Friday, October 10, 2008

The Long Run

It's a Wonderful Life is a wonderful movie. It's one of my favorites. One of its scenes is quite appropriate for these times, the one in which there is a run on the building and loan owned by the movie's main character, George Bailey (played by one of my favorite actors, Jimmy Stewart).

A building and loan is something I don't think you see anymore. It was similar to the more recent savings and loans that also went the way of the dinosaurs. Their purpose was basically to take in savings account money from depositors and turn around and lend that same money out for loans to build or buy a house.

If you could manage to take in enough interest income to cover your overhead expenses like rent, salaries, etc., and cover the interest paid out on your depositor's savings accounts, whatever was left was your profit. Nothing fancy, nothing glamorous, just slow and steady won the prize.

That's the kind of financial institution George Bailey's Building and Loan was in the movie. Let's take the bank run scene from that movie and do a remake, bringing it up to modern times (if you aren't familiar with the original scene, click on the YouTube video at the bottom).

Briefly recapping the original, George and his new bride Mary are headed for their honeymoon when they see the run on the bank. Despite Mary's protests, George gets out of the cab and runs to his building and loan to placate his panicky customers. When they demand that he close out their accounts and give them the money they have on deposit, George explains to them that the money isn't sitting in a safe in the back, it's been loaned out to their neighbors to enable them to build and buy their houses. The money comes back when the loan payments are made. That's the synergy of the operations.

Nevertheless the customers still demand their money, at which time Mary offers to cover their demands with $2,000 that she and George have saved for their honeymoon. George tells his customers this money isn't from their accounts, it's a personal loan from him and to please ask for only what they need to tide them over until more funds become available. They don't even have to sign anything; their word to repay is good enough.

Okay, now let's cut out the corny, sappy, unbelievable stuff and make it more realistic, based on the way things really are today:

Customers: We want our money!!

George: I don't have your money. You seem to think it's in a safe in the back somewhere. Why, your money isn't here, it's been invested. Joe - your money's not here, it's in the reverse derivatives we bought last week! And Mabel - your money's in hedge funds! Tom - Tom, you know we don't have your money. It's in the hands of some lobbyists in Washington right now! And Susan - your money's in that diamond around Mary's neck and also partly in my Maserati in the parking lot. God bless you for depositing so much money with my bank! Lisa - your money's tied up in currency trading right now on the Forex. Sam - your money helped pay for that executive retreat Uncle Billy and I went on last month! And Harry - I don't know where the heck your money is but it's federally insured so don't worry about it!

Customers: We don't care, we want our money right now!!

George: Folks, folks, can you just be patient? I've applied for a bailout from the federal government and we're expecting a billion or so within a few days. Can't you just hold on?

Customers: Hey George, you look like you've got plenty of money yourself! Why don't you pull out your wallet and give us some of it to tide us over, huh? How about a show of good faith?

George: Well you see folks, I'd do that but the auditors would write me up for doing something that's just not right. I have to follow regulations.

Customers: You're really irritating us, George! You've run this place into the ground and made us lose all our hard earned money! We got nothing left! We're gonna see to it that you get booted out of your job!

George: Well if that's what you want to do, please go ahead and do so. Some thanks I get. I'm leaving. Sorry 'bout that.

(stunned customers watch as George and Mary drive away, then start muttering about hiring Gloria Allred)

Mary: They're booting you out? How are we ever going to spend your $200 million termination money??

George: That's just the upfront portion. I sure hope we don't have to wait for that bailout money so I can cash my check.




*sigh* Was there ever a time when our institutions were run by George Baileys? I like to think there was. Where is he when we need him?

We hear all this talk about "Country first" and how America is the greatest nation on earth. If it were true, we'd be like the folks in the movie, now wouldn't we? Instead, just replace "country" with "me" and you'll have gotten the real picture.


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