It’s a Wonderful Life Is a Perfect Primer on Predatory Lending

The Frank Capra classic is not only a heart-warming tale of community and common decency, but it’s also an incisive portrait of predatory business practices.

Frank Capra’s 1946 film It’s a Wonderful Life has a reputation for being cheesy as heck. And that’s because it is. But as the movie’s legacy has grown over the ensuing decades since its release, that fame has become more like a shadow, blotting out some of the film’s more complex sections.

With Christmas rapidly approaching, we decided to revisit one particular aspect of the film. Namely, its villain: the greedy embittered Henry F. Potter. Because if you want to understand predatory lending—and hoping that you do is kind of our whole thing around here—all you have to do is check out how Mr. Potter goes about his business.

It’s a Wonderful Life is DARK.

Audiences unfamiliar with It’s a Wonderful Life as a family holiday staple would be forgiven if they spent the first 90 minutes of the movie thinking it was actually some sort of sick, black-hearted joke. Because George Bailey’s life up until that point is anything but wonderful.

Let’s list the evidence: He loses his hearing as a boy saving his brother from drowning, has to skip college to run the family Building & Loan when his dad dies of a stroke (only to have his brother back out of running the business as promised once he graduates), misses out on a business deal that would have made him a millionaire, is forced to skip his honeymoon and use his life savings to save his business during the 1929 stock market crash, and finally manages to pull everything together … only for his Uncle Billy to lose $8,000 freaking dollars: A loss equivalent to $102,000 in modern-day money that basically ensures both personal bankruptcy and a lengthy jail sentence for ol’ George.

Until the angel-in-training Clarence (Henry Travers) arrives to show Jimmy Stewart’s distraught George how much good he’s done in the world just by being alive, the movie is a ticker-tape parade of one good deed after another getting severely, brutally punished. The only thing that saves it is Capra’s characteristic light touch and Jimmy Stewart’s humble but overwhelming charm.

Nowhere is the movie’s bleakness more evident than in the continued success of Mr. Potter, the money-gluttonous slumlord that Lionel Barrymore plays with nefarious relish. Positioned as George’s nemesis from the very beginning, Mr. Potter’s only goal in life is to accrue more wealth for himself at the expense of everyone else.

If he were visited by three Christmas ghosts like Ebenezer Scrooge, Henry Potter would emerge the next morning entirely unchanged. If anything, he’d probably be meaner and greedier than ever.

Community need versus personal greed. 

George Bailey is a do-gooder, and most of the good he does comes via his family business, Bailey Building & Loan, a small community bank serving the people of Bedford Falls. Townsfolk keep their money in the bank, which allows the bank to loan that money out for other townspeople to buy (and build) a home.

Because the Baileys aren’t in it for the profit, they make loans at a very affordable price. It doesn’t mean a lot of money for them, of course, but it does a great deal of good for the community.

Contrast this with Mr. Potter, a slumlord who charges exorbitant rents for rundown shacks, squeezing his tenants for every penny they’ve got. And while Potter maintains that he is encouraging “thrift” among members of the community—that they just have to save the $5,000 they need in order to buy a home outright—George knows that’s bunkum.

Here’s what he says to Mr. Potter after George’s father has passed and Mr. Potter wants to buy the Building & Loan out from under him:

(via Screenplays for You)

You . . . you said . . . What’d you say just a minute ago? . . . They had to wait and save their money before they even ought to think of a decent home. Wait! Wait for what? Until their children grow up and leave them? Until they’re so old and broken-down that they . . . Do you know how long it takes a working man to save five thousand dollars? Just remember this, Mr. Potter, that this rabble you’re talking about . . . they do most of the working and paying and living and dying in this community. Well, is it too much to have them work and pay and live and die in a couple of decent rooms and a bath? Anyway, my father didn’t think so. People were human beings to him, but to you, a  warped, frustrated old man, they’re cattle.

Hear, hear Mr. Bailey!

Predators strike when their prey are vulnerable. 

Even though it means missing out on a college education and the chance to see the world, George doesn’t sell the Building & Loan. Instead, he takes his father’s place at the head of the business and continues making affordable loans to people who need them.

While this doesn’t make George a rich man, he does alright for himself. That is until he’s literally on his way out of town with his bride Mary to go on an expensive honeymoon at the exact moment that the stock market crash of 1929 causes a bank run on the Building and Loan.

(It’s moments like this when you wonder if some unseen forces are working to torture poor George. And actually, there are: They’re called screenwriters.)

Faced with all his customers pulling out their money—plus Mr. Potter’s offer to buy people’s shares for fifty cents on the dollar looming over his head—George offers the clearest contrast to his approach versus Potter’s:

Tom! Tom! Randall! Now wait . . . now listen . . . now listen to me. I beg of you not to do this thing. If Potter gets hold of this Building and Loan there’ll never be another decent house built in this town. He’s already got charge of the bank. He’s got the bus line. He’s got the department stores. And now he’s after us. Why? Well, it’s very simple. Because we’re cutting in on his business, that’s why. And because he wants to keep you living in his slums and paying the kind of rent he decides.

When the market crashes and the Building & Loan looks like it’s going to go under, Mr. Potter strikes. People are desperate. They’re worried about losing their savings and are willing to take a guaranteed fifty percent loss in order to protect against the possibility of losing it all.

If they stick together and keep their money with George, they’ll be fine—which is exactly why Mr. Potter tries to get them to take their money out. He’s taking advantage of their desperation to bury them even deeper.

George Bailey offers a way out from Potter’s traps.

Luckily, George’s level head prevails. By offering his own money to tide people over until the bank reopens the following week, he is able to stave off the run and stay in business. In fact, he goes on to have an entire neighborhood filled with his homes. It’s called Bailey Place, and it not only offers a stark contrast to Mr. Potter’s squalid offerings, it actually poses a threat to his business interests at large!

As one of Mr. Potter’s employees describe it to him, Bailey Place is, “Dozens of the
prettiest little homes you ever saw. Ninety percent owned by suckers who used to pay rent to you.” Because George Bailey isn’t making a lot of money from his loans, he’s able to offer people a much better deal than Mr. Potter, one that doesn’t trap them in a cycle of high rents and meager savings.

Potter isn’t so crazy about all this. That’s why when he later discovers an envelope filled with $8,000 in Building & Loan deposits that George’s Uncle Billy accidentally misplaces inside Mr. Potter’s bank, the old man doesn’t hesitate to strike.

By positioning himself as a socially responsible alternative to Mr. Potter’s predatory business model, George Bailey is more than a nuisance to Mr. Potter: He’s a genuine threat. One that needs to be neutralized.

Henry Potter is the patron saint of predatory lenders.

So let’s take a look at Mr. Potter’s business model: He uses high rents and poor conditions to trap his vulnerable tenants into a cycle of poverty. The only way that they can escape from him is to save up enough money to buy a house, but the cost of their shoddy accommodations means that saving that much money is virtually impossible!

This is exactly how a predatory business works. First, target vulnerable, low-income populations who don’t have many better options. Second, charge them really high prices that make it difficult for them to keep up. Third, make them reliant on your product or service, creating a feedback loop of financial dependence. Lather, rinse, repeat.

Now let’s compare Mr. Potter to modern-day predatory lenders, the kind that offers short-term no credit check loans like payday loans, title loans, and cash advances. Lo and behold, these lenders also offer products with incredibly high costs to vulnerable, low-income populations that lack decent credit scores and so can’t qualify for regular personal loans.

With average Annual Percentage Rates (APRs) just shy of 400 percent and balloon payments that cover the entire cost of the loan, is it any surprise that only 14 percent of payday loan customers can afford to pay their loans back on time? Or that many of them are forced to roll over and reborrow their loans in order to get, spending almost 200 days per year in debt? Sound familiar?

(If you’re looking for an alternative to predatory short-term bad credit loans, by the way, you should look into the kinds of bad credit installment loans we offer here at OppLoans. Check out this post to learn more.)

Saved by the sound of an angel getting his wings. 

When Clarence shows George a world in which he was never born, Bedford Falls has turned into Pottersville, a scummy hive of gin joints, slums, and misery. (Mary’s terrible fate is … being a single librarian, which is just rude.) If you want to know what a world where predatory lenders and slumlords were allowed to run amok would look like, look no further than this miserable place.

But luckily, that town never existed! By offering his friends and neighbors a reasonable, affordable alternative to Potter, George Bailey has managed to save the town of Bedford Falls. And while it might take an actual act of divine intervention for him to realize this, everyone that he’s helped knows exactly how much good he’s done.

In the movie’s climactic scene—cue the very famous cheesy part—the entire town pays him back for that kindness twentyfold. What a wonderful life, indeed. The only thing that could make it any more wonderful is if Capra had kept in that infamous lost ending. Happy holidays everyone!

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