Show Me How It Would Have Been, Clarence

I've been wondering how the last few years would have gone down if much greater care had been exercised in lending money and if mortgage debt had not been repackaged as a new form of investment that would be used and re-used many times as collateral in further specious transactions. Where might we be today, versus where we actually are?

Some people who timed their exits from stocks, mortgage backed securities, etc., would be far worse off. But more importantly, the economy would have experienced slower, steadier growth over the last few years because an artificial and unsustainable run-up in home prices would not have encouraged such free consumer spending and acquisition of further debt. The stock market would be a little higher than it is today, but it never would have reached the stratosphere and caused so many who bought in at the top to lose so much. There would be millions of people who never would have moved from rental to owned housing. Their credit ratings would be better and their jobs would be more secure because the economy wouldn't have oscillated so wildly between boom and bust.

This entire imaginary scenario would have been the reverse of the scene from It's a Wonderful Life: instead of Clarence the angel revealing the horrors of an alternate present, we would witness the results of a steady if unexciting period of slow growth and widespread but incremental increases in wealth.

The problem is all that would have been so boring. Without the huge risk, there never would have been the huge gains that produced so much instant gratification. When "house flipping" enters the mainstream vocabulary, you might realize everyone's gone a little giddy or mad. It gets me back to one of my favorite quotations about the source of human unhappiness, from Blaise Pascal in the 17th century: "all human troubles stem from a single cause -- the inability to sit still in a room." The slightest excitement can create what is probably at least a brief chemical dependency on such a state and then withdrawal symptoms unless more and greater excitement is immediately forthcoming.

In contrast to how Clarence's vision ended, we wouldn't return from such a divinely-enabled reverie to the beauty of the actual present, but rather to a mad dash to socialize the financial services sector (or at least the risky portion of their business), calls to trust the executive branch with nearly a trillion dollars without the slightest accountability, and no idea how to rework our system so this doesn't happen again. It's as if George Bailey really did run off with the bank's money, his friends came by with more money to help after the bank examiners discovered the loss, and he kept all the donations anyway. Then he expects to return to the bank the same as always. Wouldn't it be time to think about switching banks, or at least asking George to find another job?