If there's one word that captures the zeitgeist of our current economic downturn, it's subprime. The American Dialect Society named it the Word of the Year for 2007, and as I described in my last column it is among the new entries in the latest updates of Merriam-Webster's Collegiate Dictionary and the Concise Oxford English Dictionary. But it's a pretty odd word when you stop to think about it. The newly announced Merriam-Webster definition reads as follows: "having or being an interest rate that is higher than a prime rate and is extended especially to low-income borrowers." Wait a minute: a loan with a rate that is higher than prime is called sub-prime? How did that happen?
I mulled over this question recently in my capacity as a consultant to the Oxford English Dictionary. Working with Katherine Connor Martin, OED's senior editor for new words, I helped piece together the unusual evolution of the word. And even though the lexicographical wheels move much more slowly at the OED than at smaller dictionaries, it too has included subprime in its latest batch of new words. The historical citations for the word provide the full picture of how it ended up with such a counterintuitive meaning.
The very earliest sense of subprime is straightforward enough: "below the highest quality or grade; inferior," as you would expect from combining the prefix sub- "under, less than" with prime. Way back in 1920 the U.S. Federal Trade Commission issued a report referring to how products "arrived at market in subprime condition." And over the ensuing decades, everything from defective sheet metal to chain-store locations have been described as subprime. Even Madonna's acting got stuck with that label: a 1993 Toronto Star movie review said that "her 'work' in Body Of Evidence is sub-prime."
In the 1970s the word began to be used in the banking industry, but with a sense that is diametrically opposed to its current usage. Rather than relating to the risky credit status of a borrower, subprime originally described a "below prime" lending rate — in other words, below the prime rate that banks and other lending institutions offer to the most desirable borrowers. So in this sense, a loan with a subprime rate is a good thing for the borrower, who can pay an interest rate lower than what is typically offered. That explains this quote from an August 1975 Associated Press article: "Isn't the prime supposed to go only to the most credit-worthy customers? Why, therefore, they might ask, was subprime offered to a municipality whose credit standing is suspect?" Similarly, a March 1978 article in Institutional Investor told of banks "offering sub-prime rates to lure back customers."
Something happened to the word in the 1990s, however. Now it was the borrowers themselves who were being classified as "less than prime" based on their shaky credit histories. Customers in this high-risk category were increasingly able to borrow money from established lenders, particularly to pay for mortgages, automobile loans, and the like. Whereas the older sense of subprime implied a loan with a low interest rate, the subprime loans of the '90s and '00s have rates much higher than standard. In 1993 Business Wire described a company that "buys sub-prime loans made by car dealers to credit-worthy buyers unable to qualify for loans from banks and automobile finance companies, and then sells the loans to institutional investors." And a February 1997 New York Times article heralded the coming crisis: "A Risky Business Gets Even Riskier: Big Losses and Bad Accounting Leave 'Subprime' Lenders Reeling."
The two competing senses of subprime, referring either to favorable low-interest loans or to unfavorable high-interest ones, would seem to be in direct opposition. You might even call it a "Janus-faced word" or "contronym," i.e., a word that serves as its own antonym, like cleave or sanction. But the surrounding context should be enough to establish whether it's the lending rate or the borrower that is considered subprime. Consider another sub- word, subpar. For a golfer, a subpar score is a good thing, but in its more general sense subpar typically characterizes an inferior performance. Only context can resolve the conflict.
It's somehow fitting that a word that is so emblematic of these uncertain economic times faces in two contradictory directions. Here's hoping that in the not-too-distant future we can look back on the current usage of subprime as a quaint artifact of the late 20th and early 21st centuries.
Ben Zimmer is language columnist for The Wall Street Journal and former language columnist for The Boston Globe and The New York Times Magazine. He has worked as editor for American dictionaries at Oxford University Press and as a consultant to the Oxford English Dictionary. In addition to his regular "Word Routes" column here, he contributes to the group weblog Language Log. He is also the chair of the New Words Committee of the American Dialect Society.Click here to read other articles by Ben Zimmer
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