Fed funds
Fed funds are also known as federal funds. These are the bank deposits or reserves at the Federal Reserve. These reserves are needed by the banks to clear financial transactions and meet the reserve requirements. Any transaction in the federal fund market enables the institution that is depositing to have a reserve that is above the reserve requirements and these excess funds are used by the institutions that are lacking or having a deficit in the reserve. These funds are very helpful in the re-distribution of the ideal funds and enable even them to yield a return. Federal funds are also known as good money because they are available for immediate use while the cheques or other forms of money should be cleared by the banks which take a lot of time and sometimes even days.
Types of fed funds
There are several types of federal funding. Some of them can be categorized under:
Enlightenment programs: Under these programs it is ensured that all the people who are capable are served. These funds are transferred directly to the state agencies that either organize the whole program or transfer the funds to the local agency that organizes the program. These agencies may even contact the other private non profit organizations for help in the conduction of the programs.
Block grants: In these types of funds the respective states are provided with a fixed amount of fund that is calculated on the basis of an established formula. The state must be submitting a general plan that will be describing the functions and the amount of the population that has to be served under the program. Like the enlightenment program the funds in this type of program is also transferred to the state agencies that are responsible for the conduction of the program.
Project grants or Discretionary: These funds are very helpful and are used for funding a large number of federal programs. The state or the local organizations may directly apply to the sponsoring federal agency for gaining control over these funds.
Contracts: These are in the form of contracts between the state agencies and the private agencies requiring the provision of the specified services.
Direct payments: These are funds that are directly paid to the beneficiaries by the federal governments for meeting the eligibility requirements.
Loan or Loan guarantee: These types of programs enable the private or the public agencies to borrow funds. The main advantage of these funds is that they are sometimes available at below market rate for some of the specified purposes. Loan guarantee programs are engaged in providing indemnification to the lenders in the case if the borrower is unable to repay back the loan taken.
Other Articles
