Regulation, policy and institutions
The rules publishers of financial information work under, and the bodies that write them. 12 terms, defined in plain language by Ryan Hogan. Every one of them has been an answer in the daily puzzle.
appropriations · clawback · collusion · fiduciary · fsoc · furlough · omnibus · patriot · ponzi · shutdown · smoot · tariff
APPROPRIATIONS
Laws that authorize federal agencies to spend money. Without them, agencies have no legal authority to obligate funds.
Separate from authorization, which creates a program. A program can exist in law and still receive nothing, since the appropriation is the step that provides the money.
CLAWBACK
A contractual right to reclaim money already paid - typically executive bonuses after a restatement, or fund distributions returned to investors.
US listed companies must maintain clawback policies covering incentive pay awarded on financial results that are later restated.
COLLUSION
A secret agreement between competitors to limit competition, typically by fixing prices, rigging bids or dividing markets.
Illegal under antitrust law in most jurisdictions. Detection often relies on leniency programmes that reward the first participant to confess.
FIDUCIARY
A person or institution legally obliged to act in another's interest ahead of their own.
A stricter standard than suitability. A fiduciary must recommend what is best for the client, not merely something defensible.
FSOC
The Financial Stability Oversight Council, created after the 2008 crisis to watch for risks that cross the boundaries of individual regulators.
Its ability to designate a non-bank firm as systemically important, and so subject it to tighter oversight, has been the most contested part of its authority.
FURLOUGH
A temporary unpaid leave imposed by an employer, with the job itself continuing.
In a US government shutdown, employees deemed non-excepted are furloughed while excepted staff keep working without pay until funding resumes. Companies use furloughs to cut costs while keeping trained staff.
OMNIBUS
A single large bill combining many appropriations measures into one vote.
It gets used when individual bills cannot pass separately. The size and speed of these bills is the standard complaint about the process, since members vote on thousands of pages with little time to read them.
PATRIOT
The USA PATRIOT Act of 2001, which expanded anti-money-laundering requirements for financial institutions.
Customer identification, beneficial ownership checks and suspicious activity reporting all trace to it. It is the reason opening an account requires documents that banks did not previously request.
PONZI
A fraud paying existing investors with money from new ones rather than from genuine returns, requiring perpetual new inflows to survive.
Collapse is arithmetic rather than bad luck: redemptions eventually exceed new money, which is why these schemes fail in downturns.
SHUTDOWN
A lapse in federal funding that forces agencies to stop activities not covered by an appropriation or another funding authority.
Essential functions continue, so air traffic control and benefit payments carry on while data releases, permits and inspections stop. Markets usually treat the economic hit as temporary, though delayed statistics leave policymakers with less to work from.
The shutdown that began in December 2018 ran 35 days, the longest on record, and the Congressional Budget Office estimated it permanently cost about $3 billion of economic output after the delayed activity was recovered.
SMOOT
The Smoot-Hawley Tariff Act of 1930, which raised US tariffs on hundreds of imported goods.
Trading partners retaliated and world trade contracted sharply. Economists still argue about how much it deepened the Depression, and it is cited in nearly every modern tariff debate.
TARIFF
A tax levied on imported goods, charged as a percentage of value or a fixed amount per unit.
Paid by the importer, not the exporting country. Economists study how much is passed to consumers in higher prices versus absorbed in seller margins.