When was the first time a well-known word or phrase was used in print?
FirstMention.com explores the history and origins of famous people and places, and of popular phrases, companies,
brand names, products and ideas, along with familiar words and sayings.
All right, class, it’s pop quiz time. Today’s current events topic: the subprime loan crisis.
As you know, the Word of the Year for 2007 is subprime, in honor of the huge banking mess we can’t help hearing about on an hourly basis. Please answer the following question:
A subprime loan is:
A. A loan with exhorbitant interest rates, offered to customers who are considered high=risk due to a bad credit history
B. A loan with very attractive interest rates, offered to the best customers with the smallest credit risk.
And the answer is….C. All of the above!
Strange as it seems, a subprime loan used to mean the best loans available. These were the loans a bank offered to its preferred customers at interest rates below the prime rate (get it! sub-prime), as a reward for being, well, their preferred customers.
Somewhere in the 1990’s, though, the meaning did a flip-flop, a reversal, a complete 180, a total about face, a…well, you get the picture. Suddenly, the word subprime referred not to the interest rate, but to the customers themselves, who were not considered the cream of the crop.
That is, they weren’t the lender’s prime customers. Tbey were the (say it with me, now) subprime customers.
Ben Zimmer, at Oxford University Press, has a nice write up on the history of subprime. But Ben doesn’t seem to share my same odd fixation with uncovering the very FirstMention of a term, so I went to work.
In the WOTY sense of subprime, as a high-priced loan for the great unwashed masses, the FirstMention honors go to lending company, Monaco Finance, and their press release of November 4, 1993.
Monaco Finance to trade on NASDAQ
National Market System
Monaco Finance (NASDAQ:MONFA) a fast-growing consumer finance company specializing in sub-prime lending, announced that its securities shall commence trading on the NASDAQ National Market System Friday, Nov. 5.
MONFA made a bundle with subprime car loans, or “automobile financing programs” as they liked to call them. Their success didn’t go unnoticed. General Motors and Ford soon started up their own subprime loan programs shortly thereafter.
It wasn’t long before the mortgage industry caught on. The American Bankers Association’s ABA Banking Journal magazine ran a cover story in 1996, with the catchy title, “Give me your deliquents…”
I can’t help highlighting the end of the first paragraph, which says that banks sought safety in loan ‘securitization’ in order “to move the risk off their own balance sheet”.
Didn’t work, did it?
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