Reality is hard: Obama's favorite economic reporter Paul Krugman uses 'It's a Wonderful Life' bank to slam Romney

Lori Ziganto | 11:33 AM on May 22, 2012

And the ever-wrong and unemployable David Shuster joins in.

https://twitter.com/#!/MHB2012/status/204954032782053378

https://twitter.com/#!/DavidShuster/status/204687171616112640

Oh, dear. As Twitchy reported last month, President Obama calls Paul Krugman “one of the smartest economic reporters out there.” Good grief!

While accusing Mitt Romney of not understanding banking, he uses a fantasy from a movie as an example of how one should understand banking. No, really.

Here’s what the presumptive Republican presidential nominee said about JPMorgan’s $2 billion loss (which may actually have been $3 billion, or $5 billion, or more, but who’s counting?): “This was a loss to shareholders and owners of JPMorgan and that’s the way America works. Some people experienced a loss in this case because of a bad decision. By the way, there was someone who made a gain.”

What’s wrong with this statement? Well, suppose that someone — say, Jimmy Stewart in the movie “It’s a Wonderful Life” — runs a bank that takes in deposits and invests the money in various ways. And suppose that one of those investments is a risky bet on some complex financial instrument, with Mr. Potter, the evil plutocrat, on the other side.

If Jimmy Stewart’s bet pays off, we’re in Romneyworld: he’s made money, Mr. Potter has lost money, and that’s that. But suppose Jimmy Stewart loses his bet. If the bet was big enough, he no longer has enough assets to pay off his depositors. His bank collapses, probably in a chaotic bank run that takes down the whole town’s economy as collateral damage. Mr. Potter makes money on the deal, but so what?