Credit crisis vocabulary

Vocab from New York Times overview:
http://topics.nytimes.com/topics/reference/timestopics/subjects/c/credit_crisis/

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definitions & notes only words
  1. mortgage-backed security
    a security created when a group of mortgages are gathered together and bonds are sold to other institutions or the public; investors receive a portion of the interest payments on the mortgages as well as the principal payments; usually guaranteed by the government
    Banks and other investors had devised a plethora of complex financial instruments to slice up and resell the mortgage-backed securities and to hedge against any risks — or so they thought.
  2. stock market
    an exchange where security trading is conducted by professional stockbrokers
    When the stock market began a steep decline in 2000 and the nation slipped into recession the next year, the Federal Reserve sharply lowered interest rates to limit the economic damage.
  3. penny stock
    a stock selling for less that $1/share
    Credit conditions began to slip again, and stock markets fell even further, skidding to their lowest levels in 12 years and slashing the share prices of blue-chip companies to something akin to penny stocks.
  4. homeowner
    someone who owns a home
    In addition, millions of homeowners took advantage of the rate drop to refinance their existing mortgages.
  5. refinance
    renew the financing of
    In addition, millions of homeowners took advantage of the rate drop to refinance their existing mortgages.
  6. economic crisis
    a long-term economic state characterized by unemployment and low prices and low levels of trade and investment
    Polls showed that Mr. Obama’s election on Nov. 4 was partly the fruit of the economic crisis and the belief among many voters that he was more capable of handling the economy than Mr. McCain.
  7. European Central Bank
    the central bank of those members of the European Union who share a common currency
    In early November, the European Central Bank and the Bank of England followed with sharp reductions of their own.
  8. home buyer
    someone buying a house
    And turn sour they did, when home buyers had to leverage themselves to the hilt to make a purchase.
  9. investor
    someone who commits capital to gain financial returns
    Banks and other investors had devised a plethora of complex financial instruments to slice up and resell the mortgage-backed securities and to hedge against any risks — or so they thought.
  10. stress test
    a test measuring how a system functions when subjected to controlled amounts of stress
    After two weeks of declines on Wall Street marked by rumors of bank nationalization, the Obama administration came back with more details of their plans to perform " stress tests" on 19 of the country's largest banks, to see whether they had a large enough capital cushions to withstand further declines in the economy.
  11. preferred shares
    stock whose holders are guaranteed priority in the payment of dividends but whose holders have no voting rights
    Any bank that fails the assessment would have six months to raise additional capital privately, or would have to take it from the government in the form of preferred shares that could be converted to common stock.
  12. consumer loan
    a loan that establishes consumer credit that is granted for personal use; usually unsecured and based on the borrower's integrity and ability to pay
    And the Treasury and Federal Reserve would expand a program aimed at financing consumer loans.
  13. foreclosure
    proceedings initiated to repossess the collateral for a loan
    At the same time, the rising number of foreclosures helped speed the fall of housing prices, and the number of prime mortgages in default began to increase.
  14. vicious cycle
    one trouble leads to another that aggravates the first
    As inflation virtually halted, economists began to worry about deflation, the vicious cycle of lower prices, lower wages and economic contraction.
  15. balance sheet
    a record of the financial situation of an institution on a particular date by listing its assets and the claims against those assets
    On Sept. 18, Treasury Secretary Henry M. Paulson Jr. publicly announced a three-page, $700 billion proposal that would allow the government to buy toxic assets from the nation’s biggest banks, a move aimed at shoring up balance sheets and restoring confidence within the financial system.
  16. volatility
    being easily excited
    Continued Volatility When stock markets in the United States, Europe and Asia continued to plunge, the world’s leading central banks on Oct. 8 took the drastic step of a coordinated cut in interest rates, with the Federal Reserve cutting its two main rates by half a point.
  17. Federal Reserve
    the central bank of the United States
    When the stock market began a steep decline in 2000 and the nation slipped into recession the next year, the Federal Reserve sharply lowered interest rates to limit the economic damage.
  18. bail out
    remove from a boat by dipping and throwing over the side
    On Sept. 16, American International Group, an insurance giant on the verge of failure because of its exposure to exotic securities known as credit default swaps, was bailed out by the Fed in an $85 billion deal.
  19. central bank
    a government monetary authority that issues currency and regulates the supply of credit and holds the reserves of other banks and sells new issues of securities for the government
    Continued Volatility When stock markets in the United States, Europe and Asia continued to plunge, the world’s leading central banks on Oct. 8 took the drastic step of a coordinated cut in interest rates, with the Federal Reserve cutting its two main rates by half a point.
  20. Great Depression
    the economic crisis beginning with the stock market crash in 1929 and continuing through the 1930s
    In the fall of 2008, the credit crunch, which had emerged a little more than a year before, ballooned into Wall Street’s biggest crisis since the Great Depression.
  21. Freddie Mac
    a corporation authorized by Congress to provide a secondary market for residential mortgages
    Sales, Failures and Seizures In August, government officials began to become concerned as the stock prices of Fannie Mae and Freddie Mac, government-sponsored entities that were linchpins of the housing market, slid sharply.
  22. banking system
    banks collectively
    Lehman’s failure sent shock waves through the global banking system, as became increasingly clear in the following weeks.
  23. commercial paper
    an unsecured and unregistered short-term obligation issued by an institutional borrower to investors who have temporarily idle cash
    And even as the United States began to execute its bailout plan, the tactics continued to shift, with the Treasury announcing that it would spend some of the funds to buy commercial paper, a vital form of short-term borrowing for businesses, in an effort to get credit flowing again.
  24. credit crunch
    a state in which there is a short supply of cash to lend to businesses and consumers and interest rates are high
    In the fall of 2008, the credit crunch, which had emerged a little more than a year before, ballooned into Wall Street’s biggest crisis since the Great Depression.
  25. toxic
    of or relating to or caused by a poison
    As the year went on, more banks found that securities they thought were safe were tainted with what came to be called toxic mortgages.
  26. Fannie Mae
    a federally chartered corporation that purchases mortgages
    Sales, Failures and Seizures In August, government officials began to become concerned as the stock prices of Fannie Mae and Freddie Mac, government-sponsored entities that were linchpins of the housing market, slid sharply.
  27. high finance
    large and complex financial transactions
    As hundreds of billions in mortgage-related investments went bad, mighty investment banks that once ruled high finance have crumbled or reinvented themselves as humdrum commercial banks.
  28. recession
    the act of returning control
    When the stock market began a steep decline in 2000 and the nation slipped into recession the next year, the Federal Reserve sharply lowered interest rates to limit the economic damage.
  29. trade barrier
    any regulation or policy that restricts international trade
    Trade levels skidded lower and lower as demand for goods fell worldwide, hurting big exporters like China, and countries began throwing up trade barriers as the downturn deepened.
  30. blue-chip
    extremely valuable
    Credit conditions began to slip again, and stock markets fell even further, skidding to their lowest levels in 12 years and slashing the share prices of blue-chip companies to something akin to penny stocks.
  31. hedge fund
    a flexible investment company for a small number of large investors (usually the minimum investment is $1 million); can use high-risk techniques (not allowed for mutual funds) such as short-selling and heavy leveraging
    The Crisis Takes Hold The first shoe to drop was the collapse in June 2007 of two hedge funds owned by Bear Stearns that had invested heavily in the subprime market.
  32. capitalization
    writing in uppercase letters
    By late October, the Treasury had decided to use its $250 billion investment plan not only to increase banks’ capitalization but also to steer funds to stronger banks to purchase weaker ones, as in the acquisition of National City, a troubled Ohio-based bank, by PNC Financial of Pittsburgh.
  33. savings account
    a bank account that accumulates interest
    Over the weekend that followed the bailout’s passage, the German government moved to guarantee all private savings accounts in the country, and bailouts were arranged for a large German lender and a major European financial company.

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