Federal Advisory Council – FAC

An advisory group consisting of one member, usually a banker, from each Federal Reserve District. Members are elected annually by the Reserve Bank boards of directors. Members meet with the Federal Reserve Board at least four times a year to make recommendations on business and financial issues relating to banking, but have no real power.

Federal Deposit Insurance Corporation – FDIC

An independent deposit insurance agency created by Congress in 1933 to maintain stability and public confidence in the nation’s banking system. The FDIC promotes safety and soundness of insured depository institutions and the U.S. financial system by identifying, monitoring, and addressing risks to the deposit insurance funds; minimizes disruptive effects from the failure of banks and savings associations; and ensures fairness in the sale of financial products and provision of financial services.

federal funds

Short-term transactions in immediately available funds between depository institutions and certain other institutions that maintain accounts with the Federal Reserve; usually not collateralized.

federal funds rate (funds rate)

The interest rate at which banks borrow surplus reserves and other immediately available funds. The federal funds rate is the shortest short-term interest rate, with maturities on federal funds concentrated in overnight or one-day transactions.

Federal Home Loan Bank Board – FHLBB

The agency of the federal government that supervises all federal savings and loan associations and federally insured state-chartered savings and loan associations. The FHLBB also operates the Federal Savings and Loan Insurance Corporation, which insures accounts at federal savings and loan associations and those state-chartered associations that apply and are accepted. In addition, the FHLBB directs the Federal Home Loan Bank System, which provides a flexible credit facility for member savings institutions to promote the availability of home financing. The FHL Banks also own the Federal Home Loan Mortgage Corporation, established in 1970 to promote secondary markets for mortgages.

federal margin call

A broker’s demand upon a customer for cash or securities needed to satisfy the required Regulation T down payment for a purchase or short sale of securities.

Federal Open Market Committee – FOMC

Twelve-member committee made up of the seven members of the Board of Governors; the president of the Federal Reserve Bank of New York; and, on a rotating basis, the presidents of four other Reserve Banks. The FOMC meets eight times a year to set Federal Reserve guidelines regarding the purchase and sale of government securities in the open market as a means of influencing the volume of bank credit and money in the economy. It also establishes policy relating to System operations in the foreign exchange rates.

Federal Reserve Act of 1913

Federal legislation that established the Federal Reserve System.

Federal Reserve Bank – FRB

One of the twelve operating arms of the Federal Reserve System, located throughout the nation, that together with their twenty-five Branches carry out various System functions, including operating a nationwide payments system, distributing the nation’s currency and coin, supervising and regulating member banks and bank holding companies, and serving as banker for the U.S. Treasury.

Federal Reserve District (Reserve District or District)

One of the twelve geographic regions served by a Federal Reserve Bank.

Federal Reserve float

Checkbook money that, for a period of time, appears on the books of both the payor and payee due to the lag in the collection process. Federal Reserve float often arises during the Federal Reserve’s check collection process. In order to promote an efficient payments mechanism with certainty as to the date funds become available, the Federal Reserve has employed the policy of crediting the reserve accounts of depository institutions depositing checks (the payee) according to an availability schedule before the Federal Reserve is able to obtain payment from the payor.

Federal Reserve notes

Nearly all of the nation’s circulating paper currency consists of Federal Reserve notes printed by the Bureau of Engraving and Printing and issued to the Federal Reserve Banks to put into circulation through commercial banks and other depository institutions. Federal Reserve notes are obligations of the U.S. government.

Federal Reserve System

The central bank of the United States, created by Congress and made up of a seven-member Board of Governors in Washington, DC, twelve regional Federal Reserve Banks, and their twenty-five Branches.


Electronic funds transfer network operated by the Federal Reserve. Fedwire is usually used to transfer large amounts of funds and U.S. government securities from one institution’s account at the Federal Reserve to another institution’s account. It is also used by the U.S. Department of the Treasury and other federal agencies to collect and disburse funds.

fiat money

Money that has little or no intrinsic value as a commodity; it is costless to produce, usually taking the form of tokens or pieces of paper, and is not redeemable for any commodity.

finance charge

The total dollar amount paid to obtain credit.

finance lease

See open-end lease.

financial holding company

A financial entity engaged in a broad range of banking-related activities, created by the Gramm-Leach-Bliley Act of 1999. These activities include: insurance underwriting, securities dealing and underwriting, financial and investment advisory services, merchant banking, issuing or selling securitized interests in bank-eligible assets, and generally engaging in any non-banking activity authorized by the Bank Holding Company Act. The Federal Reserve Board is responsible for supervising the supervising the financial condition and activities of financial holding companies.

Similarly, any non-bank commercial company that is predominantly engaged in financial activities, earning 85% or more of its gross revenues from financial services, may choose to become a financial holding company. These companies are required to sell any non-financial (commercial) businesses within ten years.

financial institution

An institution that uses its funds chiefly to purchase financial assets (loans, securities) as opposed to tangible property. Financial institutions can be classified according to the nature of the principal claims they issue. See also depository institution.

financial instrument

Any written instrument having monetary value or evidencing a monetary transaction.

fiscal agency services

Services performed by the Federal Reserve Banks on behalf of the U.S. government. These include maintaining deposit accounts for the Treasury Department, paying U.S. government checks drawn on the Treasury, and issuing and redeeming savings bonds and other government securities.

fiscal policy

The federal government’s decisions about the amount of money it spends and collects in taxes to achieve a full employment and non-inflationary economy. See also contractionary fiscal policy and expansional fiscal policy.

fixed exchange rate system

Exchange rates between currencies that are set at predetermined levels and don’t move in response to changes in supply and demand.

fixed rate

A traditional approach to determining the finance charge payable on an extension of credit. A predetermined and certain rate of interest is applied to the principal. See also variable rate.

floating exchange rate system

The flexible exchange rate system in which the exchange rate is determined by the market forces of supply and demand without intervention.

foreign currency operations

Purchase or sale of the currencies of other nations by a central bank for the purpose of influencing foreign exchange rates or maintaining orderly foreign exchange markets. Also called foreign-exchange market intervention.

foreign exchange desk

The foreign exchange trading desk at the New York Federal Reserve Bank. The desk undertakes operations in the exchange markets for the account of the Federal Open Market Committee, and acts as agent for the U.S. Treasury and for foreign central banks.

foreign exchange rate

Price of the currency of one nation in terms of the currency of another nation.

forward exchange

A type of foreign exchange transaction whereby a contract is made to exchange one currency for another at a fixed date in the future at a specified exchange rate. By buying or selling forward exchange, businesses protect themselves against a decrease in the value of a currency they plan to sell at a future date.


Federal Reserve Bank of San Francisco.


The Communications network of the Federal Reserve which interconnects Federal Reserve Bank offices, the Board of Governors, depository institutions, and the Treasury. It is used for Fedwire transfers and transfers of U.S. securities as well as for transfer of Federal Reserve administrative, supervisory, and monetary policy information.

frictional unemployment

Short-term joblessness associated with mobility. A person who leaves a job to find something better is considered frictionally unemployed. This type of unemployment characterizes workers subject to seasonal work (e.g., construction, agricultural, winter recreational workers, etc.).

Full Employment and Balanced Growth Act of 1978 (Humphrey-Hawkins Act)

Federal legislation that, among other things, specifies the primary objectives of U.S. economic policy–maximum employment, stable prices, and moderate long-term interest rates.

funds rate

See federal funds rate.


Contracts that require delivery of a commodity of specified quality and quantity, at a specified price, on a specified future date. Commodity futures are traded on a commodity exchange and are used for both speculation and hedging.