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Simple English definitions for legal terms
full-faith-and-credit bond
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A quick definition of full-faith-and-credit bond:
A full-faith-and-credit bond is a type of bond that is backed by the government's promise to use all of its resources to repay the bondholders. This means that if the government cannot pay back the bond, it will use its taxing power to raise the necessary funds. It is similar to a general-obligation bond, which is also backed by the government's promise to repay the bondholders.
A more thorough explanation:
Definition: A full-faith-and-credit bond is a type of bond that is backed by the full faith and credit of the issuer, usually a government entity. This means that the issuer pledges to use all available resources to repay the bondholders, including raising taxes if necessary.
Example: A city issues a full-faith-and-credit bond to finance the construction of a new school. The bondholders are assured that the city will use all available resources to repay the bond, including raising taxes if necessary.
Explanation: The example illustrates how a full-faith-and-credit bond works. The bond is backed by the full faith and credit of the issuer, which means that the issuer pledges to use all available resources to repay the bondholders. In this case, the city is the issuer and the bond is being used to finance the construction of a new school. The bondholders are assured that the city will use all available resources to repay the bond, including raising taxes if necessary. This makes the bond a relatively safe investment, as the bondholders are unlikely to lose their investment even if the city experiences financial difficulties.