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Re:History of 127/8 as localhost/loopback addresses (2021) by vesinisa on Wednesday May 25, 2022 @07:56AM (#31503249)
The best answer in this old thread (Jan 2021, be sure to open the [thread] view) seems to be this:

https://elists.isoc.org/pipermail/internet-history/2021-Janu...

Re:History of 127/8 as localhost/loopback addresses (2021) by shadowgovt on Wednesday May 25, 2022 @08:43AM (#31503709)
This, coupled with the previous answer that because the class A 127 had been reserved, it was hard to tell for backwards compatibility reasons what shenanigans had gone on in that whole subnet, seems to explain how we lost a whole class A subnet to the same function.