# Exchange Stabilization Fund The **Exchange Stabilization Fund (ESF)** is a pool of money inside the [[Department of the Treasury]] that the Treasury Secretary can spend, with the President's approval, without asking Congress each time. It was created to defend the dollar. In practice it has become the executive branch's emergency checkbook for foreign rescues, market backstops and currency operations. Congress built it in 1934 and has fenced it only after the fact, one use at a time. ## Origin and legal structure The [[Gold Reserve Act of 1934]] set up the fund. When [[Franklin D. Roosevelt]]'s government revalued gold, the Treasury booked about a $2.8 billion paper profit, and $2 billion of it became the ESF's capital (Wikipedia; CRS). The fund was meant to deal in gold and foreign exchange to steady the dollar. It was first authorized for two years and later made permanent. The current statute, 31 U.S.C. § 5302, says the Secretary, "with the approval of the President, may deal in gold, foreign exchange, and other instruments of credit and securities" (Treasury). The Congressional Research Service summarizes the key point: decisions of the Treasury Secretary "are final and may not be reviewed by another government official." The ESF runs on its own assets and earnings and does not need an annual appropriation. Its main accountability tool is a monthly report to Congress. ## What it holds, as of August 31, 2026 Treasury's monthly statement, the latest available, shows: | Item | Amount | |---|---| | Total assets | $218.8 billion | | Special Drawing Right (SDR) holdings and interest | $173.2 billion | | Nonmarketable Treasury securities | $24.9 billion | | Foreign currency (euro $1.3B, yen $3.7B) | $4.9 billion | | Total liabilities (mostly SDR allocations and certificates) | $174.5 billion | | Net position | $44.3 billion | The headline is misleading. Most of the assets are SDRs held at the [[International Monetary Fund]] and matched by SDR liabilities. The money the Secretary can actually deploy is the roughly $25 billion in Treasuries plus about $5 billion in euros and yen. The statement also lists a $9 billion stabilization agreement with Mexico, with nothing drawn. At the end of 2025 total assets were $218.5 billion (Treasury Bulletin, March 2026). ## The record of use | Year | Use | What happened | |---|---|---| | 1995 | **Mexico peso rescue** | After Congress failed to pass a Mexican stabilization bill, [[Bill Clinton]]'s Treasury under Robert Rubin used the ESF to provide about $20 billion in swaps and loan guarantees. That was the US share of a roughly $50 billion package that included $17.8 billion from the IMF. Mexico repaid early and the US made a profit, put at about $500–600 million depending on the account. Congress responded with the Mexican Debt Disclosure Act, which required reports. | | 2008 | **Money-market guarantee** | On September 19, 2008, days after [[Lehman Brothers]] failed, [[George W. Bush]] approved up to $50 billion of ESF assets for [[Henry Paulson]]'s guarantee of money-market mutual funds. More than $3 trillion in fund shares were covered (CRS). The program expired on September 18, 2009, having earned about $1.2 billion in fees with no losses. Congress then barred the ESF from any future money-market guarantee and required it to be reimbursed (12 U.S.C. § 5236, enacted in the [[Emergency Economic Stabilization Act of 2008]]). | | 2020 | **CARES Act backstop** | The CARES Act put up to $500 billion through the ESF, with at least $454 billion available to absorb losses in [[Federal Reserve]] emergency lending facilities and $46 billion for direct loans to airlines and national-security firms. It also suspended the 2008 money-market ban through December 31, 2020. Before the act, the ESF's dollar assets were about $22.7 billion (CRS, February 2020). In November 2020 [[Steven Mnuchin]] declined to extend several facilities and pulled back the unused money, a decision that drew criticism. | | 2025 | **Argentina swap** | See below. | | 2026 | **Yen intervention** | ESF euros were exchanged for yen in the July 31 joint operation with Japan (see below). | ## The Argentina swap In late September 2025, [[Scott Bessent]] said the US was ready to support [[Javier Milei]]'s government, called Argentina a "systemically important US ally," and named the ESF as the likely vehicle (Bloomberg via Fortune, Sept 25, 2025). On October 9 he announced a finalized $20 billion currency-swap framework and direct Treasury purchases of pesos, as reported by AP and France 24. On October 14, standing beside Milei at the White House, Trump tied the support to the outcome of Argentina's October 26 midterm election. The next day Bessent floated a second, privately funded $20 billion facility (PBS/AP). This page could not confirm that the private facility was ever completed. Treasury's own ledger gives the terms. The Exchange Stabilization Agreement with Argentina's central bank was dated **October 18, 2025**, for $20.0 billion. One swap of **$2.5 billion** was drawn in October 2025. In **December 2025** the central bank "fully repaid the $2.5 billion and the swap transaction was closed." Nothing was outstanding as of August 31, 2026. Bessent announced the repayment on January 9, 2026, and said it had made "tens of millions" for taxpayers and that the ESF "has never lost money" (Buenos Aires Times). Milei's party won the October election decisively. The swap drew criticism even from Republicans. According to Politico, Senator [[Chuck Grassley]] asked why Washington should rescue a country that was selling soybeans to China while American farmers were losing that market. The deeper objection is structural: a commitment of this size was made by one cabinet officer, with no vote in Congress, ahead of a foreign election the President had openly tried to influence. ## The 2026 yen operation On July 31, 2026 the Treasury joined Japan's intervention to strengthen the yen, the first US intervention supporting the yen since June 1998 (PIIE). It sold euros, not dollars. The ESF's August statement records a $500 million rise in yen holdings and an equal fall in euro holdings "following operations undertaken on July 31, 2026 that settled on August 5, 2026." An FXStreet analysis estimated the US share at about $500 million from the same weekly reserve data. Bessent told Senator [[Elizabeth Warren]] that Treasury had exchanged existing ESF foreign-currency assets for yen and that Japan had not borrowed from the US. ## Why it matters here The ESF is a presidential slush fund in all but name: a standing balance the Secretary can commit in days, to a foreign government or a domestic market, under a statute that says his decision is final. Its defenders point to the record. Mexico was repaid at a profit, the 2008 guarantee paid out nothing, and the Argentina draw was repaid within weeks. Its critics point to the pattern. Every fence Congress has put around the fund came after a use it had not authorized, and each fence covered only that use. The Argentina swap showed the logical endpoint: $20 billion committed to an ideological ally, with the President saying aloud that the money depended on how that country's voters behaved. The fund also links the dollar-policy ideas behind the [[Mar-a-Lago Accord]] to actual operations, because it is the Treasury's only ready pool of foreign currency. ## See also - [[Gold Reserve Act of 1934]] · [[Department of the Treasury]] · [[Scott Bessent]] · [[Steven Mnuchin]] · [[Henry Paulson]] - [[Central Bank Swap Lines]] · [[Mar-a-Lago Accord]] · [[Dollar Dominance]] - [[Javier Milei]] · [[2008 Financial Crisis]] · [[COVID-19 Pandemic]] · [[Emergency Economic Stabilization Act of 2008]] - [[Federal Reserve]] · [[International Monetary Fund]] · [[Global Economy Hub]]