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It's a Wonderful Life, whats the diffference: Bank, Savings and Loan??


FredCDobbs
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I've always wondered about this and I'm too lazy to look it up on wiki.

 

Anyway, I like to read the opinions of people who post on this board.

 

What is the difference between Mr. Potter's BANK and George Bailey's SAVINGS AND LOAN in the movie IT'S A WONDERFUL LIFE??

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Just off of the top (to be fair I didn't look this up), in the movie *It's a Wonderful Life* the Bailey S&L is a little mom and pop business that takes the public deposits and loans right back to the local townspeople. George Bailey tells the one guy, "we don't have your money right here, its in your neighbor's house (mortgage)". I know that a bank does the same thing, but on a much larger scale and banks also make big deposits in other larger banks. In the movie's storyline the run on the banks , and the Bailey S&L, happens in the early depression days (around 1932?) so there was no FDIC institution to back up the depositors funds. I guess that a bank or S&L can be called by either name , like a credit union, although credit unions are usually formed for employees of a particular business. I joined my companies credit union years ago but it expanded to open up for other people to join, so now its almost like a bank.

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>What is the difference between Mr. Potter's BANK and George Bailey's SAVINGS AND LOAN in the movie IT'S A WONDERFUL LIFE??

 

I think it may have only been this way in the movie and not in real life:

 

Mr. Potter's bank was seen as impersonal and not interested in helping you unless you had the qualifications and the credit worthiness to apply for loans and mortgages. Potter would not extend credit, loans or mortgages to those who didn't meet the credit standards of the bank. His customers were mostly the well-to-do and business professionals of Bedford Falls.

 

The Bailey Savings and Loan was more apt to work with you and help you get that loan or mortgage. They were more willing to extend you credit if you hit a rough patch because they knew you were good for it. They were the financial choice of working class married couples just starting out, those who wanted to open their businesses and needed a help in obtaining the loan, the mom and pop business and small business owners (the druggist, the bar owner, the bartender,etc) of Bedford Falls whose customers paid cash and sometimes hit rough patches themselves and those who just needed to a loan but were good for it and would pay it back if it was the last thing they did.

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Until the 1970s and 1980s, S&Ls were limited by law to offering savings accounts and long-term mortgage loans, and barred from making risker commercial and consumer loans like banks. The S&L scandals of the '80s came in the wake of those limits being lifted.

 

So the difference between the Baileys' and Potter's operations wasn't just a function of personality; it was the law.

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Also, it seems to me that the old Bailey S&L made profit mostly from interest on loans-very paltry sums. I'm sure Potter invested in commercial business re; the neonization of Bedford Falls.

 

Today, banks still make small profit from interest on loans. You'll also notice your bank now has a lot more "penalties" on accounts, such as limited withdrawals, service fees and big fees on both sides of bounced checks.

Still, the majority of bank profits come from investing deposits (YOUR money) in the stock market, which we all know is a loser's game these days.

 

Insurance is the same way-they take your money and try to create profit for themselves investing in stocks. With the volatility of the market these days, it's a wonder banks can even pay their employees.

 

This is why your car insurance goes up every year instead of down even as the value of your car decreases.

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I used to belong to my employer's credit union too. For a long time, they were the way to go. Low interest personal loans( THEY called them "signature loans") liberal auto loans. And the convenience of payroll deduction. When the union took over it's operations, the loan officer they put in charge was too hard-nosed, so I left it.

 

But I always thought of the Saving and Loan in the movie to be more like a credit union in the nature of it's considering the people with accounts to be "members" rather than mere "depositors".

 

Sepiatone

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TikiSoo wrote:

<< Still, the majority of bank profits come from investing deposits (YOUR money) in the stock market, which we all know is a loser's game these days. >>

 

This is very much like the fictional company in "A Christmas Carol", *Scrooge and Marley* where they actually had seats on the London Stock Exchange.

 

Again another example of them not caring for their fellow man - the big point to push in the story. Love the Dante's flavor of how to punish them.

 

scrooge%20and%20marley%20sign%20large.jp

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Ok, thanks everyone. :)

 

So, an old type Savings and Loan, like the one in the movie, was for savings accounts, but no checking accounts.

 

People saved a little money and got a little interest on their savings.

 

Also, they could get modest home loans and pay a little interest.

 

The S&L made money by charging more interest for a loan than it was paying out for a savings account.

 

It was not highly profitable like a bank, but it served a purpose and made some money for the directors.

 

Mr. Potter wanted to do away with it so he could charge more money for home loans at his bank?

 

Right? :)

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Apparently the little Bailey S&L was too much competition for old man Potter's bank ( I guess Bedford Falls was too small a town for two regular banks, but some of those street scenes downtown show a rather decent sized town). Old man Potter seemed to own most of the other businesses in town as well, at least before a Walmart moved in and wiped him out :D

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Lets not forget, "It's a Wonderful Life" was made just after the Great Depression time period by which most people had a hatred towards banks.

 

People during the early 1930's actually cheered for bank robbers like John Dillinger as long as they don't hurt people in the act.

 

The point of the movie is not over analyze the banking/home loan infrastructure but to show how an honest hard working man like George Bailey can be "victimized" by Henry Potter as he is a heartless, cold, apathetic and downright evil man. Everything that Mr. Potter does is motivated by money and greed. The perfect villain in the film.

 

The FDIC try to help restore the public?s confidence in banks, as many people had lost their savings when banks failed after the stock market crash of 1929 with the huge foreclosures of homes and farms.

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The difference between banks and savings and loans is in the history of lending in this country.

 

Originally, bank loans were for elites, who already had significant assets and collateral. Bankers were not interested in lending large sums of money, to be paid back in 15-30 years! Asking for such a long repayment period would have gotten you thrown out of the bank.

 

Until the 1930's, mortgages as we know them today did not exist. "Mortgage" loans before then were made by insurance companies! Even then, they were not like today's mortgage loans! They were "interest only" throughout the life of the loan- with a whopping "balloon payment" staring at you at the end. The balloon payment was for the unpaid principal.

 

That's why in so many very old films you see some old widow or family facing foreclosure. A modern viewer might wonder: "Were they deadbeats? Have they fallen behind on their monthly payments?" No, they were not deadbeats nor did they necessarily fall behind on their payments. They were facing the approach of that final and whopping "balloon payment", where they had to come up with almost the entire purchase price of the property. When the house was bought, all that happened was a change of title and the chance for them to move in.

 

Instead of paying a combination of principal and interest like with today's mortgages, all they did was spend years making relatively low interest payments, building no real equity. ("Second mortgages" were almost unheard of) It was a seductive devil's bargain with the lender. It allowed people of ordinary means to live (I don't want to use the word "own") in a larger and grander house than they really could afford.

 

Once you signed on, it was up to you to start saving money over years to make that final pay off. Failure to do so, meant you never got to own the property. For the insurance company, it was almost like a casino bet, with it's house advantage against the chumps and hopefuls. They were betting that you weren't going to be able to scrape together that final big payment, in which case they foreclosed and went laughing all the way to their bank!

 

Such a system was disadvantageous to lower income working class people, or people who experienced widowhood (women couldn't earn much money on their own) or a disability that affected their earning ability. These kind of people couldn't save enough for that final big payoff.

 

Insurance companies then took this as an opportunity to sell more of their "products", putting you more in their hock. Mortgage borrowers were often required to purchase a savings annuity which assured that final payment years hence. For married borrowers, it was also recommended (and sometimes required) that a life insurance policy be purchased, guaranteeing the payoff of the property by the widow. Often, disability insurance was required, especially for people in manual labor professions, in the event that they were incapacitated.

 

In the wake of the crash and Depression, the Roosevelt administration launched the Federal Home Loan Bank. The FHLB lent money to Savings and Loans, which in turn could finally offer the type of mortgage loan that we are familiar with today. Until that time, you did not have any "equity" in a home until you had completely paid it off. Only then would a bank be interested in lending big sums to you, when you fully owned a paid up piece of property that could be pledged as collateral.

 

As further encouragement to S &L's, the Federal Reserve allowed them to pay higher interest rates on savings accounts than banks. Bankers naturally considered them competitors for depositor money. In the era when *It's A Wonderful Life* was made, bankers were known to detest S&L's.

 

The modern type of mortgage loan, which eliminated the balloon payment and which killed the insurance company home lending schemes, were a big and lasting legacy of the Roosevelt administration. FDR's role in bringing this about is largely forgotten.

 

 

speakthelma.gif

 

Edited by: ThelmaTodd on Nov 5, 2013 2:23 AM

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Dear finance, Andy and mrroberts!

 

I appreciate your compliments! I try and bring my best and utmost to this community. I put a lot of writing and research effort into my posts, because it gives me great pleasure to do so, it's my personal style on whatever blog I participate on and finally, because I feel the esteemed readership here deserves no less! Very mindful of the fact that the readers and visitors here far outnumber the participants, I hope to deliver insight and value to a larger community as well. Your expressions are warmly appreciated!

 

Finance, recognising and appreciating the role of the site moderator and his clearly stated rules concerning political discussions, let me answer your last post but briefly: In recent times, prior to 2008, certain changes were made to financial markets, lending practices and financial institutions that I believe Franklin Roosevelt would have felt were dangerous "laxities". He would have considered them similar to the very types of practices that were rampant prior to his administration and which led to the stock market, mortgage/ banking bubble and Depression. These constituted the reason he introduced so many regulations and agencies, which endured for decades and the adherence to which prevented another blowout. A reader can draw his own conclusions from that and I needn't say more.

 

History has never been a strong suit for many Americans, and we have forgotten a lot of important history that could have served as a useful guide in avoiding trouble. As a nation, we have a tendency to cyclically repeat some of our past follies, partly because the slate of collective memory gets wiped a bit to clean.

 

Our love for, and focus on classic film should be nurtured and celebrated here for a number of reasons. Old films, when watched with an eye to historical context, give valuable witness to the contemporary concerns and struggles of past generations. "For those that have eyes to see, let them see"! We are doomed to repeat those struggles and mistakes, if we learn nothing from the past.

 

*A very, very valuable film from that Depression era is Frank Capra's aptly titled "American Madness" (1932)*. Depicting the weaknesses of the banking system that led to massive bank closures and "bank holidays" (a misnomer if I ever heard one; they were nobody's idea of a "holiday"!) *This film should be mandatory viewing to all American school students*; such is the value of insight it furnishes. It's subtextual concerns and focus are as relevant today as they were then. *American Madness* has been shown on TCM. Hopefully it will be re-aired. It is worthy of in depth discussion! (Unfortunately no link to the complete film is available on youtube.)

 

My previous post helps give a little context to the film *It's A Wonderful Life*. It helps to better understand the conflict the Henry M. Potter character has with the protagonist in the film. The character symbolism was all to clear to American audiences at the time, but lost on modern viewers.

 

Bankers hated S &L's! They hated them as business competition for depositor dollars, but also hated what they were trying to do out of elitism and classism. Many of them believed that only people of substance have any business owning houses and property, and that everybody else should just be a renter, paying rent to the people of substance!

 

Potter was on the board of the S & L, but he was also a banker, mill owner and slumlord. He played the type of patrician character who was not on board with the changing times in America, which were signalled by the newly formed Federal Home Loan Bank money pumping S & L's, allowing them to make these newfangled "mortgage" loans by which the "little people" dared to presume that they could become "owners"!

 

The youthful George Bailey character played by Jimmy Stewart, also had deep symbolism for 1940's audiences. As a young man, he was fighting for the new way and new vision: let's help the "little people" own their own homes! He wanted to stay true to the lending mission of the S & L. Potter just wanted to turn it into another bank- taking deposit money from the many small fry, but only making loans available to the big fish!

 

Potter wanted to sabotage the whole lending mission of the Bailey Building and Loan; which is probably why he, as banker, got onto it's board in the first place. (I wonder how many times this happened in real life!) Destroy from within.

 

It was the old order vs. the new order. Old Deal vs. the "New Deal"! Classism vs. egalitarianism. I believe 1940's audiences "got it" and loud and clear- as this conflict was playing out in towns all across America. Until around that time, many Americans descended from families that could never own a home; they came from a long line of renters. As such, the film hit close to home for many (no pun intended!), and was seen as anything but a Christmas film. Rather one of class struggle and struggle over home and hearth.

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