and thereby sacrificed the opportunity to join Henry Potter to run his greedy and gouging operations. This is a lesson that is just as relevant today.
Bill Kelvie has had a long and varied technology career as a programmer, strategist, CIO of Fannie Mae, and CEO and founder of Overture Technologies. He currently is an advisor to technology start-ups and publishes a blog on technology disruption at AWWEW.com.