Treasury Secretary Scott Bessent said it would be reasonable for the Federal Reserve to consider enlarging the Foreign and International Monetary Authorities (FIMA) facility, noting that the bond market has expanded since the facility was established in 2020.
In an interview on CNBC, two days after he confirmed a joint U.S.-Japan intervention to support the yen, Bessent described the FIMA facility and existing swap lines as tools designed to protect the U.S. economy. "The purpose is to protect the U.S. economy and to keep any volatility offshore, prevent it from happening before it reaches our U.S. shores," he said.
Bessent pointed to the change in the size of the bond market since the facility's creation as a rationale for considering an increase in capacity. "When the FIMA facility was created in 2020, the size of the bond market was much smaller then, so I think it would be reasonable for the Fed to consider up-sizing the facility," he said.
He also welcomed Japan’s decision to use the facility, calling it a "completely secure lending facility." Bessent compared the mechanics of FIMA to existing swap lines: the borrowing country posts collateral and receives funds for intervention purposes. "We have swap lines outstanding, so it’s really no different than a swap line - that the country posts collateral and we lend them the money to intervene, in this case," he said.
Describing the facility as robust and intended for instances like the present, Bessent framed the arrangement as part of a set of tools to reduce the transmission of foreign market disturbances to the U.S. economy. He reiterated that he was pleased the Japanese government planned to draw on FIMA to support the yen.
The comments follow his confirmation of a coordinated action with Japan to bolster the yen, and they underscore the U.S. view that liquidity facilities are available to partners seeking to manage currency volatility. Bessent’s remarks left open the possibility that the Federal Reserve could review the facility’s capacity in light of changes in global bond markets since 2020.
Summary
Treasury Secretary Scott Bessent said it would be reasonable for the Federal Reserve to consider enlarging the FIMA facility because the bond market has grown since 2020. He affirmed that FIMA and swap lines exist to protect the U.S. economy by keeping volatility offshore, welcomed Japan’s decision to draw on the facility, and described the lending arrangement as secure and similar in operation to swap lines.