What Would Uncle Scrooge Do?

Leo Schulte schulte at teacher.com
Thu Dec 4 16:21:47 CET 2008


Greetings!

>From the article posted by Dana Gabbard in the Orange County Register:

"In 2007 Wall Street turned its back on subprime. That year, subprime lenders were forced to keep 60 percent of their loans on their own books or on the balance sheets of their affiliates.
That was the last fatal step in a financial high-wire act.
Since then, most of the 25 companies that dominated subprime lending between 2004 and 2007 have shut down or been sold at fire-sale prices.
Just eight of the 25 top subprime lenders were subject to the reinvestment law. But among those eight are two of the summer's most prominent failures – Washington Mutual and IndyMac Bank. Together with its Long Beach Mortgage subsidiary, WaMu made $74.2 billion in subprime loans. IndyMac specialized in "Alt-A" loans to customers who had good credit but couldn't qualify for top-drawer loans."

"Just eight" was enough to feed the bubble mentality: the Community Reinvestment Act was the catalyst, and it does not really matter that a majority of banks were not directly subject to it.  Besides the pressure from the bubble mentality, there was always a certain amount of de facto political pressure for banks to enter this market.  

And so we ask: What Would Uncle Scrooge Do?  Like I said: Avoid both bubble and panic mentalities, buy stocks when they are low, sell at highs, and reinvest the profits.  Scrooge is obviously not afraid of risk!  America is all about taking risks, failing now and then, but always continuing to aspire!  This is why Scrooge McDuck as a character developed by Barks has always fascinated me.

Best Wishes!

 

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