If we DO have a run on the banks, can I be George Bailey?

fter posting my last post, I went to find this scene from "It’s a Wonderful Life" — one of my All-Time, All-Category, Top Five Movies (in fact, I listed it on the blog as my No. 1, but I go back and forth on that). Interesting thing, when I went to YouTube and typed in the title, the bank run scene came up second — which makes me think others have that scene on their minds.

Surely things aren’t that bad, are they?

Well, if it does come to that, can I be George Bailey? I want to be the reassuring guy who says, "Just remember that this thing isn’t as black as it appears," just before the sirens go by. Then I can say,

No, but you’re… you’re, you’re-you’re thinkin’ of this place all wrong, as if I had the money back in a safe. Th-th-The money’s not here… why, your money’s in Joe’s house, that’s right next to yours, and in the Kennedy house, and Mrs. Maitland’s house, and, and a hundred others. … Why, you’re lending them the money to build, and then they’re gonna pay it back to you as best they can, now what’re you gonna do, foreclose on them?

I’ve always enjoyed that, a nice communitarian lesson in how a healthy community operates economically.

Of course, if you’d rather get 50 cents on the dollar from that free-market monster Mr. Potter, wull-wull-wull go right ahead, but don’t then don’t come crying to ol’ George Bailey… No, wait: I guess George wouldn’t say that, would he?

6 thoughts on “If we DO have a run on the banks, can I be George Bailey?

  1. Lee Muller

    There is already a run on Social Security.
    Wait till those welfare checks stop coming.
    Members of that minority, the Productive Class, will be told to give up their retirement in order to support the bankrupt government pensions, corporate pensions, and Social Security Welfare system.

  2. wtf

    Lee, what so you think Freddie/Fannie bailout is? It’s welfare checks for the hedgefund babies & corporate investors…and it costs a lot more than all social programs combined.
    This is where the conservative-free market theory of no government involvement collapses. If this was truly a free market then Lehman, Freddie & Fannie would collapse and the Bush family would end up like the Duke Brothers in “Trading Places”, sleeping in the streets.
    But instead, the failed theory goes unpunished. We’d all love to go to Vegas knowing full well that no matter how much we gamble or messed up, we’d still come home with the same money in our pocket that we started with. With no fear like that, of course you swing for the fences and ignore common sense.
    That in a nutshell is what the bailouts are. Corporate Welfare.
    a little background…
    The current subprime mortgage debacle (which has led to the current mess for Fannie and Freddie) is an offshoot of the Gramm-Leach-Bliley Act written by former senators Phil Gramm (R) James Leach (R) and passed by the 106th Congress (both houses Republican). The Gramm-Leach-Bliley Act repealed much of the 1933 Glass-Steagall Act which kept investment and consumer banks separate (among other consumer protections).
    The same Phill Gramm that was at the root fo the Enron failure.
    But Gramm’s most cunning coup on behalf of his friends in the financial services industry—friends who gave him millions over his 24-year congressional career—came on December 15, 2000. It was an especially tense time in Washington. Only two days earlier, the Supreme Court had issued its decision on Bush v. Gore. President Bill Clinton and the Republican-controlled Congress were locked in a budget showdown. It was the perfect moment for a wily senator to game the system. As Congress and the White House were hurriedly hammering out a $384-billion omnibus spending bill, Gramm slipped in a 262-page measure called the Commodity Futures Modernization Act. Written with the help of financial industry lobbyists and cosponsored by Senator Richard Lugar (R-Ind.), the chairman of the agriculture committee, the measure had been considered dead—even by Gramm. Few lawmakers had either the opportunity or inclination to read the version of the bill Gramm inserted. “Nobody in either chamber had any knowledge of what was going on or what was in it,” says a congressional aide familiar with the bill’s history.
    It’s not exactly like Gramm hid his handiwork—far from it. The balding and bespectacled Texan strode onto the Senate floor to hail the act’s inclusion into the must-pass budget package. But only an expert, or a lobbyist, could have followed what Gramm was saying. The act, he declared, would ensure that neither the sec nor the Commodity Futures Trading Commission (cftc) got into the business of regulating newfangled financial products called swaps—and would thus “protect financial institutions from overregulation” and “position our financial services industries to be world leaders into the new century.”
    It didn’t quite work out that way. For starters, the legislation contained a provision—lobbied for by Enron, a generous contributor to Gramm—that exempted energy trading from regulatory oversight, allowing Enron to run rampant, wreck the California electricity market, and cost consumers billions before it collapsed. (For Gramm, Enron was a family affair. Eight years earlier, his wife, Wendy Gramm, as cftc chairwoman, had pushed through a rule excluding Enron’s energy futures contracts from government oversight. Wendy later joined the Houston-based company’s board, and in the following years her Enron salary and stock income brought between $915,000 and $1.8 million into the Gramm household.)
    But the Enron loophole was small potatoes compared to the devastation that unregulated swaps would unleash. Credit default swaps are essentially insurance policies covering the losses on securities in the event of a default. Financial institutions buy them to protect themselves if an investment they hold goes south. It’s like bookies trading bets, with banks and hedge funds gambling on whether an investment (say, a pile of subprime mortgages bundled into a security) will succeed or fail. Because of the swap-related provisions of Gramm’s bill—which were supported by Fed chairman Alan Greenspan and Treasury secretary Larry Summers—a $62 trillion market (nearly four times the size of the entire US stock market) remained utterly unregulated, meaning no one made sure the banks and hedge funds had the assets to cover the losses they guaranteed.
    In essence, Wall Street’s biggest players (which, thanks to Gramm’s earlier banking deregulation efforts, now incorporated everything from your checking account to your pension fund) ran a secret casino. “Tens of trillions of dollars of transactions were done in the dark,” says University of San Diego law professor Frank Partnoy, an expert on financial markets and derivatives. “No one had a picture of where the risks were flowing.” Betting on the risk of any given transaction became more important—and more lucrative—than the transactions themselves, Partnoy notes: “So there was more betting on the riskiest subprime mortgages than there were actual mortgages.” Banks and hedge funds, notes Michael Greenberger, who directed the cftc’s division of trading and markets in the late 1990s, “were betting the subprimes would pay off and they would not need the capital to support their bets.”
    BTW, this is the same Phill Gramm who is the “architect & guru” behind McCain’s economic policies. That alone should be enough of a reason to make anyone question McCain’s decision fitness and capabilities.
    ..and now our tax dollars and the tax dollars of of our unborn great-grandchildren have to make sure that the Bush/Kennedy legacy fortunes stay intact.
    You are being played a fool but alas, you are too far gone to see it.
    It’s called the facts. Check into it.

  3. p.m.

    Won’t you come home, George Bailey?
    Won’t you come home?
    Our banks are all but gone.
    And if you let Brad Warthen impersonate you,
    That would be just plain wrong.
    He wants us to pay more taxes
    And pay his doctor
    Like we each had a solid gold comb
    So let’s keep our S&Ls Brad Warthen-free
    George Bailey, won’t you please come?
    George Bailey, won’t you please come?
    George Bailey, won’t you please come home?

  4. Mike Cakora

    Today’s (Sunday) WaPo has some excellent reporting on failed attempts over the past fifteen or so years to bring some accountability to Fannie and Freddie.
    Among the best parts are descriptions of the influence F&F could bring to bear on members of Congress. Their massive lobbying operation would initiate letter-writing campaigns throughout the country to create the impression of public opposition to this measure or that.
    For example, in opposing measures proposed by members of Congress and the White House as a result of the 2004 earnings inflation scandal, they pushed all the buttons.

    The companies orchestrated a letter-writing campaign by traditional allies including real estate agents, home builders and mortgage lenders. Fannie Mae ran radio and television ads ahead of a key Senate committee meeting, depicting a Latino couple who fretted that if the bill passed, mortgage rates would go up.
    The wife lamented: “But that could mean we won’t be able to afford the new house.”
    Most of all, the company leaned on its Congressional supporters.
    In the Senate, Robert F. Bennett (R-Utah) added an amendment giving Congress the ability to block receivership, weakening that bill to the point where the White House would no longer support it. Bennett’s second-largest contributor that year was Fannie Mae; his son was then the deputy director of Fannie’s regional office in Utah.

    I highly recommend it.

  5. Lee Muller

    Freddie Mac and Fannie Mae were GOVERNMENT programs, providing mortgages to high-risk borrowers. The government is now taking over management of what it already owned. All that means is that the taxpayers just assumed a bunch of worthless debt instruments.
    The big water carrier for the banks were Joe Biden and John Spratt. Biden protects the credit card companies from reform, and Spratt removed controls from small commercial banks like the ones his family owns.

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