Agency MBS Purchase typically refers to the U.S. Federal Reserve's policy of purchasing certain government-backed securities.

Agency MBS purchase is the purchase of mortgage-backed securities (MBS) issued by government-sponsored enterprises (GSE) such as Fannie Mae, Freddie Mac, and Ginnie Mae, the latter of which is a wholly-owned government corporation. Agency MBS purchase is the purchase of mortgage-backed securities (MBS) issued by government-sponsored enterprises (GSE) such as Fannie Mae, Freddie Mac, and Ginnie Mae, the latter of which is a wholly-owned government corporation. An agency MBS is an MBS issued by one of three quasi-governmental agencies: The Government National Mortgage Association (GNMA or Ginnie Mae), the Federal National Mortgage Association (FNMA or Fannie Mae), and the Federal Home Loan Mortgage Corporation (Freddie Mac). Agency MBS purchase typically refers to the Fed's program to purchase $1.25 trillion worth of agency MBS from government-sponsored entities. The term is most commonly used in reference to the U.S. Federal Reserve's (Fed) $1.25 trillion program to purchase agency MBS, which commenced on Jan. 5, 2009, and was completed on March 31, 2010, to mitigate the effects of the 2007–2008 financial crisis.

Agency MBS Purchase

The Crapo Bill is the nickname for the Economic Growth, Regulatory Relief, and Consumer Protection Act named after U.S. Senator Mike Crapo.

S.2155 - Economic Growth, Regulatory Relief, and Consumer Protection Act

President Signs Crapo Banking Bill Into Law

H.R.4173 - Dodd-Frank Wall Street Reform and Consumer Protection Act

The Dodd-Frank Wall Street Reform and Consumer Protection Act: Background and Summary

Economic Growth, Regulatory Relief, and Consumer Protection Act (P.L. 115-174) and Selected Policy Issues

The Dodd-Frank threshold was set at $50 billion, above which banks would be considered too big to fail.﻿﻿ The Crapo bill increased this threshold to $250 billion in assets, which only a relatively small number of banks—notably, Bank of America, Wells Fargo, and JP Morgan Chase—would exceed.﻿﻿ While the legislation was sold as a way to help community banks, several mid-sized banks also stand to benefit. The Economic Growth, Regulatory Relief, and Consumer Protection Act, or the Crapo Bill, was introduced by Republican Senator Mike Crapo of Idaho in November 2017 and became law after it was signed by President Trump on May 24, 2018.﻿﻿ The main goal of the bill is to roll back some of the regulations put forth by Dodd-Frank. Other key elements of the bill include eliminating the Volcker Rule for institutions with assets of less than $10 billion.﻿﻿ This section of the Dodd-Frank Act prevented banks from undertaking some activity with their own investment accounts and from dealing with hedge funds and private equity funds. The term Crapo Bill refers to an economic bill signed into law in 2018 that eases some of the restrictions of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Crapo Bill

Deflation is the decline in prices for goods and services that happens when the inflation rate dips below 0%.

Deflation is a general decline in prices for goods and services, typically associated with a contraction in the supply of money and credit in the economy. World-renowned economist Milton Friedman argued that under optimal policy, in which the central bank seeks a rate of deflation equal to the real interest rate on government bonds, the nominal rate should be zero, and the price level should fall steadily at the real rate of interest. In particular, deflation can harm borrowers, who can be bound to pay their debts in money that is worth more than the money they borrowed, as well as any financial market participants who invest or speculate on the prospect of rising prices. Deflation is a general decline in prices for goods and services, typically associated with a contraction in the supply of money and credit in the economy. By definition, monetary deflation can only be caused by a decrease in the supply of money or financial instruments redeemable in money.

Deflation

The Financial Stability Plan was an initiative by the Obama administration to stabilize the U.S. economy in the wake of the financial crisis. 

The Financial Stability Plan (FSP) was a memo published by the U.S. Treasury under the Obama administration in early 2009 that outlined the planned implementation of the Emergency Economic Stabilization Act of 2008. _The Financial Stability Plan was the plan to implement various emergency financial stabilization policies by the U.S. Treasury under President Obama._
_The plan detailed how the Treasury would manage the Troubled Asset Relief Program and other policies to boost lending and ease credit conditions in U.S. financial markets._
_The Treasury's Office of Financial Stability would take the lead in the plan, but in close co-operation with the Fed and other financial regulators and government agencies._
The FSP took measures to solidify the American banking system, securities markets, and mortgage and consumer credit markets. According to the plan, financial firms first needed to show how any government assistance would help the firms expand lending. Firms receiving assistance from the government had to submit monthly reports to the U.S. Department of the Treasury detailing the allocation, the number of new loans created, and how many mortgage-backed or asset-backed securities they purchased.
Eventually, the Treasury Department also launched a website, in the name of “The Taxpayer’s Right to Know.” The FSP was not an independent policy itself, but rather a set of talk points summarizing how the administration would carry out the Troubled Asset Relief Program and related programs intended to address the financial crisis of 2008-2009.﻿﻿﻿ Primary responsibility for the plan fell to the Treasury's Office of Financial Stability, but also involved co-operation with other government agencies. This website made public all information reported to the Treasury Department by firms receiving financial assistance from the treasury.﻿﻿ In this way, the Treasury Department sought to let taxpayers decide for themselves whether the FSP attained success.

Financial Stability Plan (FSP)

A financial system is a set of institutions, such as banks, that permit the exchange of funds.

A financial system is a set of institutions, such as banks, insurance companies, and stock exchanges, that permit the exchange of funds. The global financial system is basically a broader regional system that encompasses all financial institutions, borrowers, and lenders within the global economy. For example, a business firm is a centrally planned financial system with respect to its internal financial decisions; however, it typically operates within a broader market interacting with external lenders and investors to carry out its long term plans. The financial system also includes sets of rules and practices that borrowers and lenders use to decide which projects get financed, who finances projects, and terms of financial deals. On a regional scale, the financial system is the system that enables lenders and borrowers to exchange funds.

Financial System

Fiscal neutrality occurs when taxes and government spending are neutral in the impact on the total budget, aggregate demand, or economic behavior.

Fiscal neutrality refers to a principle or goal of public finance that fiscal decisions (taxing, spending, or borrowing) of a government can or should avoid distorting economic decisions by businesses, workers, and consumers. Any new spending introduced by a policy change that is fiscally neutral in this sense is expected to be entirely offset by additional revenues generated; the net effect of the policy change is neutral with respect to the balance of the government’s budget. Continuing the example of an auto tax credit coupled with an increase in gasoline taxes, it is clear that such a policy is also fiscally neutral in a macroeconomic sense provided the increased demand for new autos is offset by the decreased demand for gasoline thus creating no net change in aggregate demand. Once again continuing the example from above (an auto tax credit and offsetting gasoline tax), such a policy is definitely not fiscally neutral in a microeconomic sense, because it influences consumers to change their economic behavior by buying more new autos and paying higher prices for gasoline. A balanced budget is an example of fiscal neutrality, where government spending is covered almost exactly by tax revenue – in other words, where tax revenue is equal to government spending.

Fiscal Neutrality

Fiscal capacity, in economics, is the ability of government, groups, institutions, etc. to generate revenue. 

Fiscal capacity, in economics, is the ability of government, groups, institutions, etc. to generate revenue. The fiscal capacity of governments depends on a variety of factors including those that contribute to the tax base; the government’s ability to efficiently tax; compensating behavior among taxed individuals, markets, and asset prices; and access to other non-tax forms of revenue. Other non-tax sources of revenue, such as intergovernmental transfers or natural resource sales, may also contribute to a government’s total fiscal capacity.
In order to fund basic operations, provide public goods, and achieve other policy objectives, governments need revenue, which they can raise by imposing taxes, selling assets or resources, or receiving transfer payments from other outside governments or other entities. Fiscal capacity is the total revenue that a government can realistically raise given the available tax base, the various constraints it faces, and the availability of non-tax sources of revenue. The theory behind fiscal capacity can also be used by other groups, such as school districts, who need to determine what they will be able to provide to their students.
Raw fiscal capacity starts with a government’s available tax base.

Fiscal Capacity

Fiscal policy uses government spending and tax policies to influence macroeconomic conditions, including aggregate demand, employment, and inflation.

Fiscal policy refers to the use of government spending and tax policies to influence economic conditions, especially macroeconomic conditions, including aggregate demand for goods and services, employment, inflation, and economic growth. Fiscal policy refers to the use of government spending and tax policies to influence economic conditions, especially macroeconomic conditions, including aggregate demand for goods and services, employment, inflation, and economic growth. During a recession, the government may employ expansionary fiscal policy by lowering tax rates to increase aggregate demand and fuel economic growth. Fiscal policy is largely based on the ideas of British economist John Maynard Keynes (1883-1946), who argued that economic recessions are due to a deficiency in the consumer spending and business investment components of aggregate demand. Fiscal policy pioneer John Maynard Keynes argued nations could use spending/tax policies to stabilize the business cycle and regulate economic output.

Fiscal Policy : Types & Tools

Implementation lag is the delay between an adverse macroeconomic event and the implementation of a corrective policy response by policymakers.

Implementation lag is the delay between an adverse macroeconomic event and the implementation of a fiscal or monetary policy response by the government and central bank. Implementation lag can result from delays in recognizing a problem; disagreements and bargaining over the appropriate response; physical, technical, and administrative constraints on the actual execution of new policy; and structural economic lags as the policy change works its way through the economy. Because of all these delays, by the time an economic policy response to a negative economic shock or a downturn into recession actually works its way through the economy, the economic situation will inevitably have changed to some degree. Implementation lag can contribute to an economic policy response that either fails to adequately deal with the situation or results in a procyclical policy that increases economic instability. Implementation lag is a delay between the occurrence of a shift in macroeconomic conditions or an economic shock and the time that an economic policy response can be implemented and actually have an effect.

Implementation Lag

Lawful money is any form of currency issued by the United States Treasury and not the Federal Reserve System. It includes gold and silver coins.

What Is Lawful Money? How Is It Different From Legal Tender?

73d Congress. Sess. II. CHS. 4-6. January 24, 25, 30, 1934

Lawful money is any form of currency issued by the United States Treasury and not the Federal Reserve System. The Federal Reserve Act of 1913 gave the Federal Reserve the right to issue Federal Reserve Notes, which are backed by the U.S. government and are redeemed in lawful money, but did not specify what lawful money meant. Since the US Constitution states “no state shall make any thing but gold and silver coin a tender in payment of debts,” some believe that this is the definition of lawful money and, thus, any payment medium other than gold or silver is not considered lawful money. The Federal Reserve Act of 1913, which established the Federal Reserve System and authorizes it to issue Federal Reserve notes, states that “\[Federal Reserve notes\] shall be obligations of the United States and shall be receivable by all national and member banks and Federal reserve banks and for all taxes, customs, and other public dues. Fiat money, which consists of paper money and checks, is not lawful money but is considered legal tender.

Lawful Money

A mint is the primary producer of a country's coin currency and has the approval of the government to manufacture coins to be used as legal tender. 

Historical Commemorative Coin Sales Figures

A mint is a primary producer of a country's coin currency, and it has the consent of the government to manufacture coins to be used as legal tender. The next most popular coin over that span was the 1982 half dollar commemorating the 250th anniversary of George Washington's birth.﻿﻿ All commemorative coins are legal tender for the face value, although the precious metals and collectible value of these coins usually keep prices well above face value.
David Rittenhouse, appointed by Washington, was the nation's first director of the U.S. Mint. Mints earn a profit from seigniorage, the difference between the face value and the cost of making a coin for circulating currency, or from the premium that collectors will pay for coins over raw bullion and metal for collector coins. The mint operates a major facility in Philadelphia that produces coins for circulation, creates engravings used for coins, and makes the dies that stamp images onto metal. Among mints, the U.S. Mint has six main facilities that help produce coins for the United States.

Mint

Special drawing rights are monetary reserve currencies created by the International Monetary Fund.

Special Drawing Right (SDR) Allocations: What is an SDR?

The end of the Bretton Woods System (1972-1981)

Review of the Special Drawing Right (SDR) Currency Basket

Special Drawing Right (SDR) Allocations: What happens to the SDRs once they are allocated?

IMF Launches New SDR Basket Including Chinese Renminbi, Determines New Currency Amounts

The IMF member states that hold SDRs can exchange them for freely usable currencies by either agreeing among themselves to voluntary swaps or by the IMF instructing countries with stronger economies or larger foreign currency reserves to buy SDRs from the less-endowed members.﻿﻿ The current makeup of the SDR is represented by the following table:
**Currency**
**Weights Determined in the 2015 Review**
**Fixed Number of Units of Currency for a 5-Year Period Starting Oct. 1, 2016**
U.S. Dollar
Chinese Yuan
Japanese Yen
Pound Sterling
The SDR was formed with a vision of becoming a major element of international reserves, with gold and reserve currencies forming a minor incremental component of such reserves. The SDR interest rate (SDRi) provides the basis for calculating the interest rate charged to member countries when they borrow from the IMF and paid to members for their remunerated creditor positions in the IMF. The interest rate on SDRs, or the SDRi, provides the basis for calculating the interest rate that is charged to member countries when they borrow from the IMF and paid to members for their remunerated creditor positions in the IMF.

Special Drawing Rights (SDR)

Sequestration is a term adopted by Congress to describe a fiscal policy process that automatically reduces spending increases across most departments.

Summary of the Budget Control Act of 2011

March 1 Joint Committee Sequestration for Fiscal Year 2013

Final Sequestration Report for Fiscal Year 2018

Sequestration is a term adopted by Congress to describe a back-up fiscal policy mechanism to enforce budgetary discipline over agreed-upon deficit reduction targets established under the 2011 Budget Control Act (BCA). However, along with passing annual budgets each year, Congress has also raised the caps on increases in discretionary spending for each year to accommodate higher spending increases, so that federal discretionary spending has never actually been subject to sequestration.
Although the spending increase limits are “across the board,” most mandatory spending is actually exempt from spending caps and sequestration. In everyday terms, for mandatory spending subject to caps and sequestration, this process is analogous to a family agreeing they will increase their household spending by $100 next month, then jointly make plans to increase spending by $200 next month, then reducing that increase by 50% so that they end up only actually spending an additional $100, and then calling this a spending cut. For these programs, planned and projected spending increases are compared to the statutory spending caps, and if they exceed the limits, then the calculated reduction percentages are applied to limit the increase in spending. In practice, most federal spending is exempt or otherwise not subject to limit by sequestration as Congress continually raises its own spending caps and legally exempts new categories of spending.

Sequestration

The Smoot-Hawley Tariff Act raised U.S. import taxes to protect American businesses from foreign competition. Global trade plummeted as a result.

The U.S. Senate: The Senate Passes the Smoot-Hawley Tariff

Presidential Speeches/Herbert Hoover Presidency: June 16, 1930: Message Regarding the Smoot-Hawley Tariff Act

Great Depression: Causes, Effects and Timeline

Table of Contents
The Smoot-Hawley Tariff Act
Understanding the Smoot-Hawley Act
Effect of the Great Crash of 1929 The Smoot-Hawley Tariff Act, enacted in June 1930, added about 20% to the United States' already high import duties on foreign agricultural products and manufactured goods. The Fordney-McCumber Act of 1922 previously raised the average import tax on foreign goods to about 40%. Formally called the United States Tariff Act of 1930, the law is commonly referred to as the Smoot-Hawley Tariff or the Hawley-Smoot Tariff. Table of Contents
The Smoot-Hawley Tariff Act
Understanding the Smoot-Hawley Act
Effect of the Great Crash of 1929 The Smoot-Hawley Tariff Act of 1930 was enacted to protect U.S. farmers from foreign competition by increasing tariffs on certain foreign goods.

Smoot-Hawley Tariff Act

A standard of value is the understood worth of a commodity used to set the value of other goods and services, and is necessary in order to maintain a stable economy.

Nixon Ends Convertibility of US Dollars to Gold and Announces Wage/Price Controls

Standard of value is an agreed-upon worth for a transaction in a country's medium of exchange, such as the U.S. dollar or Mexican peso. The value of the vegetables offered in trade would require some form of agreement between the parties, since a standard of value is not available to set parameters for the exchange. A standard of value is needed so the value of goods and services can be consistently determined. Giving a set value to a specific quantity of gold_—_and then framing other commodities as multiples or fractions of that value_—_allows for other disparate items to be granted value within the same economy. A standard of value allows all merchants and economic entities to set uniform prices for goods and services.

Standard of Value

A subsidy is a benefit given by the government to groups or individuals, usually in the form of a cash payment or tax reduction.

A subsidy is a benefit given to an individual, business, or institution, usually by the government. However, critics of subsidies point to problems with calculating optimal subsidies, overcoming unseen costs, and preventing political incentives from making subsidies more burdensome than they are beneficial. Economists who promote a mixed economy often argue that subsidies are justifiable to provide the socially optimal level of goods and services which will lead to economic efficiency. Pro-subsidy economists argue that subsidies to particular industries are vital to helping support businesses and the jobs they create. In economic theory, subsidies can be used to offset market failures and externalities to achieve greater economic efficiency.

Fiscal Policy

More in Economy

Terms in Fiscal Policy