Glossary
Asset - A resource with economic value that an individual, corporation or country owns or controls with the expectation that it will provide future benefit; what a firm owns.
Asset-Backed Securities (ABS’s) – A financial security backed by a loan, lease or receivables against assets other than real estate and mortgage-backed securities.
Brokerage Firm – A business whose main responsibility is to be an intermediary that puts buyers and sellers together in order to facilitate a transaction.
Bundle – Products or services that are joined together in order to sell them as a single combined unit.
Capital Requirements - The standardized requirements in place for banks and other depository institutions, which determines how much liquidity is required to be held for a certain level of assets through regulatory agencies such as the Bank for International Settlements, Federal Deposit Insurance Corporation or Federal Reserve Board. These requirements are put into place to ensure that these institutions are not participating or holding investments that increase the risk of default and that they have enough capital to sustain operating losses while still honoring withdrawals.
Collateralized Debt Obligations (CDO’s) - An investment-grade security backed by a pool of bonds, loans and other assets.
Commercial Bank – A financial institution that provides services such as a accepting deposits and giving business loans.
Commercial Paper – An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories and meeting short-term liabilities. Maturities on commercial paper rarely range any longer than 270 days. The debt is usually issued at a discount, reflecting prevailing market interest rates.
Consumer Financial Protection Agency (CFPA) – A proposed government agency would ensure consumers in the financial sector are protected from predatory practices of large financial institutions.
Commodity Futures Trading Commission (CFTC) - A U.S. federal agency established by the Commodity Futures Trading Commission Act of 1974. It ensures the open and efficient operation of the futures markets. There are five futures markets commissioners who are appointed by the president (subject to Senate approval).
Community Reinvestment Act - An act of Congress enacted in 1977 with the intention of encouraging depository institutions to help meet the credit needs of surrounding communities (particularly low and moderate income neighborhoods). The CRA requires federal regulators to assess the record of each bank or thrift in helping to fulfill its obligations to the community. This record will then be used in evaluating applications for future approval of bank mergers, charters, acquisitions, branch openings and deposit facilities.
Countercyclical Buffers – Buffers within the financial sector that was counteract risk within the market both domestically and globally to ensure less risky business.
Credit - A contractual agreement in which a borrower receives something of value now and agrees to repay the lender at some date in the future, generally with interest. The term also refers to the borrowing capacity of an individual or company.
Depository Institutions - an institution that provides financial services for its clients or members
Deregulation - The reduction or elimination of government power in a particular industry, usually enacted to create more competition within the industry.
Fannie Mae (Federal National Mortgage Association – FNMA) – A government-sponsored enterprise (GSE) that was created in 1938 to expand the flow of mortgage money by creating a secondary mortgage market. Fannie Mae is a publicly traded company which operates under a congressional charter that directs Fannie Mae to channel its efforts into increasing the availability and affordability of homeownership for low-, moderate-, and middle-income Americans.
Federal Deposit Insurance Corporation (FDIC) - The U.S. corporation insuring deposits in the U.S. against bank failure. The FDIC was created in 1933 to maintain public confidence and encourage stability in the financial system through the promotion of sound banking practices.
Federal Housing Administration (FHA) - is a United States government agency created as part of the National Housing Act of 1934. The goals of this organization are: to improve housing standards and conditions; to provide an adequate home financing system through insurance of mortgage loans; and to stabilize the mortgage market.
Federal Housing Finance Agency (FHFA) - A U.S. government agency created by the Housing and Economic Recovery Act of 2008 that regulates the secondary mortgage market by overseeing the activities of Fannie Mae, Freddie Mac and the 12 federal home loan banks. This new agency was established to act like a bank-regulator in order to strengthen and improve oversight of the U.S. housing finance system because of the secondary mortgage market's major role in the overall economy.
Federal Reserve Board (Fed) - The governing body of the Federal Reserve System. The seven members of the board of governors are appointed by the president, subject to confirmation by the Senate.
Financial Institution Reform and Recovery Act (FIRREA) - A law enacted to ensure that real estate appraisals are performed up to standard. This includes regulation on the competency of the appraisers, supervisory standards and accurate and full documentation.
Financial Stability Board (FSB) – was established in April 2009 following the 2009 G-20 London summit, and includes all G-20 major economies, FSF members, Spain, and the European Commission. The FSB represents the G-20 leaders' first major international institutional innovation. Secretary of the US Treasury Tim Geithner has described it as "in effect, a fourth pillar" of the architecture of global economic governance. The FSB has been assigned a number of important tasks, working alongside the IMF, World Bank, and WTO.
Freddie Mac - A stockholder-owned, government-sponsored enterprise (GSE) chartered by Congress in 1970 to keep money flowing to mortgage lenders in support of homeownership and rental housing for middle income Americans. The FHLMC purchases, guarantees and securitizes mortgages to form mortgage-backed securities. The mortgage-backed securities that it issues tend to be very liquid and carry a credit rating close to that of U.S. Treasuries.
G-20 - The G-20 Leaders' Summit on Financial Markets and the World Economy was held in London in April 2009 for the world’s top economic leaders to discuss economic growth, stability, and jobs.
Government Sponsored Entities (GSE’s) - Privately held corporations with public purposes created by the U.S. Congress to reduce the cost of capital for certain borrowing sectors of the economy. Members of these sectors include students, farmers and homeowners.
Investment Banks – A financial intermediary that performs a variety of services. This includes underwriting, acting as an intermediary between an issuer of securities and the investing public, facilitating mergers and other corporate reorganizations, and also acting as a broker for institutional clients.
Leverage Ratios - Any ratio used to calculate the financial leverage of a company to get an idea of the company's methods of financing or to measure its ability to meet financial obligations. There are several different ratios, but the main factors looked at include debt, equity, assets and interest expenses.
Mega Banks – A mega bank is an commercial bank combined with an investment; together these two types of banks form mega banks that aim for high revenues through risky business within the financial markets.
Mortgage - A debt instrument that is secured by the collateral of specified real estate property and that the borrower is obliged to pay back with a predetermined set of payments.
Mortgage-Backed Securities (MBS’s) - A type of asset-backed security that is secured by a mortgage or collection of mortgages. These securities must also be grouped in one of the top two ratings as determined by a accredited credit rating agency, and usually pay periodic payments that are similar to coupon payments. Furthermore, the mortgage must have originated from a regulated and authorized financial institution.
Municipal Bonds - A debt security issued by a state, municipality or county to finance its capital expenditures.
National Community Reinvestment Coalition (NCRC) – NCRC is a key national organization working on community reinvestment and housing issues.
Rating Agencies - A company, such as Moody's or Standard & Poor's, that rates various debt and preferred stock issues for safety of payment of principal, interest, or dividends.
Regulation - Government intervention and oversight within a particular industry to ensure safer business practices.
Risk - The chance that an investment's actual return will be different than expected. This includes the possibility of losing some or all of the original investment.
Securities – Instruments representing ownership (stocks), a debt agreement (bonds) or the rights to ownership (derivatives).
Security and Exchange Commission (SEC) - A government commission created by Congress to regulate the securities markets and protect investors. In addition to regulation and protection, it also monitors the corporate takeovers in the U.S. The SEC is composed of five commissioners appointed by the U.S. President and approved by the Senate.
Securitization – The process through which an issuer creates a financial instrument by combining other financial assets and then marketing different tiers of the repackaged instruments to investors.
Speculation - The process of selecting investments with higher risk in order to profit from an anticipated price movement.
Underwriting - The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt).
Asset-Backed Securities (ABS’s) – A financial security backed by a loan, lease or receivables against assets other than real estate and mortgage-backed securities.
Brokerage Firm – A business whose main responsibility is to be an intermediary that puts buyers and sellers together in order to facilitate a transaction.
Bundle – Products or services that are joined together in order to sell them as a single combined unit.
Capital Requirements - The standardized requirements in place for banks and other depository institutions, which determines how much liquidity is required to be held for a certain level of assets through regulatory agencies such as the Bank for International Settlements, Federal Deposit Insurance Corporation or Federal Reserve Board. These requirements are put into place to ensure that these institutions are not participating or holding investments that increase the risk of default and that they have enough capital to sustain operating losses while still honoring withdrawals.
Collateralized Debt Obligations (CDO’s) - An investment-grade security backed by a pool of bonds, loans and other assets.
Commercial Bank – A financial institution that provides services such as a accepting deposits and giving business loans.
Commercial Paper – An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories and meeting short-term liabilities. Maturities on commercial paper rarely range any longer than 270 days. The debt is usually issued at a discount, reflecting prevailing market interest rates.
Consumer Financial Protection Agency (CFPA) – A proposed government agency would ensure consumers in the financial sector are protected from predatory practices of large financial institutions.
Commodity Futures Trading Commission (CFTC) - A U.S. federal agency established by the Commodity Futures Trading Commission Act of 1974. It ensures the open and efficient operation of the futures markets. There are five futures markets commissioners who are appointed by the president (subject to Senate approval).
Community Reinvestment Act - An act of Congress enacted in 1977 with the intention of encouraging depository institutions to help meet the credit needs of surrounding communities (particularly low and moderate income neighborhoods). The CRA requires federal regulators to assess the record of each bank or thrift in helping to fulfill its obligations to the community. This record will then be used in evaluating applications for future approval of bank mergers, charters, acquisitions, branch openings and deposit facilities.
Countercyclical Buffers – Buffers within the financial sector that was counteract risk within the market both domestically and globally to ensure less risky business.
Credit - A contractual agreement in which a borrower receives something of value now and agrees to repay the lender at some date in the future, generally with interest. The term also refers to the borrowing capacity of an individual or company.
Depository Institutions - an institution that provides financial services for its clients or members
Deregulation - The reduction or elimination of government power in a particular industry, usually enacted to create more competition within the industry.
Fannie Mae (Federal National Mortgage Association – FNMA) – A government-sponsored enterprise (GSE) that was created in 1938 to expand the flow of mortgage money by creating a secondary mortgage market. Fannie Mae is a publicly traded company which operates under a congressional charter that directs Fannie Mae to channel its efforts into increasing the availability and affordability of homeownership for low-, moderate-, and middle-income Americans.
Federal Deposit Insurance Corporation (FDIC) - The U.S. corporation insuring deposits in the U.S. against bank failure. The FDIC was created in 1933 to maintain public confidence and encourage stability in the financial system through the promotion of sound banking practices.
Federal Housing Administration (FHA) - is a United States government agency created as part of the National Housing Act of 1934. The goals of this organization are: to improve housing standards and conditions; to provide an adequate home financing system through insurance of mortgage loans; and to stabilize the mortgage market.
Federal Housing Finance Agency (FHFA) - A U.S. government agency created by the Housing and Economic Recovery Act of 2008 that regulates the secondary mortgage market by overseeing the activities of Fannie Mae, Freddie Mac and the 12 federal home loan banks. This new agency was established to act like a bank-regulator in order to strengthen and improve oversight of the U.S. housing finance system because of the secondary mortgage market's major role in the overall economy.
Federal Reserve Board (Fed) - The governing body of the Federal Reserve System. The seven members of the board of governors are appointed by the president, subject to confirmation by the Senate.
Financial Institution Reform and Recovery Act (FIRREA) - A law enacted to ensure that real estate appraisals are performed up to standard. This includes regulation on the competency of the appraisers, supervisory standards and accurate and full documentation.
Financial Stability Board (FSB) – was established in April 2009 following the 2009 G-20 London summit, and includes all G-20 major economies, FSF members, Spain, and the European Commission. The FSB represents the G-20 leaders' first major international institutional innovation. Secretary of the US Treasury Tim Geithner has described it as "in effect, a fourth pillar" of the architecture of global economic governance. The FSB has been assigned a number of important tasks, working alongside the IMF, World Bank, and WTO.
Freddie Mac - A stockholder-owned, government-sponsored enterprise (GSE) chartered by Congress in 1970 to keep money flowing to mortgage lenders in support of homeownership and rental housing for middle income Americans. The FHLMC purchases, guarantees and securitizes mortgages to form mortgage-backed securities. The mortgage-backed securities that it issues tend to be very liquid and carry a credit rating close to that of U.S. Treasuries.
G-20 - The G-20 Leaders' Summit on Financial Markets and the World Economy was held in London in April 2009 for the world’s top economic leaders to discuss economic growth, stability, and jobs.
Government Sponsored Entities (GSE’s) - Privately held corporations with public purposes created by the U.S. Congress to reduce the cost of capital for certain borrowing sectors of the economy. Members of these sectors include students, farmers and homeowners.
Investment Banks – A financial intermediary that performs a variety of services. This includes underwriting, acting as an intermediary between an issuer of securities and the investing public, facilitating mergers and other corporate reorganizations, and also acting as a broker for institutional clients.
Leverage Ratios - Any ratio used to calculate the financial leverage of a company to get an idea of the company's methods of financing or to measure its ability to meet financial obligations. There are several different ratios, but the main factors looked at include debt, equity, assets and interest expenses.
Mega Banks – A mega bank is an commercial bank combined with an investment; together these two types of banks form mega banks that aim for high revenues through risky business within the financial markets.
Mortgage - A debt instrument that is secured by the collateral of specified real estate property and that the borrower is obliged to pay back with a predetermined set of payments.
Mortgage-Backed Securities (MBS’s) - A type of asset-backed security that is secured by a mortgage or collection of mortgages. These securities must also be grouped in one of the top two ratings as determined by a accredited credit rating agency, and usually pay periodic payments that are similar to coupon payments. Furthermore, the mortgage must have originated from a regulated and authorized financial institution.
Municipal Bonds - A debt security issued by a state, municipality or county to finance its capital expenditures.
National Community Reinvestment Coalition (NCRC) – NCRC is a key national organization working on community reinvestment and housing issues.
Rating Agencies - A company, such as Moody's or Standard & Poor's, that rates various debt and preferred stock issues for safety of payment of principal, interest, or dividends.
Regulation - Government intervention and oversight within a particular industry to ensure safer business practices.
Risk - The chance that an investment's actual return will be different than expected. This includes the possibility of losing some or all of the original investment.
Securities – Instruments representing ownership (stocks), a debt agreement (bonds) or the rights to ownership (derivatives).
Security and Exchange Commission (SEC) - A government commission created by Congress to regulate the securities markets and protect investors. In addition to regulation and protection, it also monitors the corporate takeovers in the U.S. The SEC is composed of five commissioners appointed by the U.S. President and approved by the Senate.
Securitization – The process through which an issuer creates a financial instrument by combining other financial assets and then marketing different tiers of the repackaged instruments to investors.
Speculation - The process of selecting investments with higher risk in order to profit from an anticipated price movement.
Underwriting - The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt).
