The Evolution of the Federal Reserve Swap Lines since 1962

In this paper, we describe 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. We describe a number of consequences associated with swap operations. We argue, for example, that swaps calm crisis situations by both supplementing foreign countries’ dollar reserves and by signaling central-bank cooperation. We show how swaps exposed the Federal Reserve to conditionality and raised fears that they bypassed the Congressional appropriations process.