Congressional Research Service IF13200 (Treasury’s Exchange Stabilization Fund)
Summary
A Congressional Research Service product, IF13200, updated April 24, 2026, on Treasury's Exchange Stabilization Fund (ESF), an emergency reserve fund of the Department of the Treasury created by Congress in 1934. It explains that the ESF has evolved from its original purpose of maintaining the fixed dollar exchange rate into a fund the Treasury Secretary can use quickly, with few restrictions and without congressional approval, for purposes including supporting foreign governments, transactions with the International Monetary Fund and stabilizing U.S. financial markets. It notes that the ESF remains outside annual appropriations, has no overall size limit and retains its earnings, and that its use to provide temporary financial support to Argentina in 2025 has renewed debates about the fund.
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Updated April 24, 2026
Treasury’s Exchange Stabilization Fund
The Exchange Stabilization Fund (ESF) is an emergency exceed six months unless the President notified Congress
reserve fund of the Department of the Treasury created by that “unique or exigent circumstances” were present (P.L.
Congress in 1934. The ESF has evolved from its original 95-147). Such notifications were provided regarding ESF
purpose of maintaining the fixed dollar exchange rate. Now, exposure to Mexico in 1982 and 1995 and to Brazil in 1998.
the value of the dollar is market-determined and the ESF is
a fund that the Treasury Secretary can use quickly with few ESF Resources
restrictions for any purpose and without congressional In addition to the ESF’s initial capitalization, Congress
approval. Treasury Secretaries have used the ESF for a allowed the ESF to remain outside annual appropriations
variety of objectives, including supporting foreign and imposed no overall size limit. Instead, the ESF retains
governments, engaging in specific transactions with the all of the earnings from its operations. ESF assets include
International Monetary Fund (IMF), and stabilizing U.S. Treasury securities, foreign currencies and securities, and
financial markets. The Treasury Secretary’s use of the ESF special drawing rights (SDRs, an international reserve asset
to provide temporary financial support to Argentina in 2025 created by the IMF to supplement foreign exchange
has renewed debates about the ESF’s function and purpose. reserves). As of February 2026, ESF’s liquid assets include
$23.5 billion of Treasury securities and $4.3 billion of
Background foreign currencies and securities. Because the size of the
The ESF was established by Section 10(a) of the Gold ESF is finite, one large operation can quickly tie up most of
Reserve Act of January 30, 1934 (31 U.S.C. §5302), to its liquid assets. Furthermore, the ESF is small relative to
stabilize the exchange value of the dollar at a time when the daily turnover in foreign exchange markets, limiting its
international monetary system was being destabilized by potential effectiveness in fulfilling its original purpose of
competitive currency devaluations. The ESF was stabilizing the value of the dollar.
established with $2 billion realized after the 1934
devaluation of the dollar. The ESF is self-financing and To secure more dollars for ESF operations, Treasury could
does not regularly receive congressional appropriations. (1) seek an additional appropriation from Congress; (2)
Congressional oversight is largely limited to after-the-fact monetize its holdings of IMF SDRs, currently valued at
reporting requirements detailing the fund’s activities. $176.0 billion, by temporarily selling them to the Federal
Reserve (the Fed); or (3) engage in a currency swap
After World War II, when the International Monetary Fund arrangement called “warehousing”—in which the ESF sells
(IMF) was established, the ESF was the source of funds for foreign currency to the Fed and agrees to repurchase it at a
the U.S. contribution. As provided in the Bretton Woods later date, during which the Fed credits dollar reserves to
Agreement Act of 1945 (Section 7 of P.L. 79-191), $1.8 the ESF for the duration of the swap. The Fed limits
billion of the ESF’s capital of $2 billion was used to make a warehousing to $5 billion, but it temporarily raised the limit
partial payment on the U.S. subscription to the IMF. The to $10 billion in 1989 and $20 billion in 1995. The last use
1945 act also included permanent authority for the ESF. of warehousing was from 1988 to 1992.
In 1976, following the end of the quasi-gold standard, ESF Uses
where the dollar was pegged to gold and other countries’ Foreign Market Interventions. Between the 1930s and the
currencies were pegged to the dollar, Congress struck the late 1960s, Treasury regularly used ESF resources to
explicit purpose of stabilizing the exchange value of the manage the dollar’s foreign exchange rate, specifically
dollar from the ESF’s statute, and its purpose was expanded buying and selling currencies in order to help maintain the
(P.L. 94-564). The phrase “stabilizing the exchange value exchange rate. The United States moved to a floating
of the dollar” was deleted, and language referring to “being exchange rate system in the 1970s that does not require
consistent with U.S. obligations in the IMF regarding official intervention. As a result, Treasury has rarely used
orderly exchange arrangements and a stable system of ESF resources for foreign exchange interventions in recent
exchange rates” was inserted. As a result, the Treasury decades. Since the mid-1990s, the United States, in
Secretary (with the President’s approval) has almost coordination with other countries, has intervened on three
unlimited authority to “deal in gold, foreign exchange, and occasions—in 1998 (to support the Japanese yen), 2000 (to
other instruments of credit and securities.” support the euro following its introduction), and 2011 (to
support the yen following an earthquake in Japan)—using
Congress exercises oversight by requiring Treasury to ESF and Fed resources.
provide it with monthly and annual reporting on the ESF’s
operations. (Although Treasury has continually published Financial Support to Foreign Countries. Since the 1930s,
unaudited monthly reports, to date it has not published a Treasury Secretaries have also used ESF resources for
FY2025 audited annual report, as required.) Additionally, in “credit operations,” usually short-term loans or currency
1977, Congress added a restriction that ESF loans could not swaps, to foreign countries facing economic crises. Since
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Treasury’s Exchange Stabilization Fund
the mid-1990s, Treasury has also annually renewed a Treasury announced this program without seeking specific
currency swap arrangement with Mexico through the ESF, congressional authorization, justifying the program on the
which was negotiated in the context of the North American grounds that guaranteeing money market funds would
Free Trade Agreement (NAFTA, now the U.S.-Mexico- protect the value of the dollar. The program expired in
Canada Agreement [USMCA]). September 2009. Over the life of the program, Treasury
reported no payouts from the money market fund
The largest ESF credit operation with a foreign guarantees, and $1.2 billion in fees had been collected. The
government, adjusting for inflation, was with Mexico in the Emergency Economic Stabilization Act of 2008 (P.L. 110-
1995 “peso crisis” (see Figure 1). The second-largest was a 343) directed the Treasury Secretary to reimburse the ESF
$20 billion agreement with Argentina in 2025, the first new for any funds used for the money market guarantee program
operation with a foreign government since 2002 (outside of and prohibited similar use of the ESF in the future.
the Mexico/NAFTA arrangement renewed annually).
Through the agreement, the Treasury Department agreed to In 2020, as part of the U.S. government’s economic
buy Argentine pesos in exchange for U.S. dollars. The response to COVID-19 pandemic, the CARES Act (P.L.
arrangement was opposed by some Members of Congress 116-136) appropriated $500 billion to the ESF to support
because it appeared “to be an effort to unduly influence loans, loan guarantees, and investments for businesses
Argentina’s democratic elections,” among other reasons. affected by COVID-19 through the end of 2020. (P.L. 116-
Argentina drew $2.5 billion from the swap in October 2025, 260 rescinded $429 billion of this total.) Treasury made
which it repaid in December 2025. According to the $21.1 billion in loans to passenger air and cargo air carriers
February 2026 ESF report, the arrangement is still active. and $0.7 billion to businesses critical to national security.
Treasury reported that 35 loans were made, of which 12
Figure 1. ESF Credit Operations with Foreign borrowers defaulted, as of February 2026. The remaining
Governments funds could be pledged to support emergency facilities
created by the Fed. The ESF made $215 billion available
(of which $195 billion was from the CARES Act) to
backstop Fed facilities for corporate bonds, commercial
paper, asset-backed securities, money market funds,
municipal debt, and loans to businesses with under 10,000
employees (through the Main Street Lending Program
[MSLP]). These funds would cover any future losses on the
facilities, which allowed those funds to be leveraged with
the Fed’s resources. Only the MSLP still has ESF funding
outstanding, with the possibility of losses. All other Fed
programs returned a profit to the ESF. In addition, the
CARES Act temporarily permitted the use of the ESF to
guarantee MMFs, as in 2008. A guarantee was not issued.
Policy Considerations for Congress
Congress has delegated broad discretion over the ESF to the
Treasury Secretary to respond quickly to domestic or
foreign crises. The tradeoff is that the ESF is one of the few
areas where an Administration can spend funds as it sees fit
Transactions with the IMF and World Bank. In 1968, without congressional input or approval. Assistance to
Congress authorized the ESF to hold and transact in SDRs Argentina, which the President framed as based on
(P.L. 90-349). The ESF holds $175 billion in SDRs as of ideological rather than financial grounds, has raised
February 2026. The United States can use SDRs, for questions about whether more limitations on the ESF are
example, to provide liquidity support to other countries by needed.
purchasing SDRs in exchange for U.S. dollars. Treasury has
also used the ESF to facilitate the clearance of arrears to the For example, Members could legislate more specific
IMF and World Bank (Liberia in 2008 and Sudan in 2021). limitations on the ESF’s use—such as capping its size,
limiting how it can be used, or requiring congressional
Domestic Financial Crises. Treasury Secretaries have approval when the Treasury Secretary initiates
turned to the ESF to respond to fast-moving domestic crises interventions. Likewise, if Members want to preserve the
unrelated to the ESF’s original role to support the value of Treasury Secretary’s discretion to use the ESF during crises
the dollar in two cases. During the 2008 financial crisis, the while also exerting greater oversight of the fund, they could
ESF was pledged to guarantee money market funds consider new reporting requirements that improve the flow
(MMFs, a type of mutual fund that generally invest in high- of information from the Administration to Congress and/or
quality, short-term assets). In September 2008, there was a the public. Alternatively, if Members support the ESF as a
general run on MMFs, as investors attempted to withdraw crisis-response tool, they could increase ESF resources.
an estimated $250 billion of their holdings. To stop the run,
Treasury announced an optional program to guarantee Marc Labonte, Specialist in Macroeconomic Policy
holdings in participating money market funds, using the Rebecca M. Nelson, Specialist in International Trade and
assets in the ESF to finance any losses from this guarantee. Finance
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Treasury’s Exchange Stabilization Fund
IF13200
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https://crsreports.congress.gov | IF13200 · VERSION 3 · UPDATED
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