From Obscurity to Notoriety: A Biography of the Exchange Stabilization Fund

36 Pages Posted: 3 Oct 1996 Last revised: 3 Oct 2010

See all articles by Anna J. Schwartz

Anna J. Schwartz

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

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Date Written: August 1996

Abstract

The U.S. Treasury's $20 billion loan to Mexico in January 1995 from the Exchange Stabilization Fund (ESF) brought to public notice the fund that had functioned in obscurity since its authorization by the Gold Reserve Act of January 31, 1934. The design of the ESF, as set forth in the statute, contributed to its obscurity. Its stated mission was to stabilize the exchange value of the dollar, but it has also assumed a role that had no mandate, that of lender to favored countries. ESF's intervention activities and the Federal Reserve's warehousing of ESF foreign currency assets are questionable. A statistical profile of the ESF accounts for the growth of its working balance from $200 million in 1934 to $42.6 billion in assets in 1995.

Suggested Citation

Schwartz, Anna J., From Obscurity to Notoriety: A Biography of the Exchange Stabilization Fund (August 1996). NBER Working Paper No. w5699. Available at SSRN: https://ssrn.com/abstract=4286

Anna J. Schwartz (Contact Author)

City University of New York (CUNY) ( email )

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