Treasury’s Exchange Stabilization Fund (IF13200, Version 1)
Summary
A Congressional Research Service report, IF13200, dated April 9, 2026, on Treasury's Exchange Stabilization Fund (ESF), the emergency reserve Congress created in 1934 with $2 billion. The ESF now works as a fund the Treasury Secretary can use quickly for almost any purpose without congressional approval, with oversight limited largely to after-the-fact reports. As of February 2026 its liquid assets included $23.5 billion of Treasury securities and $4.3 billion of foreign currencies and securities, so one large operation can tie up most of it. Its use to support Argentina in 2025 renewed debate: Argentina drew $2.5 billion from a swap in October 2025 and repaid it in December 2025. The report also recalls the 2020 CARES Act use of the ESF in the COVID-19 response.
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April 9, 2026
Treasury’s Exchange Stabilization Fund
The Exchange Stabilization Fund (ESF) is an emergency 1977, Congress added a restriction that ESF loans could not
reserve fund of the Treasury Department created by exceed six months unless the President notified Congress
Congress in 1934. The ESF has evolved from its original that “unique or exigent circumstances” were present (P.L.
purpose of maintaining the fixed dollar exchange rate. Now, 95-147). Such notifications were provided regarding ESF
the value of the dollar is market-determined and the ESF is exposure to Mexico in 1982 and 1995 and to Brazil in 1998.
a fund that the Treasury Secretary can use quickly with few
restrictions for any purpose and without congressional ESF Resources
approval. Treasury Secretaries have used the ESF for a In addition to the ESF’s initial capitalization, Congress
variety of objectives, including supporting foreign allowed the ESF to remain outside annual appropriations
governments, engaging in specific transactions with the and imposed no overall size limit. Instead, the ESF retains
International Monetary Fund (IMF), and stabilizing U.S. all of the earnings from its operations. ESF assets include
financial markets. The Treasury Secretary’s use of the ESF Treasury securities, foreign currencies and securities, and
to provide temporary financial support to Argentina in 2025 special drawing rights (SDRs, an international reserve asset
has renewed debates about the ESF’s function and purpose. created by the IMF to supplement foreign exchange
reserves). As of February 2026, ESF’s liquid assets include
Background $23.5 billion of Treasury securities and $4.3 billion of
The ESF was established by Section 10(a) of the Gold foreign currencies and securities. Because the size of the
Reserve Act of January 30, 1934 (31 U.S.C. §5302), to ESF is finite, one large operation can quickly tie up most of
stabilize the exchange value of the dollar at a time when the its liquid assets. Furthermore, the ESF is small relative to
international monetary system was being destabilized by daily turnover in foreign exchange markets, limiting its
competitive currency devaluations. The ESF was potential effectiveness in fulfilling its original purpose of
established with $2 billion realized after the 1934 stabilizing the value of the dollar.
devaluation of the dollar. The ESF is self-financing and
does not regularly receive congressional appropriations. To secure more dollars for ESF operations, Treasury could
Congressional oversight is largely limited to after-the-fact (1) seek an additional appropriation from Congress; (2)
reporting requirements detailing the fund’s activities. monetize its holdings of IMF SDRs, currently valued at
$176.0 billion, by temporarily selling them to the Federal
After World War II, when the International Monetary Fund Reserve (the Fed); or (3) engage in a currency swap
(IMF) was established, the ESF was the source of funds for arrangement called “warehousing”—in which the ESF sells
the U.S. contribution. As provided in the Bretton Woods foreign currency to the Fed and agrees to repurchase it at a
Agreement Act of 1945 (Section 7 of P.L. 79-191), $1.8 later date, during which the Fed credits dollar reserves to
billion of the ESF’s capital of $2 billion was used to make a the ESF for the duration of the swap. The Fed limits
partial payment on the U.S. subscription to the IMF. The warehousing to $5 billion, but it temporarily raised the limit
1945 act also included permanent authority for the ESF. to $10 billion in 1989 and $20 billion in 1995. The last use
of warehousing was from 1988 to 1992.
In 1976, following the end of the quasi-gold standard,
where the dollar was pegged to gold and other countries’ ESF Uses
currencies were pegged to the dollar, Congress struck the Foreign Market Interventions. Between the 1930s and the
explicit purpose of stabilizing the exchange value of the late 1960s, Treasury regularly used ESF resources to
dollar from the ESF’s statute, and its purpose was expanded manage the dollar’s foreign exchange rate, specifically
(P.L. 94-564). The phrase “stabilizing the exchange value buying and selling currencies in order to help maintain the
of the dollar” was deleted, and language referring to “being exchange rate. The United States moved to a floating
consistent with U.S. obligations in the IMF regarding exchange rate system in the 1970s that does not require
orderly exchange arrangements and a stable system of official intervention. As a result, Treasury has rarely used
exchange rates” was inserted. As a result, the Treasury ESF resources for foreign exchange interventions in recent
Secretary (with the President’s approval) has almost decades. Since the mid-1990s, the United States, in
unlimited authority to “deal in gold, foreign exchange, and coordination with other countries, has intervened on three
other instruments of credit and securities.” occasions—in 1998 (to support the Japanese yen), 2000 (to
support the euro following its introduction), and 2011 (to
Congress exercises oversight by requiring Treasury to support the yen following an earthquake in Japan)—using
provide it with monthly and annual reporting on the ESF’s ESF and Fed resources.
operations. (Although Treasury has continually published
unaudited monthly reports, to date it has not published a Financial Support to Foreign Countries. Treasury
FY2025 audited annual report, as required.) Additionally, in Secretaries have also used ESF resources for “credit
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Treasury’s Exchange Stabilization Fund
operations,” usually short-term loans or currency swaps, to holdings in participating money market funds, using the
foreign countries facing economic crises. ESF resources assets in the ESF to finance any losses from this guarantee.
have funded 126 credit operations since 1936, mostly to Treasury announced this program without seeking specific
countries in Latin America. The largest credit operation, congressional authorization, justifying the program on the
adjusting for inflation, was to Mexico in the 1995 “peso grounds that guaranteeing money market funds would
crisis” (see Figure 1). protect the value of the dollar. The program expired in
September 2009. Over the life of the program, Treasury
The second largest was a $20 billion currency swap line reported no payouts from the money market fund
extended to Argentina in 2025, the first new operation with guarantees, and $1.2 billion in fees had been collected. The
a foreign government since 2002. Through the swap, the Emergency Economic Stabilization Act of 2008 (P.L. 110-
Treasury Department agreed to buy Argentine pesos in 343) directed the Treasury Secretary to reimburse the ESF
exchange for U.S. dollars. The agreement was opposed by for any funds used for the money market guarantee program
some Members of Congress because it appeared “to be an and prohibited similar use of the ESF in the future.
effort to unduly influence Argentina’s democratic
elections,” among other reasons. Argentina drew $2.5 In 2020, as part of the U.S. government’s economic
billion from the swap in October 2025, which it repaid in response to COVID-19 pandemic, the CARES Act (P.L.
December 2025. According to the February 2026 ESF 116-136) appropriated $500 billion to the ESF to support
report, the arrangement is still active. loans, loan guarantees, and investments for businesses
affected by COVID-19 through the end of 2020. (P.L. 116-
Figure 1. ESF Credit Operations with Foreign 260 rescinded $429 billion of this total.) Treasury made
Countries $21.1 billion in loans to passenger air and cargo air carriers
and $0.7 billion to businesses critical to national security.
Treasury reported that 35 loans were made, of which 12
borrowers defaulted, as of February 2026. The remaining
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.
Treasury also maintains a standing $9 billion foreign
currency swap arrangement with Mexico through the ESF, Policy Considerations for Congress
which was negotiated in the context of the North American Congress has delegated broad discretion over the ESF to the
Free Trade Agreement (NAFTA, now the U.S.-Mexico- Treasury Secretary to respond quickly to domestic or
Canada Agreement [USMCA]). Treasury has also used the foreign crises. The tradeoff is that the ESF is one of the few
ESF to facilitate the clearance of arrears to the World Bank areas where an Administration can spend funds as it sees fit
(Liberia in 2008 and Sudan in 2021). without congressional input or approval. Assistance to
Argentina, which the President framed as based on
Transactions with the IMF. In 1968, Congress authorized ideological rather than financial grounds, has raised
the ESF to hold and transact in SDRs (P.L. 90-349). The questions about whether more limitations on the ESF are
ESF holds $175 billion in SDRs as of February 2026. The needed. For example, Members could legislate more
United States can use SDRs, for example, to provide specific limitations on the ESF’s use—such as capping its
liquidity support to other countries by purchasing SDRs in size, limiting how it can be used, or requiring congressional
exchange for U.S. dollars. approval when the Treasury Secretary initiates
interventions. Likewise, if Members want to preserve the
Domestic Financial Crises. Treasury Secretaries have Treasury Secretary’s discretion to use the ESF during crises
turned to the ESF to respond to fast-moving domestic crises while also exerting greater oversight of the fund, they could
unrelated to the ESF’s original role to support the value of consider new reporting requirements that improve the flow
the dollar in two cases. During the 2008 financial crisis, the of information from the Administration to Congress and/or
ESF was pledged to guarantee money market funds the public. Alternatively, if Members support the ESF as a
(MMFs, a type of mutual fund that generally invest in high- crisis-response tool, they could increase ESF resources.
quality, short-term assets). In September 2008, there was a
general run on MMFs, as investors attempted to withdraw Marc Labonte, Specialist in Macroeconomic Policy
an estimated $250 billion of their holdings. To stop the run, Rebecca M. Nelson, Specialist in International Trade and
Treasury announced an optional program to guarantee Finance
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Treasury’s Exchange Stabilization Fund
IF13200
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https://crsreports.congress.gov | IF13200 · VERSION 1 · NEW
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