Journal Article

Warehousing: A Historical Lesson in Central Bank Independence

Abstract: This Economic Commentary explains how warehousing?a seemingly innocuous institutional arrangement between the Federal Reserve and the US Treasury?came to threaten the Fed?s independence. Warehousing began as an arcane procedure designed to help the Treasury cover a specific type of foreign-exchange exposure. It then grew into a supplemental source of funding for the Treasury's foreign-exchange interventions. Eventually the procedure morphed into a sizeable off-budget source of funding for other Treasury activities and seemed an inappropriate subversion of the congressional appropriations process, a development that raised concerns within the Fed about its ability to conduct monetary policy free from political concerns.

Keywords: Treasury auctions; foreign exchange; Federal Reserve Independence;

Bibliographic Information

Provider: Federal Reserve Bank of Cleveland

Part of Series: Economic Commentary

Publication Date: 2017

Issue: August

Order Number: 12