“It’s a Wonderful (Corporate) Life” . . . Not

Banks have never made money in the history of banking, losing the equivalent of all their past profits periodically.

–Nassim Nicholas Taleb, “How Bank Bonuses Let Us All Down” (2/24/09)

G.M. has become a giant wealth-destruction machine ” possibly the biggest in history.

–Thomas Friedman, “Start Up the Risk Takers“; The New York Times (2/21/09)

GM is a 101 year-old company which . . . has accumulated negative retained earnings of $60 billion-and-climbing”meaning that in more than 100 years of operation, the company has not managed to keep a dime’s worth of retained earnings for its shareholders.

–Jeff Matthews, “The Most Irresponsible Thing You’ll Read This Weekend” (2/22/09)

In the movie classic, “It’s a Wonderful Life,” George Bailey’s guardian angel, Clarence, shows George all the ways the world would have been poorer had he never existed.

Thriving Bedford Falls is instead tenement-filled Potterville; its citizenry is prostrate and indebted to the town’s predatory lender, the Bailey Building and Loan Association; and George’s loved ones are either dead, ruined, or miserable.

Clarence’s Verdict

Surveying the mounting financial carnage wrought by AIG, GM, Citigroup, Bank of America, Wachovia, Washington Mutual, Bear Stearns, Fannie Mae, Freddie Mac, and a long list of others, what would a financial Clarence say?

That society would have been better off had they never existed.

At least in a strict accounting sense, i.e., accumulated retained earnings, such a conclusion is incontrovertible.

You’d certainly get little argument from their devastated shareholders, nor from taxpayers burdened with their bad bets . . .

P.S.: the usually astute Thomas Friedman isn’t even close on which company is “history’s biggest wealth destruction machine.” That dubious honor goes to . . . AIG.

About the author

Ross Kaplan has 19+ years experience selling real estate all over the Twin Cities. He is also a 12-time consecutive "Super Real Estate Agent," as determined by Mpls. - St. Paul Magazine and Twin Cities Business Magazine. Prior to becoming a Realtor, Ross was an attorney (corporate law), CPA, and entrepreneur. He holds an economics degree from Stanford.
1 Response
  1. Ned

    Most articles I’ve read, and opinions from pundits and bloggers are calling this a financial crisis. I believe the financial crisis is a symptom of a crisis of “Honor” in America.

    Our leaders in government and industry have not behaved in a manner I would characterize as “Honorable”. It makes sense that when false promises are called to task, the dishonorable house of cards collapses.

    Our elected officials and leaders of industry should be taken to task for the dishonorable way they’ve behaved.

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