Specifically:
- Could a bank call a loan willy-nilly like that, with no prior warning? How often did that happen? Have the rules changed since then?
- Could George have legally loaned his own money to his customers?
Bank runs were not at all unusual during the Great Depression- that was one of the reasons FDR instituted programs like the FDIC.
Whether the practices you allude to were legal even in the 1930s, I can’t say… but before the New Deal, regulation of banks was far more lax, which is why, even before the Great Depression, periodic “Panics” were common.
In the middle of July you ask this?
It is a distinctly seasonal question, at least for Western Civilization.*
*As we know it.
It’s hard to expound in detail on a scenario from a work of fiction, but in general, yes, the scene is plausible. Loans often have restrictive covenants under which they can be called. In Bailey’s case, perhaps Potter’s loan required Bailey Brothers to maintain certain financial ratios, failing in which it could be called, and Bailey fell below those ratios as a result of the Great Depression.
And before deposit insurance, a called loan (and consequent loss of liquidity) could certainly lead to a bank run. Even as recently as 2007, the British bank Northern Rock fell to a run when it lost its access to loan money. In that case, however, Northern Rock found itself unable to renew money market loans when money markets seized up over the American subprime crisis, as opposed to an existing lender calling an outstanding loan.
As for George loaning money to his own building & loan, I don’t know why not. I’d advise him to document it more carefully than he did, but hey, it’s a movie.
I assume that George had withdrawn the honeymoon money from his own account at the Building and Loan, so he was in effect redepositing it so that the townspeople could withdraw it.
…well you better catch it!
IIRC there’s a similar less believeable scene in Mary Poppins.
Many commercial loans are callable (“demand loans”?). Basically the bank provides the cash flow and credit to allow the business to run. Losing the confidence of your bank is a bad thing for a business. Even more so for a bank… other banks cash cheques drawn on your bank; hey do ATM transfers, cashiers cheques and such nowadays too. All that is done on the trust that when the differences are settled at the end of the day, the money will arrive from whoever owes the difference. If the bank is small enough, one major failure might also crash the bank.
It would be worse today. What happened in 2008 was that the banks suddenly all got scared that other banks would dfault on these money transfers because their assets were invested in crap and their loans would fail too. None of the banks wanted to be on the hook for another bank’s debts. It took the fed stepping in to guarantee to make up any differences to prevent a total meltdown of the system. Imagine everywhere you use credit - your credit card, paying bills online, your direct-deposit payroll, your automatic mortgage and car payment withdrawals… Unless all those happen between accounts in the same bank, one bank has to trust another will pay up at the end of the day. If they don’t, well, we’re back to a cash economy.
I suspect buried in the fine print of any bank loan is a collection of circumstances under which they can call your loan.
Not so much that the bank calls in its loans, but the customers all want their savings out at once. No bank in the world has the available cash to pay everyone so you get a run, then a collapse, then the government (really - the taxpayer) bails them out. Meanwhile the bosses keep their astronomical salaries and get golden handshakes when they get terminated.