The Morality of Banking in It’s a Wonderful Life

Seventy years after its release, Frank Capra’s It’s a Wonderful Life remains a holiday classic, with warm and fuzzy messages about the importance of love and family. But the movie’s plot also touches on some still-relevant financial topics, including the nature of banking, the philosophical calculus behind issuing loans, and the way American families’ financial fates are intertwined (and, we swear, we aren’t just saying that because we both happen to report on business and economics at The Atlantic).

The film’s protagonist, George Bailey, gives up his dreams of traveling the world to run Bailey Building and Loan, a small community bank with a mortgage business. But all is not well in Bedford Falls. The decisions of the well-intentioned Bailey as he faces an unfortunate deposit-envelope mix-up and tries to fend off an aggressive tycoon make for a clear-cut narrative set piece, but also, whether Capra intended to or not, make the movie financially instructive all these years later.

Below is a conversation we had after (re-)watching the film about the various questions it raises about mortgages, banking, and financial solvency.

Gillian B. White: I forgot how much commentary there is in this movie about the economics of how banks and loans work. I want an audio file of George Bailey saying “The money’s not there!” as he tries to explain how deposits get rolled into other products, not just stacks of bills tucked away in a vault. But I love that speech for another reason, too: It helps explain, at a pretty simple level, how deeply interwoven America’s banking structure and finances can be—so when a bank, big or small, fails, lots of people wind up feeling the impact. As a whole, the movie raises some critical questions about the purpose of banks: What are they meant to do and who are they meant to serve?

Bourree Lam: That scene has always really stuck out to me. It’s an important plot point, but I also think it speaks to how much people don’t know about how banks actually work. It’s really not clear to the people of Bedford Falls how credit and loans work, to the point that people cause a bank run and George has to use his own money to stop the institution from dissolving. They really think all their money is sitting there in the safe, but never question how the bank is then able to distribute so much money, such as loans for their homes.

Read on.


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