Interesting, arnie. Simpson mentions the Proceedings of the Old Bailey in his article. Is that from Nathan Bailey's Universal Etymological English Dictionary (1736), does anyone know?
threw me a little. Almost everyone involved, at least in the US, in commercial banking for major companies in the '80s, knew the term "subprime" - though often as "sub prime" or "sub-prime" - in the sense that surprised the OED editors. I wasn't around before then, but I got the impression that the term had been in use for a long time (10-20 years or more). It went out of use fairly quickly, however, primarily (I think) because pure prime-based lending became rare in the late '80s, as sophisticated lenders increasing chose to offer rates based either on LIBOR, or a hodge-podge of the highest of a) Prime, b) LIBOR, c) the Federal Funds rate and d)-etc.- some other rate-du-jour. Sub-LIBOR also existed, though it had an even briefer life, at least in my experience.
It was never an official designation, nor was it popularly known. Those in the business knew it existed, but it wasn't touted by either lenders (for competitive reasons) or borrowers (ditto, though different competitors).
Pure Prime-based lending was viewed as risky for lenders because the rate was considered to be less than wholly economically determined. Political considerations - both governmental and within the lending industry - were thought to influence it.
It's a term not used in the UK though, or at least if it's used it's solely by people with a knowledge of international finance. I'd never heard it until it was suddenly big news because subprime lending in the US and the practice of selling debt to other lenders had caused the near-collapse of Northern Rock, the fourth biggest lender in the UK.
PS Welcome to the board This message has been edited. Last edited by: BobHale,
"No man but a blockhead ever wrote except for money." Samuel Johnson.
subprime lending in the US and the practice of selling debt to other lenders had caused the near-collapse of Northern Rock, the fourth biggest lender in the UK.
Near collapse? Had each taxpayer in the UK not had to fork out around a thousand quid to prop the rotten organisation up, it would have been a complete collapse. As it is it's still a collapse - it's just that we unwilling and uninvolved taxpayers have stopped it going the way that any other business, managed so badly, would have done.
Richard English
Posts: 8038 | Location: Partridge Green, West Sussex, UK
I don't doubt that subprime, in both senses, was relatively unused in the UK. But the OED has had US readers and researchers for a very long time, now.
In the UK, was there ever something called a "Prime Rate"? I don't recall running into it. It existed, I'm sure, but with a different name. I'm also fairly sure that the practice of lending to favored, highly secure borrowers at lower than usual rates existed, too.This message has been edited. Last edited by: Valentine,
In England most corporate borrowing is expressed in terms of LIBOR (London Interbank Offered Rate). Prime borrowers would have their interest charged at LIBOR, or a set number of percentage points above. The rate is set daily and is the weighted average of the rate at which members of the British Bankers Association are willing to lend to each other. I've heard of 'prime borrowers' but not of a 'prime lending rate' as such.
I suppose some especially favoured borrowers might be able to get a sub-prime rate under LIBOR, in the sense reported by the OED; lower than the prime rate.
Note the lack of capital letters in 'prime borrowers/rate".This message has been edited. Last edited by: arnie,
Build a man a fire and he's warm for a day. Set a man on fire and he's warm for the rest of his life.
I wouldn't be surprised to learn that LIBOR has been around since 1066, or so, but how long has it been used as the base for interest rates charged to non-banks? In the US, we started using it widely in the early '80s, generally as a part of a highest-of definition.
The US Prime Rate was (and still is) set by banks individually, which is why accurate reporting of it always refers to an average. There was seldom great divergence, but also seldom complete uniformity. It was held out to be the rate offered by a bank to its prime customers - which is one reason why subprime rates weren't talked about much:
XYZ Corp to Bank ABC: "Hey, am I not one of your prime customers? Then why did LMN Corp get a better rate than I did? Maybe DEF Bank will appreciate me more than you."
I thought the article was referring to the Central Criminal Court building in London. Here are the Proceedings. Remember Rumpole of the Bailey?
Oh, of course. Thanks, Tinman. I didn't watch the Rumpole series, but one of my friends just loves the books (I need to get him to post here). Maybe I will borrow some of them.
"BBA LIBOR fixings did not commence officially before 1 January 1986, although before that some rates have been fixed for a trial period commencing in December 1984."
Build a man a fire and he's warm for a day. Set a man on fire and he's warm for the rest of his life.
That's very interesting. My memory appears to be about 3 or 4 years off.
I thought, at the time, that LIBOR was something that had been around in the UK for a long time, and was an innovation only in US financial circles. This was at a time of great creativity. Many new financial instruments were being created, and many used floating rates. They bore almost no relation to traditional Bank A loans $100 MM to Corp B, with a 5 year term, at its own Prime plus .5%. The new instruments were publically or privately sold to financial intermediaries, like mutual funds and insurance companies.
It was all well and good for Bank A to rely (and plan) on its own Prime Rate. But the new instruments needed to have a broader scope and more accurately reflect real market conditions. There were fits and starts, but a very common formula was the highest of a) a defined Prime Rate - usually an average as published somewhere, b) The X term LIBOR, and c) the Federal Funds rate (which is certainly unknown in UK domestic banking, but is the rate at which US Federal Reserve Banks lend to each other).
There were variations, of course, and I remember using NYBOR and (I think) NIBOR (for Nassau, Bahamas). Wholly new rates were created, sometimes out of whole cloth, like the Kenny Index - an eponym.
A contributing factor in this development was the huge expansion of computing power. A Prime based interest rate might not change for months and months, but a LIBOR or kitchen-sink rate required daily calculation.
But to get back to my original point. Before LIBOR, what was the base rate used by UK banks to make floating rate loans to their customers? Was there some commonly used, but unfixed practice that was parallel to our Prime Rate? A Standard Loan Credit Rate, perhaps (which was then anagrammized, then rhyming-slanged to Boat)?
I worked for a bank between 1965 and 1993 but only in High Street branches lending to personal customers, not to corporates. I can remember seeing loan agreements for a few large branch customers with the interest rates expressed in terms of LIBOR, but don't remember anything special before LIBOR. I can only remember loans granted in terms of the bank's own Base Rate. That followed slavishly on the Bank of England's lending rate, and would change immediately the BofE announced a change.
As I said, I was not involved directly in such matters, so there may well have been some mechanism used that I didn't know about.
Build a man a fire and he's warm for a day. Set a man on fire and he's warm for the rest of his life.
It used to be rather amusing (with hindsight) the way we used to communicate in those early days before computers came in during the late 70s. It was known as the Rapid Communications System and each branch was allocated two other branches they should telephone in the event of any urgent messages, such as a change in Base Rate.
On phoning, you had to ask to speak to the senior person, then say words from a script along the lines of "HO Circular 197/65 Base Rate changed from 6.5% to 7.0% with effect from 10.10.70".
It did get the message across the country within about an hour. Of course, once every branch was linked to a central computer it took about two minutes.
Build a man a fire and he's warm for a day. Set a man on fire and he's warm for the rest of his life.
The process you describe is called a phone tree here in the US, and is still used in some schools to promulgate word of early dismissals.
At the beginning of the school year, parents are assigned to receive and pass along such messages to other parents.
But I'm a little surprised your bank branches didn't all have telex machines. Perhaps they did, but this news was considered too important to trust to electro-mechanical devices?
In those days I worked in the City and banked with William's Deacon's. They, like many other banks in the City were on "Town Clearing" (you could tell because there was a "T" against the bank sort code.
What this meant is that the banks' messengers all met daily (probably in a pub, although it was supposed to be a clearing house) and exchanged cheques. This meant that they were cleared within a day, instead of the three days that it took otherwise (when the cheques were sent through the post).
Nowadays, of course, most money doesn't even have a physical existence; it's just electronic signals.
Richard English
Posts: 8038 | Location: Partridge Green, West Sussex, UK
I am reminded of the strange (to a young Californian) custom of pub hours in the UK when I first visited in '76. As I remember it, they opened around noon, then were closed in the early afternoon, and reopened at 5:30 PM or there-abouts. Not sure if it differed from place to place, but I remember being invited to go to somebody's club (an enlisted man's organization for WW2 vets) where the hours were extended. I had to buy a single day membership, and the beer was cheaper than at regular public houses. The last few times I've been in the UK then didn't seem to close in the afternoon. When did pub hours go away?
The law differed a lot across the country but usually pubs had to close at 3.00 PM and couln't reopen until 5.30. They then had to close at 11.00. Most of the restrictions were removed by the 2003 Licensing Act which came into force in 2005. Landlords are now effectively free to stay open as much as they like. Many pubs now stay open all day, though a few still close; the'local' near my work closes from 2.30 to 5.00 as they don't have the trade at that time.
It was the Defence of the Realm Act of 1917 that made all pubs close in the afternoon. The Prime Minister had been persuaded that munitions workers were spending too long in the pubs at lunchtime and enacted this temporary legislation to help the war effort. It took until the 1980s for this ridiculous law to be repealed.
Lloyd George was a lifelong teetotaller and a lifelong serial adulterer. Had his proclivities been the opposite, it would have been the brothels that would have had to close and the pubs could have remained open. Or that's my theory.
Richard English
Posts: 8038 | Location: Partridge Green, West Sussex, UK
and is still used in some schools to promulgate word of early dismissals.
I hear that word "promulgate" mostly when talking about promulgating rules and regulations in government. That's an interesting use of the word, Valentine. I've always thought it was a very specific word related to government, but in looking it up I see that it can be used to mean "to announce officially," which would be correct in reporting early school dismissals.
By the way, we still have telephone trees in schools for situations like letting parents know that an after school basketball game has been cancelled. You can't be sure everyone will check his/her email in the next few hours, but almost everyone has a cell phone now (heck, Shu even has one now! I think he may be the last American to have one, which is strange since we were very early in getting a home computer).
but almost everyone has a cell phone now (heck, Shu even has one now! I think he may be the last American to have one
Sorry, but the last one may be me.
Have you noticed that whenever the government wants to make a change to save money, the reason given is "Everyone has (insert newest technology)." For example, our local government recently eliminated on-street fire alarm call-boxes because "everyone has a cell phone and can call for help."
Perhaps that will work most of the time but if I was the only one who saw a fire or accident, the victims would be out of luck until more tech-equipped help arrived.
Also, the officials who make these judgements often don't consider less affluent members of their domain who aren't in an economic position allowing them to procure the latest gadget (legally).
Promulgate is also used in internet talk. When a new domain is created, its details are posted to its authoritative nameserver. It is then "promulgated" to thousands of other nameservers. That process used to take 3 days or more, but is much faster now. [Edit] Scratch the above. The word I was thinking of was propagate, which has a similar meaning.
But I agree that the most common usage is in the realm of laws and regulations.This message has been edited. Last edited by: Valentine,
This message has been edited. Last edited by: BobHale, 
