Foreign Exchange Market Intervention

Brief statement presented by Anna J. Schwartz, National Bureau of Economic Research, at the SOMC meeting on March 8-9, 1992.The Federal Reserve and the Treasury are reversing the policies of 1988-90 that increased authority of the Federal Reserve to warehouse holdings of foreign currency for the Treasury to $25 billion. Warehousing is a term that refers to loans, not appropriated by Congress, from the Federal Reserve to the Treasury General Fund as well as the Exchange Stabilization Fund. The Treasury has used these loans to acquire foreign currencies. Apparently a decision has been reached by the two agencies for the Treasury gradually to repay the loans, and for the Fed not to eliminate its authority to warehouse but to reduce it to $5 billion