President Roosevelt during Fireside Chat

The efforts of the Hoover and Roosevelt administrations to fight the Great Depression and the efforts of the Bush and Obama administrations to prevent another are united by a reverence for a particular understanding of what the “principles of harmony and necessity required” of them (Roosevelt, Public Papers 317–18). Public opinion and the institutional power politics prevailing in domestic affairs created improvisational plans that showed not only great deference but also dependence on a system that had gone awry, without much encouragement to go down that road from government programs and policies (Bernanke, Federal Reserve 62).

This story remains unfinished; as of the end of 2013, 7.2 million homeowners had received mortgage modifications of various kinds, with 3.9 million from the private sector without direct government assistance (Geithner 384). And yet, by the end of 2015, the foreclosure rate remained  double what it had been before the financial crisis of 2008 (Jones 4).

Ben Bernanke

When we observe an absence of politics in Frank Capra’s film, what has been edited out is the necessarily complicated and fractious process of conflict and uneasy compromise that is essential to “peaceful and orderly progress” in a democratic society that is nonetheless made up of constituencies with unequal power and influence (Roosevelt, Public Papers 317–18). Much has been made of public anger at the banking and financial firms that received support because, in political and financial terms, they were understood to be “too big to fail.” What has received less attention is the degree to which Americans themselves suspected that those in trouble did not deserve a helping hand. As former Federal Reserve chairman Ben S. Bernanke has observed, as early as February 2009, there was already strong popular opposition developing against precisely this kind of help, fueled by the suspicion that many of those receiving assistance were undeserving (Bernanke, Courage to Act 390).

In the end, the American government did not create a broader and more durable tarp of protection for homeowners. The shortcomings in our own system’s response to its latest crisis bring us back to where we began, Frank Capra’s It’s a Wonderful Life, which demonstrates both the generosity and the shortsightedness brought on by crisis. And we must ask ourselves: where do we find ourselves today?

   Working through the Sources