Subsidyscope.org — Glossary

Accelerated Depreciation: In an income-based tax system, depreciation is considered a cost of doing business. Economic depreciation is the actual rate at which an asset loses value over time. However, because it is difficult to measure economic depreciation, the tax code groups assets into broad categories and mandates depreciation schedules for assets in each category. Accelerated depreciation occurs when the depreciation mandated in the tax code is more rapid than an asset’s economic depreciation.
Airport and Airway Trust Fund: A trust fund that collects money from aviation-related excise taxes including passenger tickets, aviation fuels, and frequent flyer mile awards. The funds are used to pay for the nation’s aviation systems.
Allocated Funding: Rather than being distributed through a formula, there are a number of allocated funding programs – most of them small – whose funding is distributed by Congress instead.
Apportionment: The amount that each state receives in a formula grant. Once an apportionment is made, a state can obligate the funds to approved projects.
Appropriated Budget Authority: One of two types of budget authority that requires that Congress pass an appropriations bill that provides the funding for authorized projects. Appropriated funds may be the same or lower than the authorized amount. Programs in the bill that are not financed through the Highway Trust Fund are granted appropriated budget authority.
Asset-Backed Commercial Paper (ABCP): A corporate debt due within a year, and backed by assets such as real estate, autos and other commercial assets. Asset-backed commercial paper is similar to a mortgage-backed security; both are packages of loans resold to other investors. However, asset-backed commercial paper includes assets other than home mortgages.
Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility Facility (AMLF): The AMLF provides funding to banks and bank holding companies to purchase high-quality asset-backed commercial paper from money market mutual funds.
Authorizations: Congressional acts that tell an agency how programs under agency control will be started or modified and the upper limit – or authorization – of the funds the agency will have to spend on these programs. Authorization acts set the ground rules on how each program will operate including the amount of funds available to the program each fiscal year, a description of how the funds are distributed, and the duration that the funds may be used and a listing of eligible activities under the program. These can be changed by subsequent acts.
Bank Holding Company (BHC): A company that owns and/or controls one or more U.S. banks or one that owns, or has controlling interest in, one or more banks. A bank holding company may also own another bank holding company, which in turn owns or controls a bank; the company at the top of the ownership chain is called the top holder.
Bond insurance: Commitment by a third party (usually an insurance company) to pay interest and principal installments due on a bond in case the bond issuer defaults.
British Thermal Unit (Btu): The abbreviation for British thermal unit; it is a precise measure of the heat content of fuels. One Btu equals the quantity of heat required to raise the temperature of 1 pound of liquid water by 1 degree Fahrenheit at the temperature that water has its greatest density (approximately 39 degrees Fahrenheit).
Budget Authority: The authority of Congress to enable agencies and states to enter into binding agreements with outside parties that will result in the outlay of federal dollars. Budget authority requires that Congress pass two different pieces of legislation before funds can be utilized: an authorization bill that says how much money may be spend on projects, and an appropriations bill that provides the funding – which may be the same or lower than the previously authorized amount
Call Option: An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument at a specified price within a specific time period. Call options give the holder the right to 'call in' and buy an asset. The holder profits on a call when the underlying asset increases in price.
Capital Gains: The amount by which a capital asset’s value exceeds its purchase price. Profits are not realized until the asset is sold. Investment and real estate are two assets that typically produce capital gains.
Catalog of Federal Domestic Assistance (CFDA): The catalog that organizes most federal assistance spending, with the exception of procurement spending, into a set of distinct programs, each with detailed information about its aims, history and eligibility requirements. Each record in the Federal Assistance Award Data System is assigned to a CFDA program; each CFDA program has an account code; and each account code falls under a budget function, which often corresponds closely to one of the sectors Subsidyscope have chosen to examine.
Categorical Grant: Grants given by the Federal government, typically to state and local governments, that contains specific objectives and a narrowly defined purpose. The grant’s recipient agrees to the identified objectives when the grant is administered. Categorical grants generally are allocated as either formula grants or project grants.
Certificate of Deposit (CD): A short-term deposit offered by banks and thrifts where depositors agree to keep their money in the account for a specified amount of time in exchange for a specified interest rate. Depositors face a penalty if money is withdrawn before the CD matures.
Comma Separated Value (CSV): A CSV is a computer file format used for data tables that are in list form such as a financial spreadsheet. Each category is separated by commas and each line represents a row. CSVs help move such data between two different computer programs and can be opened in nearly all modern spreadsheet programs.
Commercial Paper: Unsecured debt issued by a company or bank to cover short-term credit needs such as accounts receivable or inventory. The length of the debt can range from 2 to 270 days. Commercial paper can be discounted or interest-bearing.
Common Stock: Also called equity, is purchased, giving stockholders (shareholders) ownership and voting rights in a company, as well as entitlement to shares of the company's profits through dividends and/or capital appreciation.
Contract Budget Authority: One of two types of budget authority that allows states to enter into binding agreements before an appropriations bill is enacted. These binding agreements are called obligations. Most surface transportation funding uses contract authority. A state or agency does not have to wait for an appropriations bill to utilize contract authority. Only projects funded through the Highway Trust Fund may receive contract authority.
Credit Default Swap (CDS): A type of insurance arrangement in which the buyer pays a premium at periodic intervals in exchange for a contingent payment in the event that a third party defaults. The size of the premium paid relative to the contingent payment generally increases with the likelihood of default.
Credit Extended to AIG: In the fall of 2008, the Fed made two lines of credit available to AIG. The credit was intended to supply cash needed by AIG to compensate for a loss of liquidity due to devaluing assets.
Credit Subsidy: The estimated long-term cost to the federal government of a direct loan and loan guarantee program. The calculation is based on a net present value basis at the time that a loan is disbursed.
Currency Swap: The Fed is contracting with 14 foreign central banks to make U.S. dollars available temporarily. After a set period of time the original amounts of the dollars will be exchanged for the foreign currency.
Daily Closing Price: The price of the last transaction for a given stock or bond at the end of a daily trading session.
Deposit Insurance: A federal guarantee that each depositor at participating banks and thrifts will receive the total amount of their deposit up to a certain level if the financial institution becomes insolvent. (That level is currently $250,000, which is a temporary increase that took place in October 2008 from the regular guarantee amount of $100,000. Pending legislation would make the temporary increase in the deposit insurance limit to $250,000 permanent beyond 2009).
Depreciation: The wearing out of an asset over time, due to wear and tear, age or obsolete technology. In an income-based tax system, depreciation is considered a cost of doing business. As such, the depreciation of an asset can be deducted from taxable income, according to a depreciation schedule maintained by the IRS.
Direct Expenditures: Direct transfers of money, such as grants, or goods and services, such as donation of government surpluses.
Discretionary Outlays: Optional federal spending that is annually authorized by Congress through appropriation acts. The government has the choice to but is not legally required to undertake discretionary spending. This is in contrast to entitlement programs for which funding is mandatory.
Dividend: Earnings of a corporation that are distributed to stockholders, in proportion to the amount of stock owned, and usually paid on a quarterly basis.
Emergency Economic Stabilization Act (EESA): The Emergency Economic Stabilization Act of 2008 (EESA) was signed into law on October 3, 2008. See www.financialstability.gov.
enplanement: An enplanement, as defined by the FAA, is a single, revenue-generating passenger departing from or arriving at an airport.
Equity: Ownership interest of shareholders in a corporation. Also called equity shares.
Exercise Price: Also called strike price. The specified price on an option contract at which the contract may be exercised, where the call option buyer has the right to buy the stock - and a put option buyer has the right to sell the stock-at the exercise price.
Expensing: In an income-based tax system, the cost of earning income can be deducted from taxable income. Certain routine business expenditures can be deducted from taxes immediately, while capital expenditures are gradually deducted over the life of the asset. "Expensing" occurs when the entire cost of an expenditure or asset is deducted in the same year in which the cost was incurred.
Federal Agency Debt Security: The Fed is purchasing up to $200 billion in debt issued by Fannie Mae, Freddie Mac and the Federal Home Loan Banks.
Federal Assistance Award Data System (FAADS): The system that provides transaction-level information about assistance payments made by the federal government. With the exception of procurement, this includes most kinds of direct government spending.
Federal Deposit Insurance Corporation (FDIC): The Federal Deposit Insurance Corporation (FDIC) preserves and promotes public confidence in the U.S. financial system by insuring deposits in banks and thrift institutions for up to $250,000 (through December 31, 2009); by identifying, monitoring and addressing risks to the deposit insurance funds; and by limiting the effect on the economy and the financial system when a bank or thrift institution fails. (from fdic.gov)
Federal Funds Purchased: Reserve balances that are maintained by commercial banks in the Federal Reserve System at amounts above what is required. They are available for lending to other banks in need of reserves.
Federal Highway Trust Fund (HTF): A trust fund that collects motor fuel excise taxes that fund the nation’s highways. The HTF is supported primarily by revenue from an excise tax on gasoline and diesel fuel. In 1982 the Mass Transit Account was established as part of the highway trust fund to give a portion of the taxes to fund transit projects.
Federal Information Processing Standard (FIPS): A set of standards developed by the National Institute of Standards and Technology for encoding government data. Most commonly known for its numeric codes defining U.S. geographic locations (e.g. states, counties and cities).
Federal Share: The federal government rarely picks up the tab for an entire project. Instead, non-federal funds – most often in the form of state and/or local funds, but which can also come from toll revenues, private contributions, and, in specific instances, other federal agencies – must also make up a portion of the funding pool. Most often, the federal share for projects is 80 percent, so that other funding sources must contribute at least 20 percent of the funding. There are variations in federal share, however, depending on which program the funding is drawn from, and the federal share for each program is outlined in federal law.
Formula Grant: Grants given by the Federal government to recipients who are automatically entitled to receive a predetermined amount of funds. The grant amount is allocated according to statistical calculations that are typically based on programmatic needs. Formula grants are noncompetitive in nature.
Formula Grants: Grants that are funded using a formula based on specific criteria. Distribution by formula is known as apportionment. Each State is guaranteed at least some part of the funding for most programs in the transportation bill, even if the specific distribution criteria would otherwise give them nothing. This is called minimum apportionment. In most cases, each state is guaranteed ½ percent of the total funding for a program, but it also might be ¼ percent or a dollar amount or, in a few cases, no minimum guarantee at all.
Home Mortgage Disclosure Act (HMDA): The Home Mortgage Disclosure Act (HMDA) requires lending institutions to report public loan data.
In-the-Money Warrant: In-the-money means that the current stock price is above the exercise (or strike) price of the warrant. (Also see: out-of-the-money warrant.)
Inclined Railways: A transit mode that is a railway operating over exclusive right-of-way on steep grades with powerless vehicles propelled by moving cables attached to the vehicles and powered by engines or motors at a central location not onboard the vehicle. The special tramway type of vehicles have passenger seats that remain horizontal while the undercarriage (truck) is angled parallel to the slope.
Insolvent: A firm whose liabilities exceed its assets.
Interest Rate: A rate charged to a borrower for the use of loaned money.
Itemized Deduction: Deductions from a taxpayer’s taxable income that results from money spent on certain eligible goods and services. Thus, incurred expenses, such as mortgage interest and charitable gifts, can be deducted from taxable adjusted gross income.
Legacy Loans Program (LLP): The Legacy Loans Program is a FDIC and Treasury Department program aimed at getting rid of troubled assets and loans held by banks across the country. It is one arm of the Public Private Investment Program announced in March 2009. Under the $500 billion to $1 trillion Legacy Loan Program, Treasury will partner with private investors and hedge funds by creating joint Public-Private Investment Funds that will buy pools of troubled assets at auction. The Treasury Department and private investors would contribute equal amounts of equity financing; the rest of the financing would come from debt that was guaranteed by the FDIC. If a fund turns a profit, its returns are split equally between private investors and the government. However, if a fund loses money, the loss is first absorbed by the equity contributed by the Treasury and the private investors, and if those contributions are insufficient to cover the loss, the remainder is absorbed by the FDIC. Although private investors fully share the potential profit gains with the government, any losses are only limited to their initial equity contribution. The government bears most of the downside risk.
Light Rail: A transit mode that typically is an electric railway with a light volume traffic capacity compared to heavy rail. Characterized by passenger rail cars operating singly or in short, usually two-car trains, on fixed rails in shared or exclusive right-of-way, low or high platform loading, and vehicle power drawn from an overhead electric line via a trolley or a pantograph.
Line of Credit: An arrangement where a bank or vendor or the government extends a specified amount of unsecured credit to a borrower for a specified time period.
Loan: A sum of money given from one party to another for use over a period of time. The money is paid back according to terms agreed upon by both parties, including the specified interest rates and the timeframe over which the loan will be repaid.
Loan Guarantee: A commitment on the part of the guaranteeing agency or enterprise to pay off a loan if the borrower defaults.
Maiden Lane II LLC: The Fed created Maiden Lane II to purchase residential mortgage-backed securities from AIG.
Maiden Lane III LLC: The Fed created Maiden Lane III to purchase multi-sector collateralized debt obligations on which AIG had written credit default swap contracts.
Maiden Lane LLC: The Fed created Maiden Lane and extended a $29 billion credit line to the LLC for JPMorgan Chase to acquire certain assets of Bear Stearns. The LLC will manage those assets to maximize the likelihood that the investment is repaid.
Mandatory Convertible Debt: Short term securities with higher yields required to be converted into equity, such as common stock of the issuer, in a certain set time period.
Mass Transit Account: An account within the Highway Trust Fund created in 1982 to pay for projects by the Federal Transit Administration.
Minimum Apportionment: The minimum amount a state may receive in a formula grant if the distribution criteria would otherwise allow for nothing. In most cases, each state is guaranteed ½ percent of the total funding for a program, but it also might be ¼ percent or a dollar amount or, in a few cases, no minimum guarantee at all.
Money-Market Mutual Fund: An open-end mutual fund which invests only in money markets. Such funds invest in short term (one day to one year) debt such as Treasury bills, certificates of deposit, and commercial paper. The primary goal is the preservation of principal with modest dividends. Most deposits are not FDIC insured.
Monorail: A transit mode that is an electric railway of guided transit vehicles operating singly or in multi-car trains. The vehicles are suspended from or straddle a guideway formed by a single beam, rail or tube.
Mortgage-Backed Security (MBS): Debt obligations that represent claims to the cash flows from pools of mortgage loans, most commonly on residential property. Mortgage loans are purchased from banks, mortgage companies, and other originators and then assembled into pools by a governmental, quasi-governmental, or private entity. The entity then issues securities that represent claims on the principal and interest payments made by borrowers on the loans in the pool, a process known as securitization.
National Priority Rating (NPR): Each Airport Improvement Program project receives a National Priority Rating (NPR) ranging from 0 to 100, with the highest priority being 100. According to the FAA, "NPR is a numerical model that is one of several tools FAA uses to prioritize airport development projects. The NPR is the first evaluation factor and serves to categorize airport development in accordance with agency goals and objectives. The model yields the highest percentage of projects funded under the Airport Improvement Program (AIP)."
Newly Issued Security: A stock or bond publicly offered for the first time in an Initial Public Offering, or an additional issuance of stocks or bonds by a public company.
Non-Interest-Bearing Account: Accounts that do not earn interest.
Nonrefundable Credit: Tax credits reduce an individual’s tax liability on a dollar-for-dollar basis. Nonrefundable tax credits can reduce tax liability to zero, but not below zero. Thus, when an individual’s tax bill reaches zero, any leftover credit amount is unused.
Obligations: A binding agreement, or promise to pay for an approved project or action, that states make once it receives contract authority to do so. Once a state receives federal funds, funds are obligated to approved projects. Obligations are subject to obligation limitations or a ceiling or limit on the amount of assistance that the federal government promises to provide in a given period, generally a year at a time.
operation: Takeoffs and landings of air carrier, air taxi, general aviation and military aircraft.
Out-of-the-Money Warrant: Out-of-the-money means that the current stock price is below the exercise (or strike) price. (Also see: in-the-money warrant.)
Passenger Ferries: A transit mode comprised of vessels carrying commuter passengers and / or vehicles over a body of water that are generally steam or diesel powered.
People Movers: A transit mode that is an electric railway (single or multi-car trains) of guided transit vehicles operating without vehicle operators or other crew onboard the vehicle. Service may be on a fixed schedule or in response to a passenger activated call button.
Preferential Tax Rate: Preferential tax rates are a form of tax expenditure for which the government offers a lower tax rate on certain taxable items. Two examples of preferential tax rates are reduced tax rates on income from capital gains and dividends as compared to wage income.
Preferred Stock: Refers to shares of stock or equity in a company that provides a specific dividend to be paid before dividends are paid to common stockholders, and preferred stock shares take precedence over common stock shares if the company liquidates. While preferred stockholders typically receive fixed dividends, they do not usually have voting rights in the company.
Primary Dealer Credit Facility: The Fed issues one-day loans to the 16 financial institutions (primary dealers) that trade directly with the Fed in exchange for eligible collateral.
Project Grant: Project grants are awarded to recipients through a competitive application process. They must be used to support a predetermined activity for a limited period of time. Examples of project grants include scholarships, planning grants and technical assistance grants.
Promissory Note: A document that promises to pay a certain amount of money to a person at some time in the future.
Put Option: An option contract giving the owner the right, but not the obligation, to sell a specified amount of an underlying security at a specified price within a specified time. This is the opposite of a call option, which gives the holder the right to buy shares. A put becomes more valuable as the price of the underlying stock depreciates relative to the strike price.
Refundable Credits: Whereas tax deductions reduce taxable income before a tax is calculated, tax credits reduce tax liability on a dollar-for-dollar basis after the tax owed is calculated. Refundable tax credits can reduce an individual’s tax liability to a negative number, which the government then pays to the taxpayer.
Senior Unsecured Debt: Under the FDIC's TLGP program, senior unsecured debt at participating financial institutions is covered until 2012. Such debt is debt without collateral that must be paid ahead of any other debt in the event of a default. They include: Federal Funds purchased, promissory notes, commercial paper, unsubordinated unsecured notes, Certificates of Deposit, Bank deposits in an international banking facility of an insured depository institution, Eurodollar deposits standing to the credit of a bank, debt with maturities greater than 30 days, and mandatory convertible debt.
Short ton: 2,000 pounds. The short ton is commonly referred to in the United States simply as a ton.
Stock Option: An option in which the holder has the right to buy or sell its stock at a specified price by a specific date.
Stock Price: The price of a single share of a company's stock, the ownership of which makes the possessor a shareholder of the company. Also called share price.
Strike Price: See exercise price.
Subsidy Rate: In the case of the financial bailout of banks, the ratio of the subsidy to the initial disbursement of government funds. The subsidy rate shows the share of the disbursement that reflects a true subsidy cost to the government after the return on the investment is taken into account.
Systemically Significant Failing Institution (SSFI): In determining whether an institution is an SSFI, Treasury considers: 1) the extent to which the failure could threaten the viability of its creditors and counterparties; 2) The number and size of financial institutions that are seen by investors or counterparties as similarly situated to the failing institution, or that would otherwise be likely to experience indirect contagion effects from the failure; 3) Whether the institution is sufficiently important to the nation's economy that a failure would cause major disruptions to credit markets or payments and settlement systems; or 4) The extent of the institution's ability to access alternative sources of capital and liquidity.
Tax Deduction: In an income-based tax system, certain items can be deducted from income before it is taxed. Typically, this has the effect of reducing the total taxable income before taxes are calculated, thereby reducing the amount of tax paid on average by the taxpayer’s marginal income tax rate multiplied times the amount of the deduction.
Tax Deferrals: In some instances, taxpayers can delay paying taxes on income earned in the current year. Paying taxes in the future is usually seen as preferable to paying them in the present, due to the time value of money. Examples of investments on which tax deferrals are allowed include Individual Retirement Accounts (IRAs) and 401(k) accounts.
Tax Exclusion: Certain items must be reported on a tax return even though they are not taxed. Usually, a percentage or amount of these items can be excluded from taxation. An example of this is the Gift Tax rule for which donors are allowed to annually exclude up to $12,000 worth of gifts to donees from their taxable income.
Tax Exemption: Tax exemptions may provide taxpayers complete relief from taxation, taxation at a reduced rate, or taxation on only a portion of the items that are subject to taxation. For example, nonprofit organizations are exempt from the federal income tax.
Tax-exempt bonds: A bond, issued by a municipal, county or state government, whose interest payments are not subject to federal income tax, and sometimes also state or local income tax.
Term Asset-Backed Securities Loan Facility (TALF): Term Asset-Backed Securities Loan Facility is a Federal Reserve loan program that is intended to assist the credit markets in accommodating the credit needs of consumers and small businesses by facilitating the issuance of asset-backed securities (ABS) and improving the market conditions for ABS more generally.
Term Securities Lending Facility (TSLF): Created in March 2008, the TSLF lends Fed-held Treasury securities in exchange for other types of securities held by the 16 financial institutions (known as primary dealers) that trade directly with the Fed. The maximum lending amount under this program is $200 billion.
Trolleys: A transit mode comprised of electric rubber-tired passenger vehicles, manually steered and operating singly on city streets. Vehicles are propelled by a motor drawing current through overhead wires via trolleys, from a central power source not onboard the vehicle.
Troubled Asset: In relation to TARP, troubled assets are defined as any residential or commercial mortgages - or any stocks and bonds, debt or other instruments based on such mortgages - that originated or were issued on or before March 14, 2008, the purchase of which the Treasury Secretary determines promotes financial market stability. The term can also apply to any other financial instrument that the Secretary, after consulting with the Federal Reserve Chair, determines the purchase of which is necessary to promote financial market stability, but only after such determination is given in writing to appropriate Congressional committees.
Troubled Asset Relief Program (TARP): The Troubled Assets Relief Program (TARP) was established under the EESA with the specific goal of stabilizing the United States financial system and preventing a systemic collapse. (See www.financialstability.gov).
Unsubordinated Unsecured Note: A debt without collateral that would be paid out in full before all other debt.
Warrant: An option to buy stock (equity) at a specific price within a certain time frame. In this case, the specific terms will be agreed upon between Treasury and the respective bank.

Sources: Congressional Budget Office, Federal Aviation Administration, Federal Highway Administration, Federal Transit Administration, Federal Reserve, Government Acccountability Office, Department of Education, National Transit Database, Special Inspector General for TARP, Taxpayers for Common Sense, The Tools of Government: A Guide to the New Governance (edited by Lester M. Salamon, Oxford University Press, 2002), C-SPAN, businessdictionary.com, investopedia.com, investorwords.com, nolo.com, teachmefinance.com, trading-glossary.com, useconomy.about.com

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