Everyone’s a zombie now
So what exactly is a zombie?
According to Forbes Digital’s online financial dictionary Investopedia, Zombies are companies that:
“continue to operate even though they are insolvent or near bankruptcy. Most analysts expect zombie companies to be unable to meet their financial obligations.”
Sound familiar? It should, given how many formerly blue chip companies from AIG and General Motors, have been acting like the Walking Dead, turning to the government, tin cup in hand, and asking whether it can spare tens a few trillion dimes to help them stay afloat. That has prompted more and more commentators to wonder whether these supplicants can or should be saved at all.
A quick scan of the Factiva news article database shows how quickly the term has found traction in our lexicon, particularly since mid September when the financial crisis exploded.
Here are some examples of where the term has popped up lately:
In Monday’s “Heard on the Street” in the Wall Street Journal:
“If the government fails to address oversupply, the result could be zombie companies — or even a zombie economy along the lines of Japan during the 1990s.”
In today’s Lex column in the Financial Times:
“Detroit is burning cash in the belief Washington will ply it with more. Sustaining zombies on life support is no way to build a healthy economy or promote free trade in a recession.”
In an October blog by Harvard economics prof and former chairman of President Bush’s Council of Economic Advisers Greg Mankiw :
“The government does not want to put taxpayer money into “zombie” firms that are in fact deeply insolvent but have not yet recognized it.”