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Posts Tagged ‘credit rating’

Sign of a mortgage centre in East London

In 2007, when the so-called subprime mortgage market was collapsing, the natural question was, “what is a subprime mortgage?”

I discovered that it used to refer to what it sensibly means. Namely, mortgages with an interest rate lower than the prime lending rate.

Since then, the definition has changed to refer to mortgages of subprime quality. However, “subprime” is highly misleading, in that anything less than the best quality is subprime.

In the case of bonds, a triple-A credit rating is prime. Anything less than that, by definition, is subprime. However, there is a significant difference between AAA bonds, and BB and lower-grade bonds, to the extent that the latter are called “junk bonds.” Yet, according to the strict definition of subprime, AA+ and BB+ bonds are “investment grade.”

Banksters love twisting the meaning of words. Like their Federal Reserve System, which isn’t federal, doesn’t have any of its own reserves, and was called a system to obscure the fact that it’s a private central bank.

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