Jimmy Stewart is Dead
Book

Jimmy Stewart is Dead

Ending the World's Ongoing Financial Plague with Limited Purpose Banking

Laurence J. Kotlikoff
Wiley, 2010
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Editorial Rating

8

Qualities

  • Innovative
  • Eye Opening
  • Engaging

Recommendation

There’s no use pining for the good old days – It’s a Wonderful Life was just a Hollywood movie, the town of Bedford Falls doesn’t really exist and Jimmy Stewart is long gone. But earth-shattering economic tumult has a way of evoking nostalgia for the return of (what you think were) simpler, more honest fiscal times. Economist Laurence J. Kotlikoff delivers a salty, sometimes irreverent, but ultimately convincing remedy to cure you of the erroneous belief that banking should return to the past to make up for the sins of the present. He competently lays out his concept of how “limited purpose banking” would work while hoisting on their own petard the crafty bankers, sinister lenders and obfuscating bureaucrats who nearly crashed the economy. getAbstract recommends Kotlikoff’s original interpretation of events resulting from the 2008 crisis and his exposition of the far-reaching solution he offers, but quibbles over just one point: George Bailey ran the Bailey Building and Loan, not the Bailey Savings and Loan.

Summary

So Long, Bedford Falls

In the classic 1946 film It’s a Wonderful Life, actor Jimmy Stewart plays George Bailey, a beleaguered banker in the town of Bedford Falls. When panic forces a run on his bank, Stewart assures his frightened depositors that their money is safe, because it’s tied up in their neighbors’ mortgages and loans.

So much for Hollywood. The time when your local banker knew you personally is long gone. Now, your corner bank is a branch of a megabank whose service representatives score your credit and determine your creditworthiness by computer. And you don’t know where your money goes, or what assets it has funded, or even if the bank is still holding those assets on its books. Fractional reserve banking, in which banks need to keep on hand only 10% of “potential immediate withdrawal” requirements, is just one of the many problems with today’s financial system, along with “off-balance-sheet bookkeeping...kick-back accounting, sales-driven bonuses, nondisclosure, director sweetheart deals...and government bailouts.” This system nearly collapsed in 2008, and bankers and politicians still are trying to put it back together. But the only way to ensure...

About the Author

Laurence J. Kotlikoff is an economics professor at Boston University and has worked with the World Bank and the IMF.

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