Recession—a period of reduced economic activity

Capitalism—an economic system characterized by private or corporate ownership of

capital goods, by investments that are determined by private decision, and by prices,
production, and the distribution of goods that are determined mainly by competition in a
free market
Private sector— is that part of the economy which is run by private individuals or groups,
usually as a means of enterprise for profit, and is not controlled by the state
Public sector—sometimes referred to as the state sector is a part of the state that deals
with either the production, delivery and allocation of goods and services by and for the
government or its citizens
International Monetary Fund (IMF)—is the intergovernmental organization that oversees
the global financial system by following the macroeconomic policies of its member
countries
Larry Summers—is an American economist and as of 2010 Director of the White House
National Economic Council
Tim Geithner—is an American economist, banker, and civil servant. He is the 75th and
current United States Secretary of the Treasury. Geithner's position includes a large role
in directing the Federal Government's spending on the financial crisis of 2007–2010,
including allocation of $350 billion of funds from the Troubled Asset Relief Program
enacted during the previous administration
Ben Bernanke—is an American economist, and the current Chairman of the United States
Federal Reserve
Alan Greenspan—is an American economist who served as Chairman of the Federal
Reserve of the United States from 1987 to 2006. On February 26, 2007, Greenspan
forecast a possible surplus in the U.S. before or in early 2008
Subprime mortgages— means making loans that are in the riskiest category of consumer
loans and are typically sold in a separate market from prime loans.
Credit default swaps—is a swap contract in which the protection buyer of the CDS makes
a series of payments (often referred to as the CDS "fee" or "spread") to the protection
seller and, in exchange, receives a payoff if a credit instrument (typically a bond or loan)
experiences a credit event.
Deregulation—is the removal or simplification of government rules and regulations that
constrain the operation of market forces
Housing bubble—is a type of economic bubble that occurs periodically in local or global
real estate markets. It is characterized by rapid increases in valuations of real property
such as housing until they reach unsustainable levels relative to incomes and other
economic elements, followed by a reduction in price levels.
Federal Reserve—is the central banking system of the United States
Monetary policy—is the process by which the monetary authority of a country controls
the supply of money, often targeting a rate of interest to attain a set of objectives oriented
towards the growth and stability of the economy
AAA rated investment—having very high to the highest quality rating a bond can get.
"AAA" bonds are the best quality with the smallest risk of default. Issuers of "AAA"
bonds are stable and dependable
Essential societal roles of financial markets—
Default—occurs when a debtor has not met his or her legal obligations according to the
debt contract, e.g. has not made a scheduled payment, or has violated a loan covenant
(condition) of the debt contract
Variable rate mortgage—is a mortgage loan where the interest rate varies to reflect
market conditions
Fixed rate mortgage—where the interest rate on the note remains the same through the
term of the loan
Liquidity—is an asset's ability to be sold without causing a significant movement in the
price and with minimum loss of value
Derivative—It is a financial contract with a value linked to the expected future price
movements of the asset it is linked to - such as a share or a currency
Freddie Mac—Is a government sponsored enterprise (GSE) of the United States federal
government
Fannie Mae—was set up as a stockholder-owned corporation chartered by Congress in
1968 as a government-sponsored enterprise (GSE), but founded in 1938 during the Great
Depression
Securitization—Is a structured finance process that distributes risk by aggregating assets
in a pool (often by selling assets to a special purpose entity), then issuing new securities
backed by the assets and their cash flows
Externalities—Is a cost or benefit, not transmitted through prices, incurred by a party
who did not agree to the action causing the cost or benefit.
Moral hazard—occurs when a party insulated from risk behaves differently than it would
behave if it were fully exposed to the risk.
Microeconomics—Is a branch of economics that studies how the individual parts of the
economy, the household and the firms, make decisions to allocate limited resources,
typically in markets where goods or services are being bought and sold