Glossary

bank panic
A general loss of faith in the banking system, perhaps triggered by a notable bank failure, causing a wave of further bank runs and failures, often with dire economic consequences. Return

bank run
When enough of a bank’s depositors withdraw their deposits that a bank cannot meet their demands with available reserves, causing the bank to cease operating. Return

clearinghouse
A means of reconciling checks or other financial payments between parties, usually banks. Return

collateral
Property used by a borrower to back a loan, e.g. land or valuables. If the borrower defaults on their loan, the bank may take possession of the collateral. Return

commercial bank
A bank that operates as a for-profit business, by lending some of its deposits on interest, and by making other investments. Return

Federal Open Market Committee
The body, made up of the Board of Governors and the District Bank presidents, that meets eight times a year in Washington, D.C. to make monetary policy decisions. Return

fiat money
A money backed by a government decree that it is to be used in exchange, rather than by some commodity like gold. Return

open market operations
The buying and selling of bonds to keep the money supply and interest rates at their targets. Return

par
An arrangement where two or more currencies trade for each other at equal values, so that identical amounts can buy the same amount of a given good. Return

specie
Coins made of precious metals, often used to back paper money. Return

Return to: A History of Central Banking in the United States

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