The Indicator from Planet Money

Episode•November 13, 2025•9 min

Where the US got $20B to bail out Argentina

The U.S. is committed to bailing out Argentina to the tune of $20 billion using a little known mechanism called the Exchange Stabilization Fund. On today’s show, what is this fund, why was it created and does Argentina have any hope of paying it back? Related episodes: Dollarizing Argentina (https://www.npr.org/2023/12/20/1197956140/javier-milei-argentina-dollarize-economy-inflation) For sponsor-free episodes of The Indicator from Planet Money, subscribe to Planet Money+ via Apple Podcasts or at plus.npr.org (http://plus.npr.org/). Fact-checking by Sierra Juarez (https://www.npr.org/people/1268825622/sierra-juarez). Music by Drop Electric (https://dropelectric.bandcamp.com/). Find us: TikTok (https://www.tiktok.com/@planetmoney), Instagram (https://www.instagram.com/planetmoney/), Facebook (https://www.facebook.com/planetmoney), Newsletter (https://www.npr.org/newsletter/money). To manage podcast ad preferences, review the links below: See pcm.adswizz.com (https://pcm.adswizz.com) for information about our collection and use of personal data for sponsorship and to manage your podcast sponsorship preferences. Learn more about sponsor message choices: podcastchoices.com/adchoices (https://podcastchoices.com/adchoices) NPR Privacy Policy (https://www.npr.org/about-npr/179878450/privacy-policy)

Apple Podcasts Overcast

Transcript

0:01

Npr.

0:11

This is the indicator from Planet Money. I'm Stephen Bassaha.

0:14

And I'm Waylon Wong. Last month, a reporter on Air Force One asked President Donald Trump about his administration's recent deal with Argentina. The country's currency, the peso, is volatile and had plummeted in September. And the and the US government had agreed to extend Argentina $20 billion in what's called a swap line, which is essentially a loan.

0:34

Argentina, they're fighting for their life. You understand what that means? They have no money. They have no anything. They're fighting so hard to survive.

0:42

Democratic lawmakers blasted a decision to prop up the Argentine peso during a US Government shutdown. They said the administration was being reckless with American taxpayer money, money it might not even get back.

0:56

So where did the US get the money from and will it get. Welcome back. Today on the show, a peek at the 90 year old emergency fund that the administration used for the Argentine lifeline. We look at how the government has tapped this money before and why it's doing it this time.

1:16

This message comes from Instacart. Let's talk groceries, specifically your groceries. With Instacart, you want your groceries just the way you like them, right? Well, the Instacart app lets you do just that. They have a new preference picker that lets you pick how ripe or unripe you want your bananas. Shoppers can see your preferences upfront, helping guide their choices. Instacart get groceries just how you like.

1:40

The government piggy bank we're talking about today is called the Exchange Stabilization Fund. It's been around since 1934. That's when President Franklin D. Roosevelt signed a law that, among other things, set aside $2 billion for this special fund.

1:55

The fund will be controlled by the Treasury Department and the government can use the money to buy or sell gold or foreign currencies. The idea was to control the value of the US Dollar.

2:04

Monica Debol is a senior fellow at the Peterson Institute for International Economics. It's a research group focused on international trade and macroeconomics. Monica says it's hard to picture today, but back then, the value of the US dollar was volatile. Remember, 1934 was the midst of the Great Depression.

2:23

When your currency is fluctuating a lot, that can become a huge problem for companies that are dependent on, you know, flows of exports or imports. Because, of course, all of that is determined by the exchange rate. That can have a very big effect on consumers. It can even have a very big effect on the government.

2:43

The U.S. economy did in fact, face those dangers in the 1930s. So the treasury tried to contain this volatility and did this by selling and buying currencies.

2:52

Here's how this market intervention works. Let's say the US Dollar was falling in value against the Swiss franc. The treasury could sell Swiss francs and buy US Dollars in foreign exchange markets. That would make the Swiss currency weaker and the dollar stronger.

3:07

The need for this kind of market intervention went away as the US Economy became dominant. The dollar is now the world's reserve currency. It's used around the globe for trade and commerce. Its value has historically been very stable. Monica says the Exchange Stabilization Fund kind of outgrew its name.

3:23

There is really no need to stabilize the dollar, as it were. So the ESF isn't really being used to do that anymore.

3:31

In fact, the language around stabilizing the dollar was removed from the fund's mandate in the 1970s. And the Treasury Department found other ways to use this fund. One purpose is related to the International Monetary Fund. That's a group that lends money to countries in trouble. The IMF actually has its own kind of pseudo currency, something called Special Drawing Rights. And the US Uses the Exchange Stabilization Fund to hold this IMF currency.

3:57

I'm picturing like a big cookie jar that has US Dollars and euros and Japanese yen inside. And then there's also this special IMF monopoly money.

4:06

Yeah. Do you think the cookie jar is in the shape of a giant bald eagle? Or is it Uncle Sam's head? Or is it.

4:13

Can you do a like, dollar shaped cookie jar?

4:16

Okay, I see it. I see it. To the pottery. Wh. Anyway, the fund does earn some income from interest and selling investments. Those profits go right back into the jar. As of September, the fund had a NET balance of $43.5 billion. The $20 billion for Argentina represents a hefty chunk of this amount.

4:37

The treasury has dipped into this cookie jar for emergencies. For example, it guaranteed deposits in certain kinds of investment funds during the subprime mortgage crisis in 2008. It also backstopped certain loans to banks in the early part of the pandemic.

4:52

And the government also uses this money to tackle economic emergencies in other countries. One of the most famous uses of the Exchange Stabilization fund came in 1995. Mexico had borrowed a lot of money in dollars that it could not pay back. And the Mexican peso was in free fall. President Bill Clinton announced that the US Would come to Mexico's aid.

5:14

I have worked with other countries to prepare a new package as proposed. Now it will consist of a $20 billion share from the United States Exchange Stabilization Fund, which we can authorize by executive action without a new act of Congress.

5:33

Monica says the Clinton administration had strong economic and political rationales to extend Mexico.

5:39

That $20 billion Mexico was certainly systemic in the sense that a crisis in Mexico would have had implications for the United States. But we should also remember that at the time, NAFTA had just come into being. And so, you know, there was great political interest on all sides not to see NAFTA sink because of a crisis in Mexico. And therefore, that was the other reason why the ESF was deployed in this way.

6:06

And at first glance, the Mexico and Argentina situations look similar. Country with debt problems and a weak currency, Check. Political ally, check. Even the nominal amount of money, $20 billion, is the same.

6:20

But Monica says the Argentina package is unprecedented in a few different ways. For starters, the US Is going it alone on this aid package. That's different from the Mexico bailout, which was done in concert with other countries. It's also different from previous cases where the US had coordinated with the IMF on aid.

6:38

Monica says another way the Argentina example is unique is that there's no risk of other countries getting dragged down, even its neighbors. Argentina is a notorious economic basket case.

6:49

Whoa, Hayland. Forget the cookie jar. I feel like that's almost like swear jar territory.

6:54

It is justified, though. Argentina has defaulted on its government debt nine times during its history. And it's this crummy track record that's largely isolated the country so that its problems tend to stay within its borders.

7:08

A problem in Argentina does not spill over into the US So there's that additional element of, let's say, something that's being done that is not exactly like what has been done in the past. It's an unprecedented use of the esf.

7:23

It may be unprecedented, but there are many reasons for the administration to support Argentina. President Trump considers his Argentine counterpart, Javier Milei, to be a friend. The country has natural gas, lithium, and other resources that interest the U.S. and there's a desire to curb China's influence in Latin America.

7:41

And there's this. The New York Times and other media outlets have reported that former colleagues of Treasury Secretary Scott Besant stand to gain from an Argentine bailout. Some of his associates from his Wall street days are heavily invested in Argentina.

7:55

We did contact the White House and the Treasury Department for comment. We did not hear back. But CNBC talked to Scott Besant last month. He said this trope that we're helping out wealthy Americans with interest down there

8:07

couldn't be more false, no matter the rationale. Economist Monica Deboll has concerns about the bailout structure. The US hasn't publicly released any conditions for the $20 billion it's essentially loaning Argentina. She worries this lifeline has drawn the US Into a political and financial quagmire.

8:25

Argentina has done a lot on the reform front, but there are still gaps. So so the possibility that Argentina has another crisis in a few months exists. And then the question becomes, well, now that the US has put money into Argentina so that it doesn't lose money in Argentina, will it have to help Argentina again if it falls into a problem? The answer to that is probably yes.

8:49

The Trump administration, however, seems undeterred. Scott Besant has said he's pulling together another $20 billion package for Argentina, but this time from private banks and sovereign wealth funds. Monica says that would be another unusual move. By the way, if you want to hear more about how the Exchange Stabilization Fund was used in Mexico back in the 90s, you can listen to an episode from Our Planet Money Colleagues. It will be publishing tomorrow.

9:19

This episode was produced by Julia Ricci with engineering by Robert Rodriguez. It was fact checked by Sierra Juarez. Cait Concannon is our editor, and the indicator is a production of npr.

9:29

Sam.

Where the US got $20B to bail out Argentina

0:00

0:00

Related Episodes

Why Paramount went looney tunes for Warner Bros.

Why Paramount went looney tunes for Warner Bros.

Mar 3, 20269 min

Paramount SkydanceWarner Bros. DiscoveryDavid Ellison

Are we in an economic 'doom loop'?

Are we in an economic 'doom loop'?

Feb 9, 20269 min

Eswar PrasadDoom LoopGlobalization

America's next top Fed Chair

America's next top Fed Chair

Feb 2, 20269 min

Kevin WarshFederal ReserveJerome Powell

Why isn’t corporate America standing up to Trump?

Why isn’t corporate America standing up to Trump?

Jan 28, 20268 min

Donald TrumpJamie DimonJPMorgan Chase