The Evolution of the Federal Reserve Swap Lines Since 1962

32 Pages Posted: 4 Oct 2014

See all articles by Michael D. Bordo

Michael D. Bordo

Rutgers University, New Brunswick - Department of Economics; National Bureau of Economic Research (NBER)

Owen Humpage

Federal Reserve Bank of Cleveland

Anna J. Schwartz

City University of New York (CUNY); National Bureau of Economic Research (NBER) - NY Office

Multiple version iconThere are 2 versions of this paper

Date Written: September 30, 2014

Abstract

In this paper, we describe the evolution of the Federal Reserve’s swap lines from their inception in 1962 as a mechanism to forestall claims on US gold reserves under Bretton Woods to their use during the Great Recession as a means of extending emergency dollar liquidity. We describe the Federal Reserve’s successes and failures. We argue that swaps calm crisis situations by both supplementing foreign countries’ dollar reserves and by signaling central-bank cooperation. We show how swaps exposed the Federal Reserve to conditionality and raised fears that they bypassed the Congressional appropriations process.

Keywords: Swap lines, Federal Reserve, Bretton Woods, Intervention, Mexico

JEL Classification: F30, N20

Suggested Citation

Bordo, Michael D. and Humpage, Owen and Schwartz, Anna J., The Evolution of the Federal Reserve Swap Lines Since 1962 (September 30, 2014). FRB of Cleveland Working Paper No. 14-14. Available at SSRN: https://ssrn.com/abstract=2504587 or http://dx.doi.org/10.2139/ssrn.2504587

Michael D. Bordo

Rutgers University, New Brunswick - Department of Economics ( email )

New Brunswick, NJ
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Owen Humpage (Contact Author)

Federal Reserve Bank of Cleveland ( email )

PO Box 6387
Cleveland, OH 44101-1387
United States

Anna J. Schwartz

City University of New York (CUNY) ( email )

17 Lexington Avenue
New York, NY 10010
United States

National Bureau of Economic Research (NBER) - NY Office

365 Fifth Avenue, 5th Floor
New York, NY 10016-4309
United States
212-817-7957 (Phone)

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