'Merry Christmas, Mr. Potter!'

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many Americans over the age of 12 are there who can’t identify the
origin of that phrase?

naturalization division of the Immigration and Naturalization Service
should require every new applicant to see It’s
a Wonderful Life
on DVD, with the soundtrack in his native
language. He would not be granted citizenship until he could pass
a test, in English, about the movie. No one should be granted American
citizenship who does not have a good understanding of the United
States Constitution and It’s a Wonderful Life.

is that movie so important? There are a lot of reasons. Here is
a short list:

  1. Because
    the owner forgot to renew its copyright in 1974, television stations
    could show it for free. Anyone could reproduce it on videotape
    without paying a royalty. The movie did not become a Christmas
    tradition until copyright lapsed. (There is now a dispute over
    the copyright of the movie’s music, which is why NBC is the only
    network to show it these days. Until this is resolved, the movie’s
    universality has been compromised.)
  2. Its themes
    are fundamental to the American character: good vs. evil, David
    vs. Goliath, money won’t buy happiness, personal salvation through
    good works, and – neglected by most reviewers – one of the most
    powerful themes in American history and uniquely American: national
    redemption by home ownership through mortgages.
  3. Angelology.
    In America, theology is considered divisive; so, God is rarely
    a topic in mixed company. But everyone seems to have an opinion
    on angels. There are two main denominations: Cary Grant’s (The
    Bishop’s Wife
    ), aimed at suave Episcopalian types, and
    the Clarence-ites – all the rest of us. There is also a growing
    Della Reese sect, but I do not attend her services, so I will
    not comment. The Denzel Washington sect (The
    Preacher’s Wife
    ) never really caught on. He was too bland,
    I think. But Clarence’s is by far the largest and most dedicated
    denomination. The name of the actor who played Clarence is a matter
    for advanced trivia contests, and he is remembered only for this


by James Berardinelli
is a good introduction to the movie.

is it about this film, an uplifting, sentimental fable about the
importance of the individual, that strikes a responsive chord
with so many viewers? Some might argue that it has something to
do with the season, but I don’t buy that reasoning. It’s a Wonderful
Life is just as good in July as in December – the time of the
year has little to do with motion picture quality. Rather, I think
It’s a Wonderful Life has earned its legion of followers because
it effectively touches upon one basic truth of life that we all
would like to believe – that each of us, no matter how apparently
insignificant, has the power to make a difference, and that the
measure of our humanity has nothing to do with fame or money,
but with how we live our life on a day-to-day basis. It’s a Wonderful
Life asks and answers a question that all of us think of at one
time or another: “What would this world be like if I had never
been born?”

is wrong about the centrality of Christmas. To say that this movie
is just as good in July is the equivalent of saying that Christmas
carols are just as good in July. Technically, this is correct; aesthetically,
it isn’t. The movie is about redemption. It’s a Christmas movie.


a Wonderful Life is 20th-century America’s version
of Dickens’ famous short story, one which has the same themes, minus
one: redemption by mortgage. Both movies are about redemption by
good works, both take place at Christmas, and both are made possible
only through an encounter with supernatural visitors. They are stories
about secular redemption, achieved because of the most secular of
all redemption celebrations: the Christmas season – a substitute
for the story of Christ.

subtle secularism receives one brief mention in It’s a Wonderful
Life. The narrator – presumably God – speaks about
the end of World War II. Americans who rarely went to church –
most Americans, we are told (inaccurately) – went to church
on the following Sunday. It is clear that in Bedford Falls, churches
were peripheral. What distinguishes Bedford Falls from Pottersville
is not God, faith, and obedience. Rather, it is the Building &
Loan Society.

I contend, is what makes It’s a Wonderful Life uniquely American.
In Anno Domini 2002, we have been told that what has saved the American
economy, and hence the world’s economy, from the miseries of a deep
recession is the housing market. There is cheap mortgage money available,
and Americans are now re-financing their homes. Fannie Mae and Freddy
Mac are merely the Bedford Falls Building & Loan Society gone
national and federalized through presumed loan guarantees for investors.
Odd as it may sound, in this recent real-life remake of It’s
a Wonderful Life, George Bailey is played by Alan Greenspan.
He has received generally favorable reviews.

is the villain. He is a banker. He is the opposite of the Baileys.
He loans money, too, but he doesn’t loan money to help them build
homes. He loans money so that they can . . . what? In the “world
without George” sequence, the town is the essence of evil: taverns
and lewd women. Everyone makes a living by selling sin to everyone
else, or so it seems. Where the productivity originates, the scene
doesn’t indicate. Pottersville is sleazy. It is poor. Everyone presumably
lives in rented housing, presumably owned by Potter.

message: George Bailey made a difference because he helped depositors
make loans to each other that were secured by real estate. That
was the mode of national redemption in 1946, after a decade of depression
and half a decade of war: “Own your own home!” On this theological
foundation was built Levittown and the other post-War tracts. Exactly
how Bailey did this during the Great Depression, the movie never

the real world, building and loan associations did it because the
U.S. government changed the laws under Roosevelt’s Administration
regarding fractional reserve banking. There would be no more bank
runs. The government would insure against this. It would make safer
what fractional reserve bankers had feared most: borrowing short
(accepting deposits that were redeemable on demand) and lending
long (30-year loans at a fixed rate on real estate).

the government inflated the currency, raising interest rates, but
also raising people’s dollar-denominated net worth through rising
prices on their homes. Lenders then made additional loans based
on rising property values: more valuable collateral. And so it goes,
even today: the Federal Reserve System’s policy of depreciating
the dollar in order to keep home owners happy. Mortgage investors
are now locked into investments that will plummet in value if price
inflation raises long-term interest rates. The system will either
implode in deflation in one long bank run that will not end after
one day at 6 p.m., or else the creditors who extended the mortgage
loans will see their investments wiped out through mass inflation.

is why, in a future remake of It’s a Wonderful Life, Alan
Greenspan will star as Uncle Billy.


adherents of the economics of Ludwig
von Mises
and Murray
, most people don’t watch It’s a Wonderful Life
and draw inferences based on the implications of fractional reserve

thing: we never think about the crucial character in the movie,
without whom the movie would have no plot. Hint: he has no name
in the movie, or at least no one remembers it. The actor who played
him was never seen again. What role did he play?

crucial figure is the bank examiner. Throughout the movie, Uncle
Billy lives in fear of the arrival of the bank examiner. The bank
examiner serves as the agency of final judgment in the story. Without
him, only the depositors were a problem, and they were bought off
with George’s honeymoon money. The bank examiner was a threat because
the Building and Loan was somehow in the red, and not only when
Uncle Billy lost the cash. So, when the examiner tosses a dollar
onto the pile of money given to George Bailey in the final scene,
it became clear: God was on the side of George Bailey. George Bailey
had passed through judgment day with flying color: green.

movie is about forgiveness, and the form it takes is debt forgiveness
– just like in the Lord’s Prayer. (It doesn’t say “trespasses” in
the original Greek. It says “debts.”) Did the depositors forgive
the Building & Loan’s debt after only one day? No, but they
extended the promised day of judgment. All it took was George’s
honeymoon money.

the amount of his honeymoon wad of cash was enough in the depression
era to buy a new home without a mortgage, and not just in Bedford
Falls. How he earned all that money by working at his father’s
Building and Loan in the 1930’s, we are never told. Why a bank
run ends after only one day is also left unexplained. We viewers
do not even bother to ask. Frank Capra was a great director!

company is in debt. The books will not balance after Uncle Billy
loses the money. (Why George or anyone else would trust Uncle Billy
with cash is also never explained.) Potter steals the money. He
is not just a ruthless capitalist. He is a thief, and his assistant
is an accomplice. He can win in his war against Bailey only by breaking
the rules.

does Bailey keep winning? The movie explains this in terms of the
Baileys’ willingness to lend the money of little people to little
people, but only good people – family men. The Baileys are men of
the people. They lend to build homes – the bright side of every
man’s impulse to accumulate wealth – rather than loaning money to
the dark side of man, which Potter does, as the no-George sequence

the miracle/judgment sequence ends, George rejoices. He sees that
his life has made a difference. He runs home, shouting “Merry Christmas”
to everyone. The proof of his redemption – his self-redemption –
is when he runs past the bank, looks in the window, sees Potter,
and shouts, “Merry Christmas, Mr. Potter!” Potter’s response is
consistent: a sarcastic, “And a happy new year to you, too.” It
is directed at his assistant, not at Bailey, who has kept running.
It verbally confirms him in his evil ways. We do not see him again.
The money he stole presumably remains with him. Potter does not
fear the bank examiner.

course, undergirding both the movie and our willingness to watch
it over and over, year after year, is our understanding that there
is really a Bank Examiner, and the books will someday be opened.
Potter will not get away with it.

we do not talk about this assumption. We want to believe what the
movie teaches, that girls and boys get free presents under the Christmas
tree when they are little, and an invading army of grateful people
will bring in wads of free money when we really need it.

lot of Americans believe in miracles. They believe in bank examiners.
The divisive question is this one: Is God more like a bank examiner
or Santa? On what basis, judicially speaking, do those presents
under the tree show up? On our good deeds or on grace? This is the
ultimate piece of the puzzle in It’s a Wonderful Life. It
is the most subtle piece. We don’t stop to ask ourselves: “Who is
narrating the movie? Why should he bother? And why is this movie
set during Christmas?" The answer to all three questions is

by grace are ye saved through faith; and that not of yourselves:
it is the gift of God: Not of works, lest any man should boast.
For we are his workmanship, created in Christ Jesus unto good
works, which God hath before ordained that we should walk in them
(Ephesians 2:8-10).


Capra pursued one theme in movie after movie: doing
good is always rewarded at the end, no longer how dark it seems
until the movie’s final scene. There is a sub-theme: “the system”
is out to get the hero because he represents the little guy.

root for the little guy. We are afflicted with what my friend Hans
Kraepilin calls “infracaninophilia”: love of the underdog. (Lawrence
J. Peter, of Peter Principle fame, reworked this phrase after I
told him about it: "hyperaninophobia" – hated of the overdog.
It just doesn’t have the same ring to it.)

of Capra’s movies still hold up. We still watch them: You
Can’t Take It With You
, Mr.
Deeds Goes to Town
, Mr.
Smith Goes to Washington
, and Pocketful
of Miracles
. Less successful was A
Hole in the Head
(1959), but it was not a bad movie. It
Happened One Night
(1934) was a classic, and it made Clark
Gable. But it was less of a morality play than the others, which
is also true of Arsenic
and Old Lace

why I would require immigrants to master It’s a Wonderful Life.
It reveals the best of America, and it expresses the hopes of common
Americans. It also became a classic film three decades after it
was released. Television brought it to a mass audience: the children
and grandchildren of the original audience.

Academy Award for “Best Picture” in 1947 went to The
Best Years of Our Lives
, not to It’s a Wonderful Life,
which had been nominated. “Best Years” had similar themes: the system
vs. the little guy, readjustment to post-war life, and the grasping
side of bankers. Both of these movies are old fashioned. Both preach
hope: the triumph of good in the American economy. Both argue that
the little guy can make a big difference. Both argue that greed
is destructive. But “Best Years” was darker morally. It is a story
about which seductress will win the hero: his floozie wife or the
marriage-wrecking all-American girl. It was a Hollywood liberal’s

Capra was no liberal. That’s why his movies survive.

was an immigrant from Sicily. He arrived at the age of six. He loved
America. He understood what is good about it. He captured this on-screen
better than any other film director ever has. Liberal reviewers
are contemptuous of his films for this reason. They regard his themes
as simple-minded or patronizing.

is easy to criticize Capra’s view of how the economy works. His
plots often had holes in them larger than George Bailey’s wad of
honeymoon cash. But his movies held together, and also have held
up over decades, because the holes are covered over by his fundamental
theme: individual righteousness wins out in the end. The American
system, while open to greedy villains, ultimately rests on ethically
solid ground. Nice guys don’t finish last.


is one of those great ironies of history that the consummate business
villain in American movie history – Potter – was played
Lionel Barrymore. Potter is in a wheelchair in the movie because
Barrymore was in a wheelchair in real life. He had lost the use
of his legs because of arthritis. In the earlier Capra film, You
Can’t Take It With You (1938), he played the good guy who was
fighting the system, opposite Edward Arnold’s villain, a Potter-like
character who eventually reforms himself because of Barrymore’s
example. In that movie, Barrymore was on crutches and in a leg cast.
(Jimmy Stewart was in that movie, too, playing another Capra nice
guy, as he did in Mr. Smith Goes to Washington.)

success as an actor increased as he grew more crippled. He was incredibly
talented: artist, composer, author, director, and actor. He did
not allow his physical affliction to stop him. His movie career
was long: 1909 to 1953. He died in 1954.

great niece, Drew, also overcame problems, but in her case, self-inflicted:
drugs as a teenager. The comeback-kid story is also a favorite in
America, especially when it’s true.


had seen It’s a Wonderful Life enough times to let me skip
it this season. I tried. I tried several times. But when the bank
run began, I turned it off. It was not honeymoon cash that solved
bank runs in America. It was the government’s extension of an insurance
subsidy and its implied promise of a fiat-money bailout by the Federal
Reserve System. This solution has guaranteed inflation ever since,
in order to keep home owners happy and depositors asleep.

the movie isn’t about fractional reserve banking, any more than
it’s about angels getting their wings. It’s about the positive,
cumulative, but unseen benefits to many people of individual acts
of charity and honesty. It’s also about capitalism: home ownership,
small businesses, and sacrificial hard work. That’s why immigrants
should be required to take a test on It’s a Wonderful Life.

wouldn’t hurt to have political candidates take the test, either.
I suspect that most of them would flunk.

11, 2002

North is the author of Mises
on Money
. Visit http://www.freebooks.com.
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