Greg Mankiw's Blog: The Changing Meaning of "Subprime"

In discussing the Jewish Zionist input into the subprime meltdown, keeping track of the changing meaning of subprime is helpful. Harvard economics professor Greg Mankiw, who is fellow graduate of The Pingry School, makes the following point at his blog.

Simon Winchester reports:

when first applied to financial matters in 1976, “subprime” meant a loan offered below the prime rate and typically was offered only to the most desirable borrowers.

In was not until 1993 that it took on a much less enticing guise, with Business Wire referring to a company that “buys subprime loans made ... to creditworthy buyers unable to qualify for loans from banks.”

And an O.E.D. editor was moved to write a new definition: “Of or designating a loan, typically having relatively unfavorable terms, made to a borrower who does not qualify for other loans because of a poor credit history.”

A lot of racist right-wing commentators are trying to blame the financial mess on low-income African American and Hispanic borrowers, but I used subprime adjustable rate mortgages several times in the 90s when my income was around half a million and I knew

• that I would pay the loan off before the interest went up or
• that I would be able to lock the loan into a good fixed rate within a year or too.

There are lots of subprime foreclosures in upscale white neighborhoods where the borrowers did not follow my example. Subprime mortgages did not cause the financial meltdown per se. The problem lies in the manner in which they were turned into tradable securities.

In all cases subprime loans are made when the combination of borrower desirability or the expected asset value appreciation would justify a lower interest rate because of (theoretically) significantly decreased risk to the lender.

Unfortunately for the USA and the world, too many finance professionals believed or wanted to believe the Neocon and Neoliberal Zionists when they hyped the economic boom

• that would result from privatizing Iraqi state assets and
• that was supposed to keep housing prices on a steady increase.

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