March 19, 2008 4:14

Naming the financial crisis, day three

So it turns out that Darren Gersh, Washington Bureau Chief for the Nightly Business Report, addressed the question of what we should call this financial crisis of ours way back in January. He even did some actual research on the subject. What a concept!

Anyway, Gersh shared my concern that any name with "subprime" in it is too limiting. He went on:

When many things are going wrong at the same time, TV people like me reach for an “umbrella lead,” the one phrase that ties it all together. So it is that we come to another contender for the title: “Credit Crisis” or the more evocative “Credit Squeeze.” The Journal trotted out “Credit Turmoil,’ a weak contender I would say. Turmoil is a mental state of confusion or agitation. In the stages of financial shock, we’ve gone past confusion and bargaining to actual pain.

Martin Wolf at the FT is leader of the pack arguing we’re in the middle of a big event. In a column on 12/11/2007, headlined “Why the credit squeeze is a turning point for the world,” Wolf writes: “This ‘credit crunch’ may, I believe, be an . . . important turning point for financial markets and the world economy. . . . [W]hat is happening in credit markets today is a huge blow to the credibility of the Anglo-Saxon model of transactions-orientated financial capitalism.”

The problem with credit squeeze/crunch/crisis is the implication that average folks can’t get money. Yes, Jumbo loans are hard to come by, but credit cards and auto loans are flowing. So are loans to businesses. The real credit crisis is on Wall Street. ...

Another problem with “credit crisis” is that it’s boring, too plain vanilla. Fortune’s Allan Sloan offers up “debt debacle!” It’s alliterative, alive, and fun. It’s also a nice way to mock Wall Street’s hubris. That’s why I like it. But “debt debacle” is the Ron Paul/Mike Gravel of the race -- provocative, but unlikely to capture the prize.

Philip R. Perkins, co-manager of the Delaware Diversified Income Fund, tipped me off to the Obama of this race. It’s a fresh contender that unites and inspires. Perkins calls the current financial crisis “The Big Unwind.” Unwind refers to a global de-leveraging of hedge funds, banks, and everyone else. It’s also flight to simplicity, a return to assets that are easier to understand than the bundles of subprime loans parked in complex pools around the world.

The Big Unwind has gotten some support here too, although TomT worries that "it's a little too smart **s Atlantic magazine/Slate." Gersh also likes The Great Unwind, which he tracks down to some report on hedge funds by a couple of Dresdner Kleinwort Benson analysts. But he has concerns similar to TomT's:

“The Great Unwind” is elegant and sweeping, but I fear it is too inside to take hold of the popular imagination. The pros might like it, but a crisis this big requires a village. And so far, the clear front runners are subprime crisis and credit crisis.

Credit crisis is too generic. So is credit crunch. It's fine to use them now, but unless you add some kind of modifier in the future nobody will ever know which crunch or crisis you're referring to.

There are three potential modifiers that I can think of: Date, size, and source.

The difficulty with using a date for this credit crisis is that it already spans two years, and anything with Aughts or Aughties in it just sounds really weird. I guess if all financial activity comes to a halt sometime this year, we can call it the Panic of 2008, but if it's just a continuing succession of crises followed by periods of relative calm, that won't make sense.

As for size, great and big are the obvious ones. I guess long is a possibility, too, but an unlikely one.

Then there's the source. In this case it really did all start with subprime mortgages. But Subprime Crisis/Meltdown and Mortgage Crisis/Meltdown make it sound like it started and ended there. Mark Zandi's Subprime Financial Shock gets at the idea of waves emanating through the rest of the financial system, but is unwieldy.

So maybe Eric in Santa Fe, a commenter over at Ezra Klein's place, is right when he argues:

I fully expect "Subprime Meltdown" to carry the day.
It only conveys one facet of the mess, but I've seen it in too many contexts to dismiss it.

Me, I'm still torn. I like The Big Unwind (and The Great Retraction), but then I'm a smart **s who reads the Atlantic and Slate. And I love all the funny suggestions collecting in the comments here and at Swampland and Ezra's, and will do another roundup of my favorites tomorrow soon. But I was kind of hoping something transcendently obvious might emerge, and so far I don't think it has.