Credit due to a wonderful life that
was By Julian Delasantellis
On December 14, television viewers in
North America were privileged to be able to watch
the finest elaboration and elucidation ever
produced on America's burgeoning subprime mortgage
crisis.
I'm not talking about something
deathly dull and ponderous on the nation's Public
Broadcasting System ( PBS), something so
agonizingly dry that you have to keep watering
down your holiday tree to prevent it from bursting
into flame while the show is on. And I'm not
talking about something on the new Fox Business
Network, whereby the curvaceous female on-air
talent employ
their bouncing, unharnessed
mammaries to illustrate the ups and downs of
American real estate prices.
No, what I'm
talking about is one of the two (the other will be
on Christmas Eve) annual NBC network showings of
the 1946 Frank Capra holiday movie classic,
It's a Wonderful Life. (The movie is also
readily available on DVD.)
Assuming that
you have lived in a cave for most of the second
half of the 20th century, and so thus have not
seen one of American popular culture's most worthy
testaments, here is a brief synopsis.
It
is mid-century, just after the American victory in
the World War ll, that an average man, George
Bailey (Jimmy Stewart) in a classic fictional
American small town, Bedford Falls, sits alone in
a bar on Christmas Eve, depressed, despondent,
thinking of suicide.
All his life, Bailey
has sacrificed his wants, his dreams and his
hopes, so that others could follow theirs. He runs
a pitifully small and undercapitalized real estate
bank, the Bailey Building and Loan, that he
inherited on his father's death, when he would
much rather have attended college to study
engineering, to build great structures in far off
lands. He took over the bank only due to the fact
that had he not, the bank would have closed,
leaving the small little town firmly in the
clutches of the bullying local plutocrat, Henry
Potter (Lionel Barrymore).
But things are
not going well for Bailey. Through an oversight by
his continually befuddled Uncle Billy, (Thomas
Mitchell, displaying symptoms of what today we
would call pre-Alzheimer's) the Bailey Building
and Loan is short in its accounts. The bank
examiner (Imagine that! Not that long ago, America
actually had government officials that actively
audited the financial soundness of housing finance
banks. Incredible!) is hunting him down, as is the
local sheriff with George's name on an arrest
warrant.
Bailey, a man who has spent his
life furthering all others' interests but his own,
has only one real asset to his name, a life
insurance policy. He leaves the bar to take his
own life by jumping into an icy river, feeling
that is the only way he can now serve his poor
family.
Sent down from the heavens, a
wayward angel in human form named Clarence (Henry
Travers) saves George by jumping into the river
first. George follows suit, now determined to save
Clarence. Clarence talks George out of suicide,
but he is still dejected, regretting the fact that
he was ever even born.
Through his
heavenly powers, Clarence shows what would have
happened had George never been born. As a boy,
George saved the life of his little brother Harry
(Todd Karns), who grows up and goes on to save
many soldiers by shooting down a Japanese
kamikaze. In the world where George had never been
born, all the soldiers are killed. George's loyal
and loving wife Mary (Donna Reed ) never marries,
she spends her life as a spinster librarian.
Worst of all is what happens to poor,
bucolic Bedford Falls. Without the positive
influence of the Bailey Building and Loan (which
shutters its doors on the death of George's
father) the town falls under the influence of the
malevolent Potter; the town's name is even
changed-to Pottersville.
Pottersville is a
grim, hard, merciless place. Instead of the Bailey
Building and Loan providing the mortgage finance
to seed a thriving middle class, Pottersville is
sharply socially stratified into rich and poor,
the poor living unhappy, broken lives in unheated
tarpaper shacks outside of town. Instead of
Bedford Fall's Main Street composed of happy,
family friendly department stores and pharmacies
with ice cream counters, Pottersville's Main
Street features bars, rooming houses, and "dance
parlors" which the viewers of the time must
instantly have recognized as being fronts for an
even more unsavory commerce between men and women.
George has learned his lesson. The world
is a better place from his living presence in it.
He returns home, ready to face his fate, but,
instead finds that loving Mary has rallied friends
and the town on George's behalf. All charges are
dropped. The crown rejoices in a raucous chorus of
Hark, the Herald Angels Sing. It's a
wonderful life.
At which point, a few
drops wet my cheeks.
A few years ago, my
core appreciation for the movie was that it was
God's gift to economics teachers doing the
course's banking and finance lecture.
Rather than drone on and on about the bank
runs of the Great Depression, I could point to the
one that occurs at the Bailey Building and Loan,
on George and Mary's wedding day, as how an actual
bank looked and felt. George's passionate plea to
the panicked mob for them not to withdraw their
money from the bank - "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." - is, of
course, the core process of old-fashioned housing
finance.
The fact that the depositors were
asking to withdraw their funds in the form of
their "shares" in the bank illustrated the
difference between standard, shareholder/equity
capitalized banks and the now increasingly rare
"mutual" banks, savings and loans, that once
provided the vast majority of housing finance in
the United States.
But, as time has
passed, I've come to see It's a Wonderful
Life as much more than just a teaching tool,
much more than just another glorified academic
Powerpoint. At a particular point in time, the
late 1980s and early 1990s, fate intervened to
intertwine the destinies of the movie and the
country in order to illustrate an especially
poignant point about life in America.
In
accordance with the rules and standards of
intellectual property in the capitalist world, the
studio that produced It's a Wonderful Life,
RKO, along with Capra's Liberty Films, "owned" the
movie. The rules state that, even if you manage to
get your hands on an actual print of the film,
you're forbidden to show it for commercial
purposes without an accompanying royalty payment
to RKO-Liberty, or to the various media
conglomerates that through the years bought out
RKO, Liberty Films and their successors-Paramount,
UM&M, and finally the National Telefilm
Associates (NTA).
Copyrights can be
renewed virtually indefinitely, but the copyright
owner has to file with the courts, to take a
positive action, to do so.
In 1974, NTA
failed to renew its copyright on It's a
Wonderful Life. Nobody really knows why; some
say it was a clerical error, some say that, in the
social upheaval that was America in the early
1970s, the studio didn't really see that much
value in this old black and white relic of a
bygone time. In February 1975, the movie entered
the public domain, free for anybody, especially
television broadcast, and later cable, stations,
to show it as often as they wanted.
At
first, like a thief gradually coming to realize
that all the doors to a hotel's rooms were open,
nobody even noticed. Local PBS stations were the
first to show it; they were always open to free
programming they could use as fundraising
vehicles.
But as time went on, and
Americans looked wistfully back to Frank Capra's
1946 to see a longed for, better, much simpler
time, the movie took root in America's collective
consciousness. By the late 1980s, there were
dozens, hundreds of yearly showings of the film on
television, especially around the holidays
(although I very well remember that Fourth of July
I spent watching the movie in a sweltering Houston
hotel room whose air-conditioning had broken).
There was another factor that made the
movie's popularity in the late 80s and early 90s
particularly propitious. That was also the time of
what came to be known as the Savings and Loans
crisis, the $200 billion subprime-like housing
finance fiasco of the day.
In the early
80s, the deregulatory/free market ethic of the
Ronald Reagan era engineered the deregulation of
America's Savings and Loans industry, the
dedicated housing finance banks that previously
had been limited to mortgage and housing lending.
Under deregulation, and operating under
the moral hazard shield of Federal deposit
insurance, the S&Ls ran wild and free during
the period, lending to everything and anything
(except housing) that they thought would generate
high returns.
Of course, the experiment
ended very badly. Far too many of the new loans
made by the S&Ls were essentially worthless;
they were never paid back. About 1,000 S&Ls
failed nationwide; by the mid-1990s the industry
had essentially ceased to exist. The economic and
financial dislocation caused by the crisis was the
core factor in the recession of the early 1990s;
the recession that would ultimately drive George H
W Bush out of office in 1992.
Many
commentators at the time noted the eviscerating
irony of the S&L crisis occurring
contemporaneous to the wild popularity of It's
a Wonderful Life.
What a contrast
there was seen to be between the selfless,
generous, compassionate housing finance bankers of
George Bailey's ilk, and the modern corrupt,
dishonest, always self-serving and frequently
criminal modern variant. (Prominent among these
was Charles Keating, the moralistic
anti-pornography crusader whose looting of the
Phoenix, Arizona S&L Lincoln Savings
necessitated a $3 billion federal bailout.)
Surely, ethically, spiritually, the country had
somewhere along the way lost its moral bearings,
and had to find its way back to retrieve them.
Bill Clinton felt the country's pain. So
long, George H W Bush.
By the early 1990s,
Republic Pictures had assumed control of NTA and
knew it had to attempt to regain the ownership
interest in the movie's copyright that NTA had let
lapse 20 years earlier. Through a clever legal
artifice, it did.
Republic successfully
argued that, although the movie itself was indeed
now in the public domain, the movie soundtrack and
underlying story on which the movie was based,
Philip Van Doren Stern's The Greatest Gift,
were not. Thus, now anyone can still show the
movie, just as long as you don't play the
soundtrack or allow the movie to tell the story.
In 1994, Republic, by then part of Spelling
Entertainment, licensed the legal broadcast rights
to NBC, but for only two showings a year. Usually,
NBC uses the advertising spots within the showings
to promote its own holiday specials, maybe like
The Britney Spears Old Fashioned Traditional
Holiday Special, complete with friends,
family, social workers and court ordered monitors.
Ever so slowly, the movie is seeping out
of the canon of American popular culture. Since
the movie is now shown so infrequently, it doesn't
work nearly so well as a teaching tool with my
younger students, those in their late teens, as it
does with my students in their late 20s and 30s.
Now here we are, late in the first decade
of the 21st century. Another housing finance
crisis is on us, the subprimes; estimates are
calling for it to eventually cost the economy far
more than did the S&Ls.
The internal
dynamics of the two crises are different, but they
do share a common causation. Both have been caused
by the very un-George Bailey-like notion that
housing finance's true rewards lie not in the
people that it puts into homes, into the stable
middle class communities that it can create, but
in the riches it can generate for the housing
financiers themselves. Bailey may have been
content with a drafty old house and a rickety old
Model-T car; for his modern equivalent, a Beverly
Hills mansion and a shiny red Testarossa will do
much more nicely, thank you very much.
More importantly, the contrast between the
movie and reality illustrates another deep
contradiction in the American character.
Americans keep telling pollsters, and, for
that matter, anybody else who will listen, that
they admire people like Bailey and that they want
to live in places like Bedford Falls - strong,
stable middle-class yet not ostentatious
heterogeneous communities, where there is at least
some small measure of mixing of ethnicities,
lifestyles and occupations.
The truth is
far different. In reality, American society
continues to be an ever more dizzying race towards
the far away summit of the class and status
mountain, up one level, to the next, and then the
next higher after that, throughout the entire
duration of an American's working life.
The purveyors of subprime mortgages knew
this. They knew that the nature of American
society meant that there will always be millions
of Americans who will hunger for the extra fillip
in social status that a bigger house, in a more
exclusive location, would bring them. And if there
was a minor detail in that they couldn't really
afford their champagne wishes and caviar dreams?
Hey, we've got a thing called subprime loans!
Lots of press ink and Internet electrons
are devoted to the recent decline in real estate
sales prices. More should be devoted to the
simultaneous phenomenon of declining real estate
sales volumes, down, depending on region, by
between 10 and 15% from last year.
This is
not due to the fact that lots of people have
decided that the local Little League baseball team
is so good that they want to hang around and watch
it for another year. It's not because the local
church choir has finally got its harmonies down
just right, either.
It's because of the
fact that the subprime crisis has now derailed
much of the great status-advancement train that
Americans ride on the way to a higher-class
station. With real estate prices no longer rising,
it's not so easy to trade up residences in terms
of status and community. They're stuck in their
little Bedford Falls for the duration. Publicly,
they may say that's what they want. In their
hearts, the prospect fills them with horror.
Would increased broadcasts of It's a
Wonderful Life, as in the late 80s and early
90s, have staved off our current doleful
predicament, have prevented the subprime crisis?
Probably not. The greed and desire for status
advancement lies too deeply intertwined in the
American character.
Still, I would have
preferred that the much more frequent broadcast
schedules of the recent past had continued. They
could have represented a form of Greek chorus, a
collective voice of conscience, for American
society, warning of what must inevitably be
sacrificed in the drive for ever greater wealth,
luxury and status. From what we have learned
about the subprime crisis in the last year,
American housing finance is certainly no longer a
matter of "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". Instead,
it's in belly-up hedge funds run by Bear Stearns,
super-leveraged structured investment vehicles
(SIVs) that big banks such as Citigroup sold and
now want to walk away from, Northern Rock in
England, the city finances in Narvik, Norway, and
probably thousands of other unlikely places it
will soon be our misfortune to discover.
That's why you should watch It's a
Wonderful Life. It's not that it says much of
anything about the today's time, the era in which
the subprime crisis exists. It's just that it says
so much about the time in which that crisis didn't
exist.
Julian Delasantellis is a
management consultant, private investor and
educator in international business in the US state
of Washington. He can be reached at
juliandelasantellis@yahoo.com.
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