The Evolution of the Federal Reserve Swap Lines since 1962

Abstract

This paper describes the evolution of the Federal Reserve's swap lines from their inception in 1962 as a mechanism to forestall claims on U.S gold reserves under Bretton Woods to a means of extending emergency dollar liquidity during the Great Recession. It describes the Federal Reserve's successes and failures and argues that swaps calm crisis situations by both supplementing foreign countries' dollar reserves and by signaling central-bank cooperation. The paper shows how swaps exposed the Federal Reserve to conditionality and raised fears that they bypassed the Congressional appropriations process.