Lutnick sees “It’s a Wonderful Life” threat to U.S. economy

November 5, 2007

Howard Lutnick, the head of Cantor Fitzgerald, says he fears that bankers may start to behave like George Bailey and his father in the iconic 1946 movie “It’s a Wonderful Life,” and keep loans on their books to maturity.

While this may be a reasonable response to the credit crunch and the losses that might be suffered if those loans are offloaded, Lutnick told the Reuters Finance Summit in New York that it would present a serious risk to the U.S. economy.

“If they hold the stuff and they don’t recycle it, it has got to slow down their lending,” he said. That in turn could worsen the credit crunch (or blockade as he terms it), and will require further interest rate cuts from the Federal Reserve.

On the criticism that Fed Chairman Ben Bernanke is just bailing out the financial sector, Lutnick said it was more of a question of his needing to look after his child, the economy.

“Whatever bad things your children have done, they are still your children,” he said. Perhaps Bernanke is playing the equivalent of the guardian angel, Clarence, in the movie, which starred Jimmy Stewart.

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