Definition of Fed

Fed

See federal Reserve System.

Federal agency securities

Securities issued by corporations and agencies created by the U.S. government,
such as the federal Home Loan Bank Board and Ginnie Mae.

Federal credit agencies

Agencies of the federal government set up to supply credit to various classes of
institutions and individuals, e.g. S&Ls, small business firms, students, farmers, and exporters.

Federal Deposit Insurance Corporation (FDIC)

A federal institution that insures bank deposits.

Federal Financing Bank

A federal institution that lends to a wide array of federal credit agencies funds it
obtains by borrowing from the U.S. Treasury.

Federal funds

Non-interest bearing deposits held in reserve for depository institutions at their district federal
Reserve Bank. Also, excess reserves lent by banks to each other.

Federal funds market

The market where banks can borrow or lend reserves, allowing banks temporarily
short of their required reserves to borrow reserves from banks that have excess reserves.

Federal funds rate

This is the interest rate that banks with excess reserves at a federal Reserve district bank
charge other banks that need overnight loans. The fed Funds rate, as it is called, often points to the direction
of U.S. interest rates.

Federal Home Loan Banks

The institutions that regulate and lend to savings and loan associations. The
federal Home Loan Banks play a role analogous to that played by the federal Reserve Banks vis-Ă -vis
member commercial banks.

Federal Reserve System

The central bank of the U.S., established in 1913, and governed by the federal
Reserve Board located in Washington, D.C. The system includes 12 federal Reserve Banks and is authorized
to regulate monetary policy in the U.S. as well as to supervise federal Reserve member banks, bank holding
companies, international operations of U.S.banks, and U.S.operations of foreign banks.

Federally related institutions

Arms of the federal government that are exempt from SEC registration and
whose securities are backed by the full faith and credit of the U.S. government (with the exception of the
Tennessee Valley Authority).

Fedwire

A wire transfer system for high-value payments operated by the federal Reserve System.

Forward Fed funds

fed funds traded for future delivery.

Freddie Mac (Federal Home Loan Mortgage Corporation)

A Congressionally chartered corporation that
purchases residential mortgages in the secondary market from S&Ls, banks, and mortgage bankers and
securitizes these mortgages for sale into the capital markets.

Term Fed Funds

fed Funds sold for a period of time longer than overnight.

Federal Reserve (the Fed)

The central bank in the United States, responsible for setting interest rates.

Federal Funds Rate

The interest rate at which banks lend deposits at the federal Reserve to one another overnight.

Federal Open Market Committee (FOMC)

fed committee that makes decisions about open-market operations.

Federal Reserve Banks

The twelve district banks in the federal Reserve System.

Federal Reserve Board

Board of Governors of the federal Reserve System.

Federal Reserve System

The central banking authority responsible for monetary policy in the United States.

Electronic Federal Tax Payment Systems (EFTPS)

An electronic funds transfer system used by businesses to remit taxes to the government.

Federal Employer Identification Number

A unique identification number issued
by the federal government used for payroll purposes to identify the company
when it deals with the Internal Revenue Service.

Federal Insurance Contributions Act of 1935 (FICA)

A federal Act authorizing the government to collect Social Security and Medicare payroll taxes.

Federal Unemployment Tax Act (FUTA)

A federal Act requiring employers to pay a tax on the wages paid to their employees, which is then used to create a
pool of funds to be used for unemployment benefits.

Agencies

federal agency securities.

Agency pass-throughs

Mortgage pass-through securities whose principal and interest payments are
guaranteed by government agencies, such as the Government National Mortgage Association ("Ginnie Mae"), federal Home Loan Mortgage Corporation ("Freddie Mac") and federal National Mortgage Association ("Fannie Mae").

Bank for International Settlements (BIS)

An international bank headquartered in Basel, Switzerland, which
serves as a forum for monetary cooperation among several European central banks, the Bank of Japan, and the
U.S. federal Reserve System. Founded in 1930 to handle the German payment of World War I reparations, it
now monitors and collects data on international banking activity and promulgates rules concerning
international bank regulation.

Book-entry securities

The Treasury and federal agencies are moving to a book-entry system in which securities are not represented by engraved pieces of paper but are maintained in computerized records at the
fed in the names of member banks, which in turn keep records of the securities they own as well as those they
are holding for customers. In the case of other securities where a book-entry has developed, engraved
securities do exist somewhere in quite a few cases. These securities do not move from holder to holder but are
usually kept in a central clearinghouse or by another agent.

CFTC

The Commodity Futures Trading Commission is the federal agency created by Congress to regulate
futures trading. The Commodity Exchange Act of 1974 became effective April 21, 1975. Previously, futures
trading had been regulated by the Commodity Exchange Authority of the USDA.

Discount rate

The interest rate that the federal Reserve charges a bank to borrow funds when a bank is
temporarily short of funds. Collateral is necessary to borrow, and such borrowing is quite limited because the
fed views it as a privilege to be used to meet short-term liquidity needs, and not a device to increase earnings.

Discount window

Facility provided by the fed enabling member banks to borrow reserves against collateral
in the form of governments or other acceptable paper.

Edge corporations

Specialized banking institutions, authorized and chartered by the federal Reserve Board
in the U.S., which are allowed to engage in transactions that have a foreign or international character. They
are not subject to any restrictions on interstate banking. Foreign banks operating in the U.S. are permitted to
organize and own and Edge corporation.

Eligible bankers' acceptances

In the BA market, an acceptance may be referred to as eligible because it is
acceptable by the fed as collateral at the discount window and/or because the accepting bank can sell it
without incurring a reserve requirement.

Export-Import Bank (Ex-Im Bank)

The U.S. federal government agency that extends trade credits to U.S.
companies to facilitate the financing of U.S. exports.

FDIC

federal Deposit Insurance Corporation.

Flower bond

Government bonds that are acceptable at par in payment of federal estate taxes when owned by
the decedent at the time of death.

Free reserves

Excess reserves minus member bank borrowings at the fed.

Gestation repo

A reverse repurchase agreement between mortgage firms and securities dealers. Under the
agreement, the firm sells federal agency-guaranteed MBS and simultaneously agrees to repurchase them at a
future date at a fixed price.

Go-around

When the fed offers to buy securities, to sell securities, to do repo, or to do reverses, it solicits
competitive bids or offers from all primary dealers.

Initial margin requirement

When buying securities on margin, the proportion of the total market value of
the securities that the investor must pay for in cash. The Security Exchange Act of 1934 gives the board of
governors of the federal Reserve the responsibility to set initial margin requirements, but individual
brokerage firms are free to set higher requirements. In futures contracts, initial margin requirements are set by
the exchange.

Jumbo loan

Loans of $1 billion or more. Or, loans that exceed the statutory size limit eligible for purchase or
securitization by the federal agencies.

Margin account (Stocks)

A leverageable account in which stocks can be purchased for a combination of
cash and a loan. The loan in the margin account is collateralized by the stock and, if the value of the stock
drops sufficiently, the owner will be asked to either put in more cash, or sell a portion of the stock. Margin
rules are federally regulated, but margin requirements and interest may vary among broker/dealers.

Monetary policy

Actions taken by the Board of Governors of the federal Reserve System to influence the
money supply or interest rates.

Money market fund

A mutual fund that invests only in short term securities, such as bankers' acceptances,
commercial paper, repurchase agreements and government bills. The net asset value per share is maintained at
$1. 00. Such funds are not federally insured, although the portfolio may consist of guaranteed securities
and/or the fund may have private insurance protection.

Pension Benefit Guaranty Corporation (PBGC)

A federal agency that insures the vested benefits of
pension plan participants (established in 1974 by the ERISA legislation).

Pool factor

The outstanding principal balance divided by the original principal balance with the result
expressed as a decimal. Pool factors are published monthly by the Bond Buyer newspaper for Ginnie Mae,
Fannie Mae, and Freddie Mac(federal Home Loan Mortgage Corporation) MBSs.

Project notes (PNs)

Project notes are issued by municipalities to finance federally sponsored programs in
urban renewal and housing and are guaranteed by the U.S. Department of Housing and Urban Development.
Project financing A form of asset-based financing in which a firm finances a discrete set of assets on a standalone
basis.
Projected benefit obligation (PBO) A measure of a pension plan's liability at the calculation date assuming
that the plan is ongoing and will not terminate in the foreseeable future. Related:accumulated benefit obligation.

Regular way settlement

In the money and bond markets, the regular basis on which some security trades are
settled is that the delivery of the securities purchased is made against payment in fed funds on the day
following the transaction.

Regulation D

fed regulation currently that required member banks to hold reserves against their net
borrowings from foreign offices of other banks over a 28-day averaging period. Regulation D has been
merged with Regulation M.

Regulation M

fed regulation currently requiring member banks to hold reserves against their net borrowings
from their foreign branches over a 28-day averaging period. Reg M has also required member banks to hold
reserves against Eurodollars lent by their foreign branches to domestic corporations for domestic purposes.

Regulation Q

fed regulation imposing caps on the rates that banks may pay on savings and time deposits.
Currently time deposits with a denomination of $100,000 or more are exempt from Reg Q.

Repurchase agreement

An agreement with a commitment by the seller (dealer) to buy a security back from
the purchaser (customer) at a specified price at a designated future date. Also called a repo, it represents a
collateralized short-term loan, where the collateral may be a Treasury security, money market instrument,
federal agency security, or mortgage-backed security. From the purchaser (customer) perspective, the deal is
reported as a reverse Repo.

Required reserves

The dollar amounts based on reserve ratios that banks are required to keep on deposit at a federal Reserve Bank.

Reserve ratios

Specified percentages of deposits, established by the federal Reserve Board, that banks must
keep in a non-interest-bearing account at one of the twelve federal Reserve Banks.

Reserve requirements

The percentage of different types of deposits that member banks are required to hold
on deposit at the fed.

SEC

The Securities and Exchange Commission, the primary federal regulatory agency of the securities
industry.

Securities & Exchange Commission

The SEC is a federal agency that regulates the U.S.financial markets.

Tax-exempt sector

The municipal bond market where state and local governments raise funds. Bonds issued
in this sector are exempt from federal income taxes.

Variance rule

Specifies the permitted minimum or maximum quantity of securities that can be delivered to
satisfy a TBA trade. For Ginnie Mae, Fannie Mae, and feddie Mac pass-through securities, the accepted
variance is plus or minus 2.499999 percent per million of the par value of the TBA quantity.

Payroll tax expense

The amount of tax associated with salaries that an employer pays to governments (federal, state, and local).

depreciation

Refers to the generally accepted accounting principle of allocating
the cost of a long-term operating asset over the estimated useful
life of the asset. Each year of use is allocated a part of the original cost of
the asset. Generally speaking, either the accelerated method or the
straight-line method of depreciation is used. (There are other methods,
but they are relatively rare.) Useful life estimates are heavily influenced
by the schedules allowed in the federal income tax law. Depreciation is
not a cash outlay in the period in which the expense is recorded—just
the opposite. The cash inflow from sales revenue during the period
includes an amount to reimburse the business for the use of its fixed
assets. In this respect, depreciation is a source of cash. So depreciation is
added back to net income in the statement of cash flows to arrive at cash
flow from operating activities.

Securities and Exchange Commission (SEC)

The federal agency that
oversees the issuance of and trading in securities of public businesses.
The SEC has broad powers and can suspend the trading in securities of a
business. The SEC also has primary jurisdiction in making accounting
and financial reporting rules, but over the years it has largely deferred to
the private sector for the development of generally accepted accounting
principles (GAAP).

Cost Accounting Standards Board (CASB)

a body established by Congress in 1970 to promulgate cost accounting
standards for defense contractors and federal agencies; disbanded
in 1980 and reestablished in 1988; it previously issued
pronouncements still carry the weight of law for those
organizations within its jurisdiction

Securities and Exchange Commission (SEC)

federal agency responsible for regulation of securities markets in the United
States.

Discount Rate

The interest rate at which the fed is prepared to loan reserves to commercial banks.

Discount Window

The federal Reserve facility at which reserves are loaned to banks at the discount rate.

FOMC

See federal Open Market Committee.

NOW Account

Negotiable order of withdrawal account, an interest-bearing bank account on which a special check called a negotiable order of withdrawal could be written. Because NOWs are not technically checks, by this means it was possible for banks to circumvent fed regulations prohibiting payment of interest on checking accounts.

Consolidated Omnibus Budget Reconciliation Act (COBRA)

A federal Act
containing the requirements for offering insurance to departed employees.

Consumer Credit Protection Act

A federal Act specifying the proportion of
total pay that may be garnished.

Contract Work Hours and Safety Standards Act

A federal Act requiring federal contractors to pay overtime for hours worked exceeding 40 per week.

Current Tax Payment Act of 1943

A federal Act requiring employers to withhold income taxes from employee pay.

Davis-Bacon Act of 1931

A federal Act providing wage protection to nongovernment
workers by requiring businesses engaged in federal construction
projects to pay their employees prevailing wages and fringe benefits.

Employee Retirement Income Security Act of 1974 (ERISA)

A federal Act that sets minimum operational and funding standards for employee benefit
plans.

Equal Pay Act of 1963

A federal Act requiring that both sexes receive equal pay
in situations where work requires equivalent effort, responsibility, and skills,
performed under similar working conditions.

Fair Labor Standards Act of 1938

A federal Act creating standards of overtime
pay, minimum wages, and payroll recordkeeping.

Family and Medical Leave Act

A federal Act containing the rules for offering
health insurance to employees who are on leave.

FICA

The acronym for the federal Insurance Contributions Act, also used to describe
the combined amount of Social Security and Medicare deductions from
an employee’s pay.

Form 940

A form used to report federal unemployment tax remittances and liabilities.

Health Insurance Portability and Accountability Act of 1996 (HIPAA)

A federal Act expanding upon many of the insurance reforms created by
COBRA. In particular, it ensures that small businesses will have access to
health insurance, despite the special health status of any employees.

Illegal Immigration Reform and Immigrant Responsibility Act of 1996 (IIRIRA)

A federal Act shielding employers from liability if they have made
a good-faith effort to verify a new employee’s identity and employment eligibility.

Immigration Reform and Control Act of 1986

A federal Act requiring all employers having at least four employees to verify the identity and employment
eligibility of all regular, temporary, casual, and student employees.

Internal Revenue Code

Refers to all federal tax laws as a group.

Internal Revenue Service

A federal agency empowered by Congress to interpret and enforce tax-related laws.

McNamara-O'Hara Service Contract Act of 1965

A federal Act requiring federal contractors to pay those employees working on a federal contract at
least as much as the wage and benefit levels prevailing locally.

Minimum Wage

An hourly wage rate set by the federal government below
which actual hourly wages cannot fall. This rate can be increased by state governments.

Personal Responsibility and Work Opportunity Reconciliation Act

A federal Act requiring the reporting of new hires into a national database.

Self-Employment Contributions Act (SECA)

A federal Act requiring self-employed business owners to pay the same total tax rates for Social Security and
Medicare taxes that are split between employees and employers under the federal Insurance Contributions Act.

Social Security Act of 1935

A federal Act establishing Old Age and Survivor’s
Insurance, which was funded by compulsory savings by wage earners.

Uniform Interstate Family Support Act

A federal Act specifying which jurisdiction
shall issue family support-related garnishment orders.

Uniformed Services Employment and Reemployment Rights Act of 1994

A federal act that minimizes the impact on people serving in the Armed Forces
when they return to civilian employment by avoiding discrimination and increasing
their employment opportunities.

W-2 Form

A form used to report gross pay and tax deductions for each employee
to the IRS for a calendar year.
W-4 Form
A form on which an employee declares the amount of federal tax deductions
to be deducted from his or her pay.

Walsh-Healey Public Contracts Act of 1936

A federal Act that forces government contractors to comply with the government’s minimum wage and hour rules.

Securities and Exchange Commission (SEC)

A federal agency that administers securities legislation,
including the Securities Acts of 1933 and 1934. Public companies in the United States
must register their securities with the SEC and file with the agency quarterly and annual financial
reports.

Staff Accounting Bulletin (SAB)

Interpretations and practices followed by the staff of the Office of the Chief Accountant and the Division of Corporation Finance in administering the disclosure
requirements of the federal securities laws.

Statutory Tax Rate

The income tax rate that is stated in income tax law. It is applied to taxable
income reported in income tax returns. The U.S. federal statutory corporate income tax rate
starts out at 15% for taxable income up to $50,000 and rises quickly to 35%.

Assuris

Assuris is a not for profit organization that protects Canadian policyholders in the event that their life insurance company should become insolvent. Their role is to protect policyholders by minimizing loss of benefits and ensuring a quick transfer of their policies to a solvent company where their benefits will continue to be honoured. Assuris is funded by the life insurance industry and endorsed by government. If you are a Canadian citizen or resident, and you purchased a product from a member life insurance company in Canada, you are protected by Assuris.
All life insurance companies authorized to sell in Canada are required, by the federal, provincial and territorial regulators, to become members of Assuris. Members cannot terminate their membership as long as they are licensed to write business in Canada or have any in force business in Canada.
If your life insurance company fails, your policies will be transferred to a solvent company. Assuris guarantees that you will retain at least 85% of the insurance benefits you were promised. Insurance benefits include Death, Health Expense, Monthly Income and Cash Value. Your deposit type products will also be transferred to a solvent company. For these products, Assuris guarantees that you will retain 100% of your Accumulated Value up to $100,000. Deposit type products include accumulation annuities, universal life overflow accounts, premium deposit accounts and dividend deposit accounts. The key to Assuris protection is that it is applied to all benefits of a similar type. If you have more than one policy with the failed company, you will need to add together all similar benefits before applying the Assuris protection. The Assuris website can be found at www.assuris.ca.

Back To Back Annuity

This term refers to the simultaneous issue of a life annuity with a non-guaranteed period and a guaranteed life insurance policy [usually whole life or term to 100]. The face value of the life insurance would be the same amount that was used to purchase the annuity. This combination of life annuity providing the highest payout of all types of annuities, along with a guaranteed life insurance policy allowed an uninsurable person to convert his/her RRSP into the best choice of annuity and guarantee that upon his/her death, the full value of the annuity would be paid tax free through the life insurance policy to his family members. However, in the early 1990's, the federal tax authorities put a stop to the issuing of standard life rates to rated or uninsurable applicants. Insuring a life annuity in this manner is still an excellent way to provide guaranteed tax free funds to family members but the application for the annuity and the application for the life insurance are separate transactions and today, most likely conducted through two different insurance companies so that there is no suspicion of preferential treatment given to the life insurance application.

Creditor Proof Protection

The creditor proof status of such things as life insurance, non-registered life insurance investments, life insurance RRSPs and life insurance RRIFs make these attractive products for high net worth individuals, professionals and business owners who may have creditor concerns. Under most circumstances the creditor proof rules of the different provincial insurance acts take priority over the federal bankruptcy rules.
The provincial insurance acts protect life insurance products which have a family class beneficiary. Family class beneficiaries include the spouse, parent, child or grandchild of the life insured, except in Quebec, where creditor protection rules apply to spouse, ascendants and descendants of the insured. Investments sold by other financial institutions do not offer the same security should the holder go bankrupt. There are also circumstances under which the creditor proof protections do not hold for life insurance products. federal bankruptcy law disallows the protection for any transfers made within one year of bankruptcy. In addition, should it be found that a person shifted money to an insurance company fund in bad faith for the specific purpose of avoiding creditors, these funds will not be creditor proof.

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