The Exchange Stabilization Fund: Slush Money or War Chest? (Policy Analyses in International Economics)

The Exchange Stabilization Fund (ESF) holds more than $40 billion that is at the disposal of the US secretary of the Treasury for use in foreign exchange intervention and international financial support operations. Its use in the Mexican rescue package of 1995 brought ESF into the spotlight for the first time in recent years, and it has been deployed in several Asian crisis countries as well. Its availability for such packages and its control by the Treasury secretary have therefore become very controversial. This study maintains that the Fund is an important element of US foreign policy and economic policy and that it should remain under the exclusive control of the Treasury, but that congress should excercise effective steady oversight. Henning also covers the legislative history of the ESF and outlines the principles by which the Fund should be administered.