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

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  • Anna J. Schwartz

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

  • Anna J. Schwartz, 1996. "From Obscurity to Notoriety: A Biography of the Exchange Stabilization Fund," NBER Working Papers 5699, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:5699
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    References listed on IDEAS

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    1. Gold, Joseph, 1988. "Mexico and the development of the practice of the International Monetary Fund," World Development, Elsevier, vol. 16(10), pages 1127-1142, October.
    2. Edwin M. Truman, 1996. "The Mexican peso crisis: implications for international finance," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), vol. 82(Mar), pages 199-209, March.
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    Cited by:

    1. Michael D. Bordo & Owen F. Humpage & Anna J. Schwartz, 2010. "U.S. Foreign-Exchange-Market Intervention and the Early Dollar Float: 1973 - 1981," NBER Working Papers 16647, National Bureau of Economic Research, Inc.
    2. Mr. James M. Boughton, 2006. "American in the Shadows: Harry Dexter White and the Design of the International Monetary Fund," IMF Working Papers 2006/006, International Monetary Fund.
    3. Charles Calomiris & David Wheelock, 1998. "Was the Great Depression a Watershed for American Monetary Policy?," NBER Chapters, in: The Defining Moment: The Great Depression and the American Economy in the Twentieth Century, pages 23-65, National Bureau of Economic Research, Inc.
    4. Rik Hafer, 1999. "Against the tide: Malcolm Bryan and the introduction of monetary aggregate targets," Economic Review, Federal Reserve Bank of Atlanta, vol. 84(Q1), pages 20-37.
    5. -, 2022. "Special Drawing Rights (SDRs) and the COVID-19 crisis," Coediciones, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 47856 edited by Eclac.
    6. Michael D. Bordo & Owen F. Humpage & Anna J. Schwartz, 2016. "On the Evolution of US Foreign-Exchange-Market Intervention: Thesis, Theory, and Institutions," NBER Chapters, in: Strained Relations: US Foreign-Exchange Operations and Monetary Policy in the Twentieth Century, pages 1-26, National Bureau of Economic Research, Inc.
    7. Bordo, Michael D. & Schwartz, Anna J., 1999. "Under what circumstances, past and present, have international rescues of countries in financial distress been successful?," Journal of International Money and Finance, Elsevier, vol. 18(4), pages 683-708, August.
    8. Robert L. Hetzel, 1997. "The case for a monetary rule in a constitutional democracy," Economic Quarterly, Federal Reserve Bank of Richmond, issue Spr, pages 45-66.
    9. Michael D. Bordo & Owen Humpage & Anna J. Schwartz, 2007. "The historical origins of US exchange market intervention policy," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 12(2), pages 109-132.
    10. Kenneth D. Garbade, 2016. "The first debt ceiling crisis," Staff Reports 783, Federal Reserve Bank of New York.
    11. Faudot, Adrien & Nenovsky, Nikolay, 2024. "Edgard Milhaud And The Case For Establishing An International Clearing Union In The 1930s: A Forgotten Forerunner Of Keynes?," Journal of the History of Economic Thought, Cambridge University Press, vol. 46(3), pages 399-420, September.
    12. J. Bradford DeLong & Barry Eichengreen, 2001. "Between Meltdown and Moral Hazard: The International Monetary and Financial Policies of the Clinton Administration," NBER Working Papers 8443, National Bureau of Economic Research, Inc.
    13. Steffen Murau & Armin Haas & Andrei Guter-Sandu, 2024. "Monetary architecture and the Green Transition," Environment and Planning A, , vol. 56(2), pages 382-401, March.
    14. Michael Bordo & Anna J. Schwartz, 2001. "From the Exchange Stabilization Fund to the International Monetary Fund," NBER Working Papers 8100, National Bureau of Economic Research, Inc.

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