Bailey Brothers' Building and Loan

The classic film It's a Wonderful Life is set during the Great Depression. The main character, George Bailey (Jimmy Stewart), runs "Bailey Brothers Building and Loan," a financial institution similar to a bank but that specializes in loans to people buying homes. When someone deposits money in the BBB&L, they are purchasing "shares" and will earn interest on their shares.George's nemesis, Mr. Potter, is trying to force George's BBB&L to become insolvent and fail.

Watch the bank run scene https://youtu.be/iPkJH6BT7dM. As the scene starts, George and his new wife, Mary, are leaving town for their honeymoon. She is carrying $2,000 in cash for their trip.

ASSETS | LIABILITIES

Reserves $225 | Deposits $1,000

Securities $250 | Short-term loan fromBank $275

Loans to homeowners $800 |

Consider the simplified Building and Loan balance sheet above.Put the following events in chronological order and answer the accompanying question.

Using the simplified BBBuilding and Loan balance sheet above, put the following five events in chronological order and answer the accompanying questions.

_______George explains the money is not in the vault, but has been loaned out to other customers.Is this legal?What kind of banking system is this called?

_______Potter is willing to buy each depositor's "share" for half their value.If enough depositors allow this, he would become the majority shareholder in BBB&L.Why can't George give the depositors their money if they demand it?

_______A depositor demands to withdraw all his money (sell his shares), $242.From where on the balance sheet should this cash come?Is there too little, too much, or just enough to give him?

_______Mary reveals the honeymoon cash of $2000.George offers to use it to let each of his customers withdraw some funds.From where on the balance sheet does this money come?

_______In the aftermath of the stock market crash and resulting financial panic, the Bank called in (demanded repayment of) the short-term loan.Uncle Billy paid what he could in cash. From where on the balance sheet did the cash Billy use come? Does he have too little, too much, or just enough?