There is probably no more iconic piece of cinematic Americana than Frank Capra's 1946 film It's a Wonderful Life.  Even today, families enjoy the folksy warmth of small-town America at Christmas as seen in the golly-gee world of the Bailey family, living their all-American lives in Bedford Falls, NY.  And indeed, Americans should watch this timeless classic often but, I suggest, more to remind themselves of just how our modern-day financial problems were born and what cavalier habits bred them.

What most fans of the film and the hero of the piece, George Bailey (the role that solidified Jimmy Stewart's career), never realize is that Bailey's story epitomizes the change that America experienced in the postwar era, with his naïve values and intemperate actions laying the foundation for the world-wrecking crisis gripping the globe today.  It is a story of "moral hazard" and slipshod financial management run wild in a microcosm of crony capitalism doomed to enshrine the feel-good policies which now threaten  world order.

First, let's take a contrary look at this champion of the little guy who took on the forces of big business in his small town.  Just how squeaky-clean is the heroic Mr. Bailey?

George, it is established early in the film, is a somewhat unrealistic dreamer, yearning only to see the world before embarking on -- what else? -- a grand career as an architect building "skyscrapers a hundred stories high!"  His idea of a date is to take his future wife, Mary (played in the film by the virginal Donna Reed), to an abandoned house she adores.  He persuades Mary to help him vandalize it by explaining that "with deserted houses, you make a wish and then try to bust a window."  When a neighbor asks them to stop their late-night carousing outside his house, the belligerent George tries to pick a fight with him while Mary attempts to leave the tense scene.  Such is our story's hero.

When George's father dies, the board of the Bailey Building and Loan Association (BBLA), a co-op owned by its members, meets to consider the institution's future.  Arguing for its dissolution is the story's stereotypical villain, Henry Potter, who, according to George, is a "money-grubbing old buzzard," despised  and roundly cursed throughout the story for being insufficiently generous to  the town's working-class citizens.  Nevertheless, Potter's primary criticism of the BBLA may now sound prescient to us today: "It isn't fair to the little people to encourage them to live beyond their means."  Pop Bailey, by comparison, had considered his job as president to "help their dreams come true."

Potter argues convincingly that the BBLA should be closed because George's father was an incompetent administrator, citing a loan given to Ernie the taxi driver after it was declined at Potter's bank.  The bank's wisdom in rejecting Ernie is shown clearly when, in fact, he is soon unable to make payments on the mortgage he holds with the BBLA and attempts to return his home's deed.

Nice-guy George, however, in a move typical of the kind of lax administration Potter abhors, casually tells Ernie to "forget the principal" and "just pay the interest" while riding in his buddy's cab.  (Undoubtedly, Bailey would have been a big fan of the ill-fated, "nothing down, 'no-doc' loan" program that gave today's borrowers far grander homes than they could afford and is still crushing American credit markets while sending personal bankruptcies skyrocketing.)

Typically, it doesn't occur to Generous George to consult with his board or the shareholder-customers of the BBLA before spontaneously modifying loan terms.  It is enough that the taxi-driver is a pool-playing Friend of George (FOG) and, most importantly, a really swell guy, trying hard to support a family.  Clearly George's spur-of-the-moment crony-capitalism is typical of the management style of the BBLA, and the board, comfortable with George's management style, elects the high school-educated 25-year-old to succeed his father as president.  We sense a benevolent dynasty aborning, with Bailey continuing to dispense his investors' money to whomever he deems worthy of his largesse.  North Korea would certainly approve of the succession.

As he and Mary are leaving for their honeymoon, however, destiny again intervenes, and they are forced to use their savings to pay off shareholder-customers demanding their money during the bank-run of 1932.  Incredibly, however, George refuses to allow them to close their accounts, insisting that any funds retrieved be "loans," again making extraordinary and unilateral decisions with no legal basis or even consent by his customers.

Potter, the businessman, instead offers the cash-strapped shareholders half-price for their shares in BBLA, which, history tells us, was rather generous considering that overall financial markets dropped well over 80%.  For his fair offer, of course, he is derided and publicly mocked by the working-class hero, George, who arrogantly announces to him that "there'll be no fire sale here.  We don't need your 'bailout.'"  Noble words, but one wonders how many small institutions like BBLA simply vanished that year with, their shareholders losing everything.

Nevertheless, in this American fairy tale, Bailey barely succeeds in meeting the Association's redemptions (or "loans," as he insists in making them), and his doors stay open.  The BBLA comes within $2 of going bankrupt.

For Bailey's astute (lucky?) management under stress, Potter then offers to hire away the 26-year-old man at a salary of over $300,000 (in today's dollars) to manage his investments.  For his generous offer, Potter is again vilified by the intemperate Bailey, who responds that "if you offered me a million dollars ... to be your stooge, the answer would still be no!"

Another good FOG is the coquettish Violet -- an "easy girl," we are told -- whom George nearly dated before marrying Mary.  When Violet leaves for the bright lights of New York, one of George's farewell gifts to her is a phony letter of recommendation which causes even the jaded Violet to blurt, "But that's lying, George!"  Worse than this fraud, he gives the departing floozy a cash gift, telling her, "It's a loan, Violet!  I'm in the loan business."  With no promise made by the bimbo to ever repay, it seems clear that it pays to be friends with the undisputed authoritarian in full charge of the BBLA honeypot.

Yet another close FOG is the bumbling Uncle Billy; nearly senile, he logically would be allowed nowhere near Association funds.  Oddly, however, he is entrusted by the BBLA with making cash deposits at the bank alone, while he freely admits, "I forget things all the time."  In this case, he loses an enormous deposit of $100,000 (in 2011 dollars), and the BBLA again faces ruin.  What kind of manager would entrust sweet old Billy with such a wad?  Our hero.

Putting aside the well-remembered heavenly intervention by a kindly angel (whom our hero, let us note, at one point threatens to choke), the real salvation of King George's Association comes in the form of donations by friends and the biggest bailout of all from a "super FOG" deus ex machina as omnipotent as today's federal government: an informal "advance" of more than $300,000 (2011 dollars) from a rich former suitor of George's wife -- apparently with no strings attached.  Yes, Virginia, there is a Santa Claus!

With the issues of Communism, "social justice," income redistribution, and all manner of progressive thinking far from resolved in the postwar years, It's a Wonderful Life reflects the hunger for easy answers and general wealth, which seemed quite feasible for the world's colossus at the time.

Luxury homes seemed the birthright of our citizens, untouched by the war which had left the rest of the world as rubble.  The George Baileys of postwar America, like the apparatchiks of the Soviet Union, had no time for the niceties of business regulation or careful vetting of credit.  They were impatient to dispense wealth to the fawning masses, who clearly didn't understand credit but were certainly happy to enjoy the largesse of the BBLA, Fannie Mae, or their day's Barney Frank.

Today, we are left with a legacy of ideas, deeply entrenched in the entire Western World from Athens to Honolulu.  A simple viewing of this iconic film reminds us, as do our teachers, entertainers, and the media daily, of the following postwar American values:

• Money is for those who "deserve" it -- i.e., "nice" people
• Profit is evil, as it encourages businesses to act impersonally
• Destruction of property is OK if done for "pure" reasons
• Publicly insulting others is OK if done with passion and conviction
• In the end, an "angel" will rescue "good" people if their hearts are pure

These values, so transparently embodied in the naïve persona of Jimmy Stewart, are more subtly cloaked today, twisted by dark forces who seek to use them to justify their greed.  Today's clever Mr. Potter would certainly be championing green causes and arguing for higher tax rates while knowing precisely how he'd exploit both to gain more while convincing the "garlic-eaters" of his sincere social concern.

Obviously, old man Potter's business sense was exactly right when he told the BBLA board: "High ideals without common sense can ruin a town" -- or a nation -- as easy credit creates "a discontented, lazy rabble instead of a thrifty working class. All because starry-eyed dreamers like Bailey put impossible ideas into their heads."  Ernie the taxi driver should have "moved back in with the missus' folks" as he wanted to do until he could retrain to afford the nice home he wanted for his family.  Ernie intrinsically knew that he was in over his head; George likely helped him drown.

Our current mortgage meltdown crisis shows us that, indeed, 70 years of Bailey-style undisciplined credit growth has brought us to tears as we had ignored common lending standards and let crony capitalism favor personal connections over objective analysis.  A bit more cold-hearted caution in the '40s might have helped us avoid the civil unrest and plummeting living standards we almost certainly will experience as Potter's reality bites and the FOGs adjust to a new world of painful limits, correcting for decades of living an unearned high life.

But Capra was right, too.  It was a wonderful life that seven decades of care-free spending gave America.  I suspect that no country in the world will again know such unrestrained and general wealth in our lifetimes as postwar America.  George Bailey helped us all to enjoy one hell of a party, a true "free lunch," generous to all our friends, relaxing our cares for the future.

But now the rich friends are broke too and offer no more blank-check "advances."  Our poorer friends are equally strapped and can lend us nothing.  It is time for a discipline familiar to the hard-nosed Potter but unknown to the happy-go-lucky faux banker Bailey.  The Champaign bill is on the table and now begins the serious talk of how we pay for the "Wonderful Life" we've loved too well.