bank charter
An operating license issued to a bank by the federal government or a state government; required for a commercial bank to do business.
commercial banks
Profit-oriented financial institutions that accept deposits, make business and consumer loans, invest in government and corporate securities, and provide other financial services.
credit unions
Not-for-profit, member-owned financial cooperatives.
currency
Cash held in the form of coins and paper money.
demand deposits
Money kept in checking accounts that can be withdrawn by depositors on demand.
discount rate
The interest rate that the Federal Reserve charges its member banks.
Federal Deposit Insurance Corporation (FDIC)
An independent, quasi-public corporation backed by the full faith and credit of the U.S. government that insures deposits in commercial banks and thrift institutions for up to a ceiling of $250,000 per account.
Federal Reserve System (Fed)
The central bank of the United States; consists of 12 district banks, each located in a major U.S. city.
financial intermediation
The process in which financial institutions act as intermediaries between the suppliers and demanders of funds.
M1
The total amount of readily available money in the system; includes currency and demand deposits.
M2
A term used by economists to describe the U.S. monetary supply. Includes all M1 monies plus time deposits and other money that is not immediately accessible.
money
Anything that is acceptable as payment for goods and services.
open market operations
The purchase or sale of U.S. government bonds by the Federal Reserve to stimulate or slow down the economy.
pension funds
Large pools of money set aside by corporations, unions, and governments for later use in paying retirement benefits to their employees or members.
reserve requirement
Requires banks that are members of the Federal Reserve System to hold some of their deposits in cash in their vaults or in an account at a district bank.
selective credit controls
The power of the Federal Reserve to control consumer credit rules and margin requirements.
thrift institutions
Depository institutions formed specifically to encourage household saving and to make home mortgage loans.
time deposits
Deposits at a bank or other financial institution that pay interest but cannot be withdrawn on demand.
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