Giving Foreign Central Banks all the Dollars They Want
Pic credit: David Dees
The European Central Bank and Swiss National Bank said Monday they would end a program designed to supply Swiss currency to banks, in a further sign that the region’s financial system is becoming more stable.
The E.C.B. and S.N.B., as well as the Polish and Hungarian central banks, will stop providing so-called swaps, which had allowed the banks to exchange euros for Swiss francs. The last swap operation will be on Jan. 25, the Swiss central bank said.
The central banks began providing the swaps in October 2008 following the collapse of the investment bank Lehman Brothers, when interbank transactions broke down amid an atmosphere of mistrust, and banks began having trouble acquiring francs from each other.
Meanwhile, there's still a dollar crisis out there somewhere but who wants to read about that?!
David Wessel via WSJ:
The Fed’s policy-setting Federal Open Market Committee initially set ceilings on the currency swaps with each foreign central bank. But last year it lifted those ceilings, and now says it’ll give foreign central banks as many dollars as they want.
The Fed itself doesn’t disclose precisely how many dollars it has swapped with other central banks. Fed watchers do estimate the amount from balance sheet information that the Fed does disclose, and from disclosures by other central banks — including the ECB.
It turns out that the U.S. Treasury’s public statements of the U.S. International Reserve Position has a line that reveals exactly how many dollars the Fed has swapped with the ECB and other central banks. New Treasury data out today (See Table 2, Line 2(a)) reveals that as of January 9, 2009, the Fed had outstanding swaps of $520.26 billion in dollars with other central banks.
Hmmm how about that? "Whatever it takes"... keep those dollars coming!