The Federal Reserve's Financial Crisis Response C: Providing US Dollars to Foreign Central Banks

20 Pages Posted: 30 Jan 2016 Last revised: 9 Feb 2016

See all articles by Rosalind Wiggins

Rosalind Wiggins

Yale Program on Financial Stability

Andrew Metrick

Yale School of Management; National Bureau of Economic Research (NBER); Yale University - Yale Program on Financial Stability

Date Written: February 1, 2016

Abstract

The financial crisis that began in late 2007 with the decline in the United States (U.S.) subprime mortgage markets, quickly spread to other markets and eventually disrupted the interbank funding markets in the U.S. as well as overseas. To address the strain in the U.S. dollar (USD) funding markets, the Federal Reserve worked with foreign central banks around the world to provide USD liquidity to affected overseas markets by entering into currency swap agreements. Following the bankruptcy of Lehman Brothers in September 2008, and the resulting further destabilization of the world’s financial systems, the size and utilization of these swaps expanded significantly. Ultimately the Federal Reserve would enter into currency swap agreements with central banks in 14 major economies and lend an unprecedented total of $10 trillion pursuant to them. In terms of commitment and usage, the currency swaps were one of the most significant efforts by the Federal Reserve to combat the crisis. These extraordinary actions succeeded in maintaining the availability of USD liquidity internationally and helped to moderate the stresses in the financial markets.

Keywords: Financial Crisis, Federal Reserve, Swaps, Central Banks

JEL Classification: G01, G21, G28

Suggested Citation

Wiggins, Rosalind and Metrick, Andrew, The Federal Reserve's Financial Crisis Response C: Providing US Dollars to Foreign Central Banks (February 1, 2016). Available at SSRN: https://ssrn.com/abstract=2723598 or http://dx.doi.org/10.2139/ssrn.2723598

Rosalind Wiggins (Contact Author)

Yale Program on Financial Stability ( email )

165 Whitney Avenue
P.O. Box 208200
New Haven, CT 06520-8200
United States

Andrew Metrick

Yale School of Management ( email )

165 Whitney Avenue
New Haven, CT 06511
United States
(203)-432-3069 (Phone)

HOME PAGE: http://faculty.som.yale.edu/andrewmetrick/

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Yale University - Yale Program on Financial Stability

165 Whitney Avenue
P.O. Box 208200
New Haven, CT 06520-8200
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
96
Abstract Views
482
rank
270,692
PlumX Metrics