How Long Will The Credit Crunch Last?

We think that the credit crunch began in April 2007 when subprime lender New Century went under. Others think that the beginning was when two Bear Stearns hedge funds collapsed in June 2007. And most people think it began on August 1, 2007 when American Home Mortgage went down, and the credit markets froze up. What nobody knows is when the credit crunch will end, but now we have an official, credible prediction.

A recent report by Morgan Stanley and consulting firm Oliver Wyman entitled Outlook for Investment Banking and Capital Market Financials (via Bloomberg), says that: “Banks’ earnings have been hurt for the past three quarters by the turmoil in the credit markets. In total, the crisis may last for eight to 10 quarters, exceeding the six-quarter duration of the Asia crisis and bailout of LTCM in 1997-8, and the seven-quarter fallout from the bursting of the dot-com bubble.”

This means they’re pegging the start of the credit crunch at June 2007, and if it lasted five more quarters, it would put us at July 2009. If it lasted seven more quarters, it would put us at January 2010.

If you need a lighter analysis to ease the pain, check out our History of The Credit Crunch, with some help from the Simpsons.