Merry Christmas, everyone. In today's guest post, our friend Kevin Dolan offers his unique take on the Christmas classic, It's A Wonderful Life. Before we get to it, a couple of quick market notes.

Mr. Potter is basically right about George Bailey.

You can't run a lending business like "a charity ward" -- particularly one owned by other people, for whom you act as a fiduciary agent.

If Bailey gave away money to anyone who asked, he would bankrupt the place.

No matter how much profit Bailey selflessly chooses to leave on the table, it isn't enough to build infinite houses for free.

And that's the first clue as to what is really happening here: George Bailey doesn't bankrupt the Building & Loan.

In fact, he somehow pulls it through the Great Depression (which, in the real world, sank Building and Loan Associations as a category -- more on that later) and his large family lives simply but comfortably.

Which means that, somewhere off camera, someone at the Bailey B&L is denying loans, foreclosing on deadbeats, and repossessing properties.

It may be done very patiently, compassionately, judiciously -- but it's happening. A lending institution exists to make exactly these decisions -- they have no other function.

We see George make a lot of decisions that aren't "strictly business" -- but he also isn't giving everything away. So what is he really up to?

George Bailey conspicuously gives (the B&L's) money to the people he thinks deserve it, and who he believes to be good for it.

Some of these choices are pretty sensible from the outside (like Ernie Bishop, his taxi driver buddy) -- but others are harder to justify (like Violet Bick, who wants the money so she can skip out on a bad reputation).

In Potter's words: "if you shoot pool with some employee around here, you can come and borrow money".

Needless to say, any one of the informal, personal favors that Potter observes in the Bailey Building and Loan -- virtually every decision we see Bailey make in the film -- would likely land him in serious trouble today, even without the crisis caused by Uncle Billy's nepo-hire incompetence.

Potter's objections are, of course, self-interested -- but they're also a reasonably forthright representation of Yankee business norms, as critiqued by an Italian immigrant (writer/director Frank Capra).

From Potter's perspective (which is the prevailing perspective at every company you've ever worked at, as well as their regulators), agents responsible for other people's investments ought to be impartial and procedural, and perform their fiduciary duty to maximize shareholder returns.

As seen through this lens, George Bailey is essentially a gangster, using other people's money to hand out favors to his friends and build a personal patronage network.

The film clearly admires George for his leniency to debtors and disregard for profit, but that too is a way of acquiring personal influence at the shareholders' expense.

A lot of people in Bedford Falls owe George Bailey a favor -- and the heartwarming climax of the movie is when that favor is called in, and his friends receive him into everlasting habitations.

The propriety of George's behavior depends on whether you think of him as an employee, responsible to act in the interest of his employers -- or a king, responsible to act in the interest of his subjects.

From the film's perspective, George Bailey is clearly the rightful heir to the throne of Bedford Falls, and it's exactly his unaccountable, sovereign power that allows him to save the realm.

You don't hear about Building & Loan Associations anymore because they required human trust, loyalty, and coordinated action.

Building & Loan Associations operated under a mutual membership structure, in which homeowners paid for their homes through "share accumulation", in which a significant portion of the monthly payment was a purchase of shares in the B&L.

The value of your shares was based on the profitability of the association, and you were obligated to buy and hold your shares to maturity. A B&L depended on strong economic alignment -- you needed your neighborhood to stay financially healthy, so that all your neighbors kept making their payments.

This is what George Bailey means when he says "...The money's not here. Your money's in Joe's house, right next to yours ... you're lending them the money to build, and then they're going to pay it back to you as best they can. Now what are you going to do? Foreclose on them?"

Well, in the real world, in the Great Depression, they did foreclose on each other, and B&Ls largely collapsed, in favor of Savings & Loan Associations (S&Ls) with conventional mortgages as we now understand them (a strictly bilateral contract between the individual debtor and the bank).

The miracle of It's a Wonderful Life is that George Bailey, by God's grace, holds his people together through courage, sacrifice, and force of will.

When George "stands up to Potter", he's not fighting for infinite free houses for everyone in Bedford Falls: he's fighting for his own personal right to decide who gets the loans that don't make sense on paper, who gets a few extra months to make payments, etc. He wants the power to decide the exception.

Which is to say: Bailey and Potter are fighting for sovereignty over Bedford Falls -- to decide who lives there, and in what sort of homes, and on what terms. They are explicitly struggling for personal power.

The most important question to ask of It's a Wonderful Life is: why would a selfless, decent man like George Bailey struggle for personal power? And why would the people of Bedford Falls struggle and sacrifice to keep him in power?

Answer: because both George Bailey and the people recognize that his sovereignty is their sovereignty.

If George had refused to take on the Bailey Building & Loan after his father's death, it would have been dissolved -- and for lack of a binding institution, every member's property would have been gobbled up piecemeal by Potter.

If he had not set an example of sacrifice during the bank run, even the stalwart members of the B&L would have been cleaned out and forced to sell their shares -- probably for less than the 50% discount Potter initially offered.

It matters very much that George Bailey has the power to cut all these informal human deals to prevent the bank from failing, and the personal magnetism to convince people to take less than they are owed.

His sovereignty doesn't compete with theirs -- it's precisely because he is in charge that they are able to hold on to their own dominions.

This is why the archetypal connection between the righteousness of the king and the health of the land is so resonant and intuitive.

People in our corner of Twitter are accustomed to thinking of our present algorithmic, headless, entropic state as a unique dysfunction of managerialism.

But it's actually just the Law of the Jungle -- the state of the land without a protector -- and it's one of the oldest stories there is.

In the alternate history of Bedford Falls in which no king emerges, power/sovereignty simply falls to the most cunning and dangerous predator (Potter), who does not actually want to "rule" Bedford Falls in any meaningful sense. He just wants to eat it.