California Economic Development Lending Initiative – CEDLI

This is a statewide community development corporation that provides financing to serve a range of community economics development needs, including small businesses, non-profit lenders, and community real estate projects.

capacity utilization rate

The percentage of the economy’s total plant and equipment that is currently in production. Usually a decrease in this percentage signals an economic slowdown, while an increase signals economic expansion.

capital market

The market in which corporate equity and longer-term debt securities (those maturing in more than one year) are issued and traded.

capital market rates

See long-term interest rates.

Cash Management Bills – CMB

Very short maturity bills that the Treasury sells on an irregular basis to bridge low points in the Treasury’s cash balance.

cash method of accounting

A system, used especially in computing income tax, in which income is not credited until it is actually or constructively received and expenses are not charged until they have been paid; to be distinguished from the accrual method, in which income is credited when the legal right to the income occurs and expenses are charged when the legal liability becomes enforceable.

cease-and-desist order

An order issued after notice and opportunity for hearing, requiring a depository institution, a holding company, or a depository institution official to terminate unlawful, unsafe, or unsound banking practices. Cease-and-desist orders are issued by the appropriate federal regulatory agencies under the Financial Institutions Supervisory Act and can be enforced directly by the courts.

central bank

The principal monetary authority of a nation, a central bank performs several key functions, including issuing currency and regulating the supply of credit in the economy. The Federal Reserve is the central bank of the United States.

central bank intervention

The buying or selling of currency, foreign or domestic, by central banks, in order to influence market conditions or exchange rate movements.

certificate of deposit – CD

A form of time deposit at a bank or savings institution which cannot be withdrawn before a specified maturity date without being subject to an interest penalty for early withdrawal. Small-denomination CDs are often purchased by individuals. Large CDs of $100,000 or more are often in negotiable form, meaning they can be sold or transferred among holders before maturity.

check clearing

The movement of checks from the banks or other depository institutions where they are deposited back to those on which they are written, and funds movement in the opposite direction. This process results in credits to accounts at the institutions of deposit and corresponding debits to accounts at the paying institutions. The Federal Reserve participates in check clearing through its nationwide facilities, though many checks are cleared by private sector arrangement.


An institution where mutual claims are settled between accounts of member depository institutions. Clearinghouses among banks have traditionally been organized for check-clearing purposes, but more recently have cleared other types of settlements, including electronic fund transfers.

Clearinghouse Interbank Payments System – CHIPS

An automated clearing system used primarily for international payments. This system is owned and operated by the New York Clearinghouse banks and engages Fedwire for settlement.

closed-end credit

An agreement in which advanced credit, plus any finance charges, are expected to be repaid in full over a definite time. Most real estate and automobile loans are closed-end agreements.


Property that is offered to secure a loan or other credit and that becomes subject to seizure on default. (Also called security.)

commercial bank

Bank that offers a broad range of deposit accounts, including checking, savings, and time deposits, and extends loans to individuals and businesses. Commercial banks can be contrasted with investment banking firms, such as brokerage firms, which generally are involved in arranging for the sale of corporate or municipal securities.

commodity prices

An index of commodities (such as oil and steel) traded in worldwide markets.

Community Reinvestment Act – CRA

Enacted by Congress in 1977, the CRA encourages banks to help meet the credit needs of their communities for housing and other purposes, particularly in neighborhoods with low or moderate incomes, while maintaining safe and sound operations.

Community Reinvestment Act Statement

A description available for public inspection at each bank office indicating, on a map, the communities served by that office and the types of credit the bank is prepared to extend within the communities served.

competitive bidders

One of two categories of bidders on Treasury securities: competitive and noncompetitive. Competitive bidders are usually financial institutions.

Comptroller of the Currency

See Office of the Comptroller of the Currency.


A grouping of corporations to fulfill a combined objective or project that usually requires interbusiness cooperation and sharing of the goods.

Consumer Advisory Council – CAC

A statutory body established by Congress in 1976. The Council, with 30 members who represent a broad range of consumer and creditor interests, advises the Federal Reserve Board on the exercise of its responsibilities under the Consumer Credit Protection Act and on other matters on which the Federal Reserve Board seeks its advice.

consumer price index – CPI

A measurement of the cost of living determined by the Bureau of Labor Statistics.

contractionary fiscal policy

A policy to decrease governmental spending and/or an increase in taxes. See also fiscal policy.

contractionary monetary policy

A policy to restrict the growth of money and credit in the economy. See also monetary policy.

contemporaneous reserve accounting

An accounting method that allows member banks of the Federal Reserve a one-day lag when calculating their required reserves and reserves held as vault cash. Except for the one-day lag, assets and liabilities used in calculating reserves and required reserves are those of the same week.

correspondent bank

A bank that accepts deposits of and performs banking services for other depository institutions.


A term referring to a person, other than the principle borrower, who signs for a loan. The cosigner(s) assumes equal liability for the loan.


The promise to pay in the future in order to buy or borrow in the present. The right to defer payment of debt.

credit card

Any card, plate, or coupon book that may be used repeatedly to borrow money or buy goods and services on credit.

credit scoring system

A statistical system used to determine whether or not to grant credit by assigning numerical scores to various characteristics related to creditworthiness.

credit union

Financial cooperative organization of individuals who have a common bond, such as a place of employment, residence, or membership in a labor union. Credit unions accept deposits from members, pay interest (in the form of dividends) on the deposits out of earnings, and use their funds mainly to provide consumer installment loans to members.

credit history

A record of how a person has borrowed and repaid debt.


A creditor’s measure of a consumer’s past and future ability and willingness to repay debts.

currency appreciation

An increase in the value of one currency relative to another currency. Appreciation occurs when, because of a change in exchange rates, a unit of one currency buys more units of another currency.

currency depreciation

A decline in the value of one currency relative to another currency. Depreciation occurs when, because of a change in exchange rates, a unit of one currency buys fewer units of another currency.

currency devaluation

A deliberate downward adjustment in the official exchange rate established, or pegged, by a government against a specified standard, such as another currency or gold.

currency revaluation

A deliberate upward adjustment in the official exchange rate established, or pegged, by a government against a specified standard, such as another currency or gold.

currency union

A group of countries that agree to peg their exchange rates and to coordinate their monetary policies so as to avoid the need for currency reallignments.

current account balance

The difference between the nation’s total exports of goods, services, and transfers and its total imports of them. Current account balance calculations exclude transactions in financial assets and liabilities.

cyclical unemployment

Unemployment caused by a low level of aggregate demand associated with recession in the business cycle.