The Financial World is Steeped in Special Lingo

[Baker, John]

        "Haircut" is indeed a popular and longstanding term in the
financial world.  The earliest uses with which I am familiar are under
the SEC's Rule 15c3-1, which requires broker-dealers to have sufficient
"net capital."  In computing their net capital, the highest quality
securities (e.g., U.S. Treasury notes) are carried at 100%, but
lower-quality securities are reduced in value by specified percentages.
Failure to maintain adequate net capital is considered grounds for
shutting a brokerage down immediately.  "Haircut" now is used in other
financial contexts, whenever it is desirable to show that some
securities (typically debt securities) are being valued for some purpose
at a discount.

        I can track down some early uses of "haircut" if there is
sufficient interest.


John Baker


-----Original Message-----
From: American Dialect Society [mailto:ADS-L at LISTSERV.UGA.EDU] On Behalf
Of Doug Harris
Sent: Thursday, June 05, 2008 3:10 PM
To: ADS-L at LISTSERV.UGA.EDU
Subject: The Financial World is Steeped in Special Lingo

>From the NY Times (today):
Updated: Verizon Communications is in talks to buy Alltel for about $27
billion . . .
. . . But some debt holders, including banks like Goldman and Citigroup
who are stuck with billions of dollars in buyout-related loans that they
cannot sell, may take _a steep haircut_.
----
An odd turn of phrase, or mixed metaphor (undoubtedly by someone who
never met one s/he didn't like).
Google suggests the term is 'popular' with financial types, if you can
consider something earning 121 hits 'popular'.
-----
dh

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The American Dialect Society - http://www.americandialect.org