It is interesting that this feature is guarded by a parameter named priviledged_mode, then no_functions, then privmode, and also another parameter named read_bu

It is interesting that this feature is guarded by a parameter named priviledged_mode, then no_functions, then privmode, and also another parameter named read_but_dont_execute. So I would say that bash maintainers were aware in general of this feature. But it looks like they never realized that there was a problem there. (Probably they just counted on the guard to disable this feature in sensitive situations (the so called, "priviledged mode")).