How “It’s a Wonderful Life” Helps Explain U.S. Building and Loan Associations

For generations, the movie “It’s a Wonderful Life” has warmed hearts with the story of George Bailey, who sacrifices his dreams to head the building and loan association his father and uncle founded. His guardian angel pulls George back from the brink of despair when the building and loan faces a crisis.

But if watching the 1946 Frank Capra movie is a holiday tradition for your family, it may have raised some questions about building and loans: namely, what they are and why there aren’t many around in the U.S. anymore.

An article from the Federal Reserve Bank of Richmond and a Federal Reserve Education lesson offer some history and explanation on building and loans—and why they mattered. Let’s take a look.

What Are Building and Loans?

The Bailey Bros. Building & Loan is central to the plot of “It’s a Wonderful Life.” But present-day Americans could be excused for not being familiar with building and loan associations. The thrift associations “made home loans more broadly accessible” from the 1830s until the Great Depression, according to a 2019 article in the Federal Reserve Bank of Richmond’s Economic Brief publication. That was before more modern mortgage markets were established.

The associations were based on the idea of combining self-reliance and mutual aid, David A. Price and John R. Walter wrote in the article “It’s a Wonderful Loan: A Short History of Building and Loan Associations.”

“Individuals held shares in the institutions and, in return, had borrowing privileges as well as the right to dividends,” the authors wrote. “Broadly speaking, while operating plans varied, members committed to making regular payments into the association and took turns taking out mortgages with which to buy homes.”

By the Numbers in 1927

• 12,804 building and loan associations
• 11.3 million building and loan members
• 119 million U.S. population
• $7.2 billion in building and loan assets

SOURCE: “It’s a Wonderful Loan: A Short History of Building and Loan Associations.”

Why Were Building and Loans Important?

In the 1920s and early 1930s, mortgages offered by commercial banks (and life insurance companies) extended for just three to seven years and covered about half the value of the mortgaged property (PDF). That’s according to a chapter in a 2014 National Bureau of Economic Research publication, “Housing and Mortgage Markets in Historical Perspective.”

Building and loans had easier terms for borrower members and “played a significant role in extending homeownership through more affordable mortgage lending,” Price and Walter wrote in the “It’s a Wonderful Loan” article.

In the movie, George makes the building and loan associations’ role in homeownership clear as he calms Bailey Bros. members demanding their money after a run on the local bank. (More on historic bank runs like the one portrayed in the movie shortly.)

“You’re thinking of this place all wrong, as if I had the money back in a safe,” George tells the anxious crowd. “The money’s not here.

“Well, your money’s in Joe’s house—that’s right next to yours—and in the Kennedy house and Mrs. Maklin’s house and a hundred others,” George continues. “You’re lending them the money to build and then they’re gonna pay it back to you as best they can. What are you gonna do, foreclose on them?”

How Were Buildings and Loans Like Banks?

You might be thinking that much of George’s description of the location of Bailey Bros. members’ money also could be applied to mortgage lending from banks nowadays.

Indeed, a Federal Reserve Education lesson on the Great Depression gives a similar explanation about how bank customers’ deposits are used now and how much of that money is available to customers.

People who borrow from banks use the money for everything from buying houses to starting businesses and paying for college, according to the lesson. Banks take in deposits and hold as reserves the deposits they don’t loan out.

“The money loaned out is spent almost immediately by borrowers to pay for purchases,” the lesson says. “Because only a small fraction of the banks’ customers’ deposits are kept on reserve, not everyone can get all of their money out of the bank in cash on the same day.”

What Is a Bank Run?

In typical situations, not all of an individual bank’s customers want to withdraw their money at the same time. What happens if they do?

That brings us to bank runs of the early 1930s, roughly the time of the run on the Bedford Falls bank portrayed in “It’s a Wonderful Life.” The Great Depression lesson outlines what happened: The failure of the Bank of the United States and other commercial banks, plus nearly 7,000 banks’ suspension of operations, created bank panics.

 

Depositors gather in front of the failed Bank of the United States in 1931. The New York commercial bank’s failure in late 1930 contributed to bank panics.

Image via the Library of Congress.

Depositors must be confident that they can access their money whenever they need it for banking systems to work well. If depositors lose that confidence because a large bank or business fails, people may rush to withdraw their money from other banks because they’re afraid they could lose it if their bank also closes.

“When depositors remove money from the system, banks may be forced to reduce their outstanding loans; that is, require full payment or foreclose,” the lesson says.

The Banking Act, signed in 1933 to stabilize the country’s banking system, included the creation of insurance for customers’ bank deposits via the Federal Deposit Insurance Corp. (FDIC). Between the October 1929 stock market crash and March 1933, more than 9,000 banks had ceased operations, according to the “The First Fifty Years,” a publication on the history of the FDIC.

After the passage of the act, the bank failure rate dropped “precipitously,” according to the publication.

How Were Building and Loans Different than Banks?

Banks and building and loans had different options during bank runs.

People who put their savings in the associations were member-owners investing in the building and loans. Bank savers, however, were creditors.

That distinction, and restrictions in association plans about pulling out the money you had invested, meant that building and loans didn’t immediately have to fulfill withdrawal requests, as Price and Walter wrote. Some didn’t allow withdrawal before members had paid their shares’ maturity value, and those that did had a “significant” period, usually 30 to 60 days, to carry out the request.

“Thus, building and loans were not exposed to the extent that banks were to a risky mismatch between long-term assets and short-term liabilities,” they wrote.

Price and Walter noted that “It’s a Wonderful Life” accurately portrayed the withdrawal process: When member Tom demands the $242 he has in the building and loan, George initially tells him he would get it in 60 days. “That’s what you agreed to when you bought your shares,” he says.

Why Aren’t There Many Building and Loans Now?

While building and loan associations didn’t close because of depositor runs, the Great Depression affected them in other ways. The number of building and loans dropped from more than 12,000 in 1929 to a little over 8,000 a decade later, according to the “It’s a Wonderful Loan” article.

The sharp drop in real estate prices likely contributed to closures, Price and Walter wrote. And widespread bank failures affected building and loan associations, which relied on short-term lending from banks since they mostly had longer-term mortgages as assets.

Building and loans changed, transitioning into what are now called savings and loans, history professor David Mason said in a 2022 interview with Marketplace. They lobbied for and got deposit insurance in 1935, he said.

“It was part of a process that the industry went through after the Great Depression to kind of reorganize and unify itself and become, in some ways, more professional,” said Mason, of Georgia Gwinnett College.

As of June 30, 2025, there were 503 of those kinds of institutions left in the U.S., according to Federal Reserve data.

And the need for building and loans has dwindled. Mortgage-backed securities and government-sponsored enterprises “now play significant roles” in home mortgage markets in the U.S., according to the “It’s a Wonderful Loan,” article.

So prospective homebuyers no longer rely on building and loans for longer-term mortgages. But they still can count on what Price and Walter called the “best-known example” of a building and loan—Bailey Bros.—if they need help with holiday cheer.