Summary
The bank examiner, Mr. Carter, visits George at his office. George wishes him a merry Christmas, as it is Christmas Eve, and they go into his office to look over the books. Meanwhile, Uncle Billy goes to deposit $8,000 of the Building and Loan's cash at the bank, when he spots Mr. Potter coming into the bank. He wanders over to Potter and gloats about Harry's heroism.
In the process of gloating, Billy accidentally puts his envelope of money into the newspaper. He searches in vain for the money, while Potter finds it in the newspaper.
Back at the Building and Loan office, Violet visits George to get a loan. She's moving to New York and needs some money to get started. As she leaves, she plants a kiss on his cheek. In the lobby, she wipes the lipstick stain away with a handkerchief and everyone mistakes the interaction for evidence that George is having an affair.
George goes into Billy's office and Billy tells him he lost the $8,000. Hearing this, George rushes to the desk in search of the money, before telling one of his workers what happened. He goes into town with Billy, searching for the cash, and Potter watches them from his office window.
That night, after searching in vain, George begs Billy to remember what happened to the money. "Where's that money, you silly, stupid old fool!" George yells at his uncle, grabbing him by the collar and suggesting that the lost money "means bankruptcy and scandal and prison." He storms out of the room and Billy cries, as his pet squirrel climbs up onto his arm.
That evening, George returns home to his family. They ask him what's wrong and ask where the Christmas wreath is as he somberly takes a seat in the living room. One of his sons grunts at him as George erupts into tears. Mary seems worries as she looks over at her heartbroken husband, and his daughter plays "Hark the Herald Angels Sing" on the piano in preparation for a party that evening.
Mary takes George into the living room and tells him that one of their daughters is upstairs with a cold. George is horribly grumpy, and goes upstairs to check on the sick daughter, whose name is Zuzu. She is holding a flower she got at school, and the petals fall off. Putting the flower in water, he tells Zuzu to go to sleep for a little while, even though she wants to look at the flower. "Go to sleep, and you can dream about it, and it'll be a whole garden," he whispers to her.
Downstairs, Mary is talking to Zuzu's teacher, and George grabs the phone and scolds her for letting his daughter wander home with her coat open. He hangs up the phone and yells at his children, before knocking over a desk by the window. In the silence that follows, he apologizes to each of his family members.
When he yells at his family to continue what they were doing, his oldest daughter, Janie, begins crying, and he leaves the house. Mary calls Uncle Billy, telling her children to pray for their father.
George goes to Potter and tells him he's in trouble. "I've got to raise $8,000 immediately," he tells Potter, and begs him for help. Potter does not let on that he knows where the money is, as George says that he misplaced the money. Potter knows George is lying, as he saw Billy lose the money himself, but he does not say so. Instead, he asks George if he lost the money gambling or giving it to Violet Bick.
Potter asks George if he has any stocks or bonds, but George does not. "I have some life insurance, a $15,000 policy," George says, and $500 equity. "You once called me a warped, frustrated old man. What are you but a warped, frustrated young man?" Potter says, before laughing and adding, "You're worth more dead than alive." Potter pulls out a phone and begins to call the police on George, and George wanders off to his car.
George goes to Martini's, an Italian restaurant, and drinks at the bar. He prays to God and asks for guidance. The proprietors of Martini's ask George to stop drinking so much and go home, when another man at the bar, hearing that he is George Bailey, punches George in the face. It's the schoolteacher's husband and he scolds George for speaking so disrespectfully to his wife on the phone.
George wanders out into the snow. Driving home, he crashes his car into a tree. When he gets out of the car, a man approaches him and scolds him for hitting the tree, which was planted by his great-grandfather. George walks to a bridge in the snow and prepares to throw himself off into the river below, when he is visited by Clarence, the angel who has not earned his wings yet.
Just before George can throw himself in, Clarence throws himself in and begins screaming for help. George jumps in after him and pulls him to shore. As they dry off in the lodging of the nightwatchman, Clarence puts on an outdated nightgown, which he tells George is the garment that he passed away in. He also has a copy of Tom Sawyer.
Clarence tells George and the watchman that he comes from heaven, and he was sent to help George as his guardian angel. "I'm worth more dead than alive," George says, but Clarence tells him that he cannot have that kind of an attitude. "I suppose it would have been better if I'd never been born at all," George says, which gives Clarence an idea.
Analysis
Just when life seems to be going along more easily, something terrible happens. This time, while going to deposit the company's money, $8,000, Billy misplaces it in a newspaper that is in the possession of Mr. Potter. All of a sudden, all of George's professional assets are completely gone, because of the absentmindedness of his uncle. Poor Uncle Billy searches for the envelope, but struggles to remember where he possibly could have put it.
It is this event, the loss of the money—and on Christmas Eve no less—that precipitates George's suicidal ideation, which we have anticipated since the beginning of the film. After telling his uncle that the loss of the money will surely mean bankruptcy and scandal and prison, George returns home to his unsuspecting family, all of whom are preparing for the joyous Christmas holiday. It is here that the audience is first introduced to the central conflict of the film: George's great sense of disappointment and desire to die. He snarls at his family members and gets irrationally angry, knowing that he might be on the verge of ruin.
Much of the film is spent introducing the viewer to George and teaching the viewer about what kind of a man he is. We are shown many of the most significant events in his biography—childhood traumas, young love, professional disappointments, loss. This establishes an identification between the viewer and George. Thus, by the end of the film, when we finally catch up to the initial framing device—the discussion between the guardian angels—we are invested in his plight and want to see him succeed. After so much disappointment and misfortune, George is due for a boost.
The nefarious Mr. Potter becomes only more evil in this section of the film, when he does not let on that he knows exactly where the $8,000 is. He toys with George, suggesting that the young man was careless, and not letting on that he himself has the money, when George comes to him and baldly asks him for help. Potter is an especially slimy antagonist, and the antithesis of George. Where George is sacrificial, earnest, and forthcoming, Potter is self-serving, disingenuous, and withholding.
Just when George reaches the very end of his rope, drunk and suicidal, he is visited by Clarence, his guardian angel. Clarence is a sweet older gentleman in a nightgown who wants to help George see how valuable he is to the people in his life. Clarence is gentle and ordinary in many ways, hardly what one might expect of an angel, but he has a benevolent spirit and a deep desire to help George find meaning in his life again.
