Exchange Stabilization Fund - Uses

Uses

A change in the law, in 1970, allows the Secretary of the Treasury, with the approval of the President, to use money in the ESF to "deal in gold, foreign exchange, and other instruments of credit and securities."

The U.S. government used the fund to provide $20 billion in currency swaps and loan guarantees to Mexico following the 1994 economic crisis in Mexico. This was somewhat controversial at the time, because President Clinton had tried and failed to pass the Mexican Stabilization Act through Congress. Use of the ESF circumvented the need for approval of the legislative branch. In response, Congress passed and President Clinton signed the Mexican Debt Disclosure Act of 1995, which implicitly accepted the use of the ESF, but required reports to Congress every six months on the status of the loans. At the end of the crisis, the U.S. made a $500 million profit on the loans.

On September 19, 2008, U.S. Treasury Department announced that up to $50 billion in the ESF would temporarily be made available to guarantee deposits in certain money market funds.