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Appendix A: Glossary 541
System and certain of the presidents of the Federal Reserve Banks; oversees market conditions
and implements monetary policy through such means as setting interest rates.
Federal Reserve Bank of New York One of regional Federal Reserve Banks, with responsibility
for regulating bank holding companies in New York State and nearby areas.
Federal Reserve U.S. central banking system created in in response to financial panics, con-
sisting of the Federal Reserve Board in Washington, DC, and Federal Reserve Banks around
the country; its mission is to implement monetary policy through such means as setting inter-
est rates, supervising and regulating banking institutions, maintaining the stability of the fi-
nancial system, and providing financial services to depository institutions.
FHA see Federal Housing Administration.
FHFA see Federal Housing Finance Agency.
FICO score A measure of a borrower’s creditworthiness based on the borrower’s credit data; de-
veloped by the Fair Isaac Corporation.
Financial Crimes Enforcement Network Treasury office that collects and analyzes information
about financial transactions to combat money laundering, terroristfinancing, and other finan-
cial crimes.
FinCEN see Financial Crimes Enforcement Network.
FOMC see Federal Open Market Committee.
foreclosure Legal process whereby a mortgage lender gains ownership of the real property secur-
ing a defaulted mortgage.
Freddie Mac Nickname for the Federal Home Loan Mortgage Corporation (FHLMC), a govern-
ment-sponsored enterprise providing financing for the home mortgage market.
Ginnie Mae Nickname for the Government National Mortgage Association (GNMA), a govern-
ment-sponsored enterprise; guarantees pools of VA and FHA mortgages.
Glass-Steagall Act Banking Act of creating the FDIC to insure bank deposits; prohibited
commercial banks from underwriting or dealing in most types of securities, barred banks
from affiliating with securities firms, and introduced other banking reforms. In , the
Gramm-Leach-Bliley Act repealed the provisions of the Glass-Steagall Act that prohibited affil-
iations between banks and securities firms.
government-sponsored enterprise A private corporation, such as Fannie Mae and Freddie Mac,
created by the federal government to pursue certain public policy goals designated in its
charter.
Gramm-Leach-Bliley Act legislation that lifted certain remaining restrictions established by
the Glass-Steagall Act.
GSE see government-sponsored enterprise.
haircut The difference between the value of an asset and the amount borrowed against it.
hedge In finance, a way to reduce exposure or risk by taking on a new financial contract.
hedge fund A privately offered investment vehicle exempted from most regulation and oversight;
generally open only to high-net-worth investors.
HOEPA see Home Ownership and Equity Protection Act.
Home Ownership and Equity Protection Act federal law that gave the Federal Reserve new
responsibility to address abusive and predatory mortgage lending practices.
Housing and Economic Recovery Act law including measures to reform and regulate the
GSEs; created the Federal Housing Finance Agency.
HUD see Department of Housing and Urban Development.
hybrid CDO A CDO backed by collateral found in both cash CDOs and synthetic CDOs.
illiquid assets Assets that cannot be easily or quickly sold.
interest-only loan Loan that allows borrowers to pay interest without repaying principal until the
end of the loan term.
