Tunku Varadarajan 11.10.08, 12:00 AM ET
The editors at Forbes.com--not, on the whole, a pedantic bunch--made a decision a little while back to swap the phrase "Wall Street Crisis" for another, spookier one: "Global Financial Crisis." While this taxonomical adjustment is important--reflecting, as it does, the borderless nature of the financial contagion--the underlying cast of causes and characters remains unchanged. Here, I offer an alphabetic sampling, by no means exhaustive. Apologies to anyone who feels unfairly left out.
A is for America, the big swinging Richard whose dysfunction started it all. Think also of accountability (lack of); AIG (which has cost the U.S. $140 billion, and counting--who knew insurance could be so exciting!);assets ( what assets?), and Adam Smith, who's slapping us about the face -- with his invisible hand .
B boasts Ben Bernanke, known, lovingly, as "Helicopter Ben," who's clearly no Greenspan, um ... Volcker, um ... Morgan. And isn't it swell that he's an expert on the Great Depression and its causes? Bear Sterns was the big, fat canary in the coal-mine, whose death-trill was the first note of a symphony known as the bailout. B is also forbalance sheet and belt-tightening.
C is for Credit Default Swaps, defined for me by a Wall Street watcher as: Risk whatever you want, and we insure it; risk too much, taxpayers insure it. And there are those CDOs (pronounced "seedy owes") that were all the rage at Citigroup, one of many tarnished poster children ofcapitalism, a philosophy that's taken a hefty write-down. ( Congresscertainly doesn't believe in it.) And then there's Christopher Cox, whose finger was never going to be big enough for the dike, poor bloke.
D is Depression: Yes, we're in one, and it's going global. The trouble is we've already used "Great" in 1929. So we need a new superlative. D is also for debt; and for deregulation: Some say we had too little of it, others that we had too much. (This analytical Pushme-Pullyu bodes ill for a swift recovery.)
E is for excess (of, for example, executive pay and easy money).
F has a rich hand: Fannie & Freddie (that avuncular couple down the street with their children's bodies in the basement), and Fuld (Richard, Last of the Lehmans). Let's not forget flippers, the Fed, and frozen credit; or FDR and fear: The only thing we have to fear is fear itself ... Yikes, isn't that exactly what's happening? ( F is also for Fair Value Accounting, a genie that all the banks once clamored for, but now wish they could stuff back in the bottle.)
G is for Greenspan, godfather of this crisis, whose legacy sleeps with the fishes; and Goldman Sachs, coming to an ATM near you. G is also for greed, simple and unadorned.
H is for home equity, a quaint notion from the 1990s (cf. housing bubble), and haircut (a cold-blooded euphemism for household calamity). H is also for hearings (expect a lot of those).
I is for Iceland, on which Britain exacted its revenge, some 1,300 years after the Viking raids; and inflation, the next crisis ... or will that bedeflation? Of course, there's your IRA ... but let's change the subject. Iis also for innovation, the life-blood of the American economic miracle. Will it survive the coming age of regulatory overreach?
J is for Jamie Dimon, jolly good fellow, whose JP Morgan held back--and missed the mess.
K is for Kashkari (Neel), the bald young hero brought in by Paulson to fish us out of the deep end; oh ... and it's also for Keynes (John Maynard), who is enjoying a comeback to match anything that the Rolling Stones could ever pull off. (Watch, as Washington's fever swamps are drained of neo-cons and then restocked with neo-Keynsians.)
L is for leverage (a means of maximizing your losses), liar loans,Lehman (pronounced "lemon")--and the losses/liabilities that unite them all. L is also for liquidity puts (don't ask me what that means, Robert Rubin didn't know, either); and layoffs.
M is for where it all started: the mortgage (which, aptly, means death-pledge). Like the dog, it comes in a variety of breeds, "sub-prime" being a cross between a pit bull and a chihuahua. And let's not forgetmarking-to-market, a hyper-purist tool that contributed to the downward spiral; moral hazard (moral what?); Main Street (the rest of us dopes); and, my favorite, macroprudence (a sadly neglected word--and concept, come to that).
N is the no-short rule. Why didn't someone tell the SEC there's no shortcut?
O is for Obama, the most important political outcome of the Global Financial Crisis. The question is, will Obamanomics only make things worse?
P is for Paulson: Is he Moses, or Don Quixote? At least he isn't John Snow. And for that small mercy we give thanks.
Q is for quants, who forgot that, every so often, past performance is no indicator of anything at all.
R is for Roubini (Nouriel), the professor at NYU's Stern Business School and Forbes.com columnist, who foresaw it all. Not for nothing is he known as Doctor Doom. In person, he's a rather cheerful chap. And why shouldn't he be? There's no tonic more invigorating than one's being right.
S is for securitization, the process by which one passes off cat food as caviar. This is how mortgage debt was repackaged and sold. Be suspicious--very suspicious--of that stuff on the plate before you.
T is for TARP, which is what all of Wall Street is hiding under. This writer finds the acronym (for Troubled Assets Relief Program) reassuring: it's proof that someone in Treasury has a sense of fun, even when dealing with toxic securities.
U is for unemployment. And also for underwater (almost every hedge fund, mutual fund and 401(k)).
V is for a new vocabulary, which we've had to acquire in a blazing hurry, to fathom our way through this failure. Try these for size: CRA, Alt-A, ABCP, SPV. And that's just the ones in English. (What's Icelandic for CDO?)
W is for Wall Street, which will never be the same again--until the next boom, when idiocy will once more stake its claim to excess.
X is for xenophobia. Let's blame the Chinese ... Wait, can we really do that?
Y is for yelling "fire!" in a crowded theater, what Jim Cramer was accused of doing when he went on NBC's Today Show and told people to pull their money from the stock market. (His response: There is a fire!)
Z is for ZWD, the symbol for the Zimbabwe dollar. If you thought the greenback had problems ... try getting a mortgage in Harare.
Tunku Varadarajan, a professor at the Stern Business School at NYU and research fellow at Stanford's Hoover Institution, is Opinions editor at Forbes.com, where he writes a weekly column. (For this week's column he'd like to offer a grateful tip of the hat to the following: Sudhakar Balachandran, Dan Bigman, Jerry Bowyer, Reuven Brenner, Philip Delves Broughton, Thomas Cooley, Charles Dubow, Andy Kessler, Annabel Levy, David Levy, Paul Maidment, Partha Mohanram, Thomas Peacock, Roy Smith, Marti Subrahmanyam, Hugh H. Shull Jr., Hugh H. Shull III and Vijay Vaitheeswaran.)