Imagining ‘It’s a Wonderful Life, 2017’

 The holidays would not be the same without watching “It’s a Wonderful Life” and feeling every moment of struggle as George Bailey discovers that riches are not measured in dollars and cents. The film highlights the importance of family and love and celebrates civic and familial virtues.

Those of you who have seen the classic 1946 movie will remember one of its most famous scenes. George Bailey runs a small community bank with a mortgage business. One day, as he is headed out on his honeymoon, George is confronted by a group of depositors wanting to withdraw their savings because they are nervous about the bank’s solvency.

He explains that he doesn’t keep their savings lying in the bank safe. Instead, he has invested most of the money in affordable mortgages on the homes they own.

Sam’s money is in Chuck’s house. And Chuck’s money is in Dick’s house. And Dick’s money is in Sam’s house…

So it goes, with customers able to own their homes instead of having to pay rent to Old Man Potter, the predatory capitalist villain who owns the leading commercial bank in Bedford Falls – and most everything else in town.

In George Bailey’s day, a lending institution would keep a home mortgage on its books until it was fully paid off. The default risk was held by the bank, which sought to protect itself by granting mortgages only to clearly creditworthy borrowers with stable incomes sufficient to meet monthly mortgage payments and the ability to invest a significant portion of their own money in a down payment.

In a modern “It’s a Wonderful Life”, director Frank Capra could have contributed to an understanding of the financial crisis by turning George Bailey into a rapacious mortgage broker willing to do almost anything to maximize his mortgage origination volume.

A modern-day Capra would present a series of fast-paced sequences showing how George converted low-income homebuyers with non-existent credit into qualified sub-prime mortgage applicants.

No money for a down payment? “Not a problem,” George reassures the applicant. “You can take out a small first mortgage to cover the down payment, then a larger second mortgage to cover the rest of the purchase price.”

“But won’t that mean high monthly payments?”

“Not with adjustable rate mortgages that charge interest only for the first two years.”

“But after two years, when the much higher monthly payments kick in …?”

“Nothing to worry about. The way house prices are skyrocketing, you’ll be able to refinance with a single bigger mortgage to pay off both original mortgages, and give yourself enough extra cash to cover the monthly payments for several years.”

“And after that?”

“As long as home prices keep going up, you’ll be building equity in your house, which you can tap for ready cash by refinancing yet again.”

“So the house keeps paying for itself?”

“That’s what it amounts to.”

“Sounds great. What’s next?”

“Let’s fill out the mortgage applications together right here on my PC. I know how to word the answers to give banks what they’re looking for.”

“Do I need documentation for my income?”

“Nah. It’s all streamlined these days. The banks run your applications against their crazy computer models to see if you qualify for the mortgage. And you will. It’s just a formality.”

“A formality?”

“Banks are mainly interested in generating new mortgages to sell to Wall Street. Each mortgage they sell increases their servicing fee volume, so they approve as many applicants as possible.”

Just then, George gets a phone call from Old Man Potter, George’s hungriest lender for the sub-prime mortgages he sells to his Wall Street buddies.

“Hi Mr. Potter,” George says, leaning back in his desk chair with a big smile. “Just going to call you … No, a first and second mortgage this time … Yeah, I thought you’d like that … Great. I’ll see you at the club around six.

A wonderful life indeed.

Originally Published: Dec 9, 2017

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