The Peril of Financial Linguistics
Gross, Daniel, Newsweek
Byline: Daniel Gross
Apparently, 'legacy' derives from an ancient root meaning 'it wasn't my fault and I should still get a bonus this year.'
In his timeless 1946 essay, "Politics And the English Language," George Orwell condemned political rhetoric as a tool used "to make lies sound truthful" and "to give an appearance of solidity to pure wind." Were he alive today, Orwell might well be moved to pen a companion piece on the use of financial lingo. Remember those toxic assets? The poorly performing mortgages and collateralized debt obligations festering on the books of banks that made truly execrable lending decisions? In the latest federal bank-rescue plan, they've been transformed into "legacy loans" and "legacy securities" --safe for professional investors to purchase, provided, of course, they get lots of cheap government credit. It's as if some thoughtful person had amassed, through decades of careful husbandry, a valuable collection that's now being left as a blessing for posterity.
Using the word "legacy" to describe phenomena that are causing financial carnage is "crazy," according to George Lakoff, a UC Berkeley professor of cognitive science and linguistics, because "legacy typically suggests something positive." More insidiously, the word is frequently deployed to deflect blame. Legacy financial issues are, by definition, holdovers from prior regimes. Word sleuths advise me that legacy derives from an ancient Indo-Aryan root meaning "it wasn't my fault, and I should still get a bonus this year even though we lost billions of dollars."
The (not so) Big Three auto companies routinely refer to the now-unaffordable pension and health-care commitments entered into by prior management as "legacy costs." (And why not? They've convinced us to regard used cars as "preowned.") Citi CEO Vikram Pandit last month told employees that "we are profitable through the first two months of 2009 and are having our best quarter-to-date performance since the third quarter of 2007." Huh? Citi, currently connected to a taxpayer-funded multibillion-dollar feeding tube, is "profitable" only if you ignore the losses it continues to incur on lending decisions made in the previous years--legacy loans made by legacy bankers.
In this new paradigm, a legacy, usually a gift, is a burden. A potential loss is spun as a potential gain. War is Peace. See what I mean by Orwellian?
The legacy gambit is necessary, in part, because the prior nomenclature used to describe the stuff in question was so corrosive. "'Toxic' is one of those words that is so negative that it's just hyperbole," said Jesse Sheidlower, editor-at-large of the Oxford English Dictionary. The phrase "toxic assets," used widely in 2008, was either a sign of admirable reality, or an attempt to scare people into action. …