By Ray Birch
BEDFORD FALLS—All of the friends, townspeople and George Bailey himself would need to brush up on their social media skills if they wanted to have any hope of saving the Bailey Brothers Building & Loan in 2023 in the same way they did in the movie classic “It’s a Wonderful Life.”
TikTok, X, Facebook, Instagram and various payments apps would all have to be put to work to raise the funds needed to avoid conservatorship in the new, highly digital, financial services world, according to one state regulator.
Perhaps #GeorgeBaileyNeedsYou, #SaveTheBuilding&Loan, #MrPotterUp2NoGood or something else that might start trending?
Not that any of that wouldn’t raise a host of enforcement issues, especially when the “bank examiner” is in town and already unhappy over being away from family near Christmas.
“George Bailey, a social media influencer…I think he would have to be that guy,” said Corey Krebs, assistant commissioner at the North Dakota Department of Financial Institutions. “He would have to have quite the followers to reach everyone in time before they pulled their funds.”
As anyone who has ever been near a cable broadcast during the holidays knows, in the movie, after being rallied by George Bailey’s wife, Mary Bailey, the people of Bedford Falls empty out their own savings and assets in order to fill a big financial hole at the building and loan—which for all intents and purposes is a credit union, with George Bailey in one scene successfully heading off a deposit run by explaining how their money isn’t in the vault, it’s been loaned out to others.
The No-Good Banker
That financial hole and the resulting emergency is the result of absent-minded assistant manager Uncle Billy, who loses $8,000 he was supposed to deposit at the evil Mr. Potter’s bank when he mistakenly leaves the deposit in a newspaper that he hands to Potter.
According to the U.S inflation calculator, the $8,000 Uncle Billy lost in 1946 would represent $125,969.64 today. (Until the creation of corporates, it was customary for credit unions to also keep funds in local commercial banks.)
Holiday humor aside, Krebs emphasized what saved the savings and loan from insolvency would not play out well today. In fact, as the failure of Silicon Valley Bank and others earlier this year proved, technology has created the era of the digital run and an even faster crash.
“Yes, the liquidity issue, how would George stave off that run today?” asked Krebs. “I mean, back in the day, good old George had quite the PR skills, did he not? He was good enough at public relations, and he was well known is his community.”
Where to Begin
As for the Bailey Brothers Building & Loan, Krebs said the first question that would come to his mind had he been back in the day and assigned to investigate the tiny organization would be trying to get a true picture of what was happening.
Corey Krebs
“I'd have to see what triggered it,” he said. “First and foremost, I’d need to know the loss is correctly reported on the 5300 Call Report. With the data integrity verified, we’d turn our attention to the impact of this loss on ratios—first capital, then liquidity and finally earnings.
“Assuming those ratios still fell within peer group averages or, given it’s Christmas, maybe a few basis points below peer group average, we would move on to check to ensure a SAR was filed,” Krebs continued. “Fortunately, while there are only 12 days of Christmas, FinCEN gives 30 days to file this festive document.”
Finally, Krebs would meet with the supervisory committee.
“Likely interrupting their Christmas party meeting, I’d ask them to monitor the spending habits of the assistant manager,” he said. “Nothing that dramatic, just low-hanging stockings to rule out elaborate Christmas gift giving as the means of laundering the cash. While this might be a Grinch-like move on my part, the supervisory committee is elected to monitor who has been naughty or nice.”
Putting the Finger on a Risk Issue
And what about this character, Billy Bailey, aka Uncle Billy to everyone in town and known for tying strings to his fingers as reminders?
“An MRBA, often called a document of resolution, requiring a third-party assessment of their information systems and risk monitoring process would be warranted,” Krebs said. “This will include a review of the string-on-finger tickler system for adequacy, to ensure it provides the user with all relevant information to appropriately track the issues, and that it can be transferred to other staff.”
One Other Potential Red Flag
There is another potential problem the investigation would also likely uncover, according to Krebs, and even Clarence the guardian angel might not have an answer.
The issue is the Bailey Building and Loan has also been expanding into residential lending for a new housing development called Bailey Park, possibly without the lending expertise.
“As a state regulator I am very familiar with the housings development’s abysmal absorption rate,” said Krebs. “While I am sure the appraisers had visions of sugarplums dancing in their heads when they were putting their USPAP compliant appraisal together, there is still a need for the credit union’s board to review and update their OREO policy. To be clear, this is not the policy related to cookies for Santa.”