NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

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

Anna J. Schwartz

NBER Working Paper No. 5699 (Also Reprint No. r2131)
Issued in August 1996
NBER Program(s):   ME

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.

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Document Object Identifier (DOI): 10.3386/w5699

Published: Journal of Money, Credit and Banking, Vol. 29, no. 2 (May 1997): 135-153.

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