Bessent denied allegations that the Trump family’s economic ties to the UAE were behind the decision to offer the swap line.
U.S. Treasury Secretary Scott Bessent said several allies in the Gulf and Asia are requesting currency swap lines from the United States to help deal with energy shocks and other fallout from the U.S.-Israel war against Iran.
Bessent told U.S. senators on Wednesday that both the United States and the United Arab Emirates would benefit from a swap line proposal (an act in which central banks swap currencies to provide liquidity to stabilize markets during times of economic uncertainty) that U.S. President Donald Trump said he was considering on Tuesday.
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Mr. Bessent did not name the countries making such requests, but he said in a budget hearing before the U.S. Senate Appropriations Committee that such facilities would help stabilize financial markets during the turmoil of war.
“And the swap lines, whether it’s from the Fed or the Treasury, are meant to maintain order in the dollar funding market and prevent the sale of U.S. assets in a disorderly manner,” Bessent said. “Therefore, a swap line would benefit both the UAE and the United States, and as I said, many other countries, including some of our Asian allies, have also requested swap lines.”
Last October, the U.S. Treasury provided Argentina with a $20 billion currency swap to stabilize the Argentine peso during the election turmoil, which helped strengthen the position of President Javier Millei’s party.
The swap line, backed by the Treasury Department’s $219 billion Exchange Stabilization Fund, provided Argentina with a dollar safety net that the central bank could use to support the value of the peso and prevent it from weakening ahead of the vote. It has since been repaid.
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Democratic members of the committee pushed back against Bessent’s claims. Sen. Chris Van Hollen of Maryland argued that such measures would put pressure on American consumers.
“In addition to the lives lost, we’re talking about more than $1 billion of taxpayer money a day, we’re talking about high gas prices, high prices across the board. And now we understand that the UAE is asking us to provide a swap line through the Exchange Stability Fund,” Whalen said.
“This request is symbolic and likely one of many ways the UAE government is trying to demonstrate its commitment to the United States, at least in national security-sensitive areas such as AI development and defense,” Rachel Ziemba, a nonresident senior fellow at the Center for a New American Security, wrote in a post about the currency swap initiative on Substack’s Weaponized Economy.
“Furthermore, the UAE wants to be at the nexus of global financial hubs, making swap lines with the US seal of approval particularly attractive,” Ziemba wrote.
During the hearing, Van Hollen expressed concern that the Trump family’s close ties to the UAE may be driving the decision.
“President Trump and his family have had very active business dealings with the UAE in recent years,” Van Hollen said.
These include a $500 million investment by a UAE government official into the Trump family’s crypto venture, World Liberty Financial, and the use of $2 billion worth of the company’s stablecoin to invest in Binance, whose founder, Zhao Changpeng, was pardoned by President Trump in October while the U.S. government eased export restrictions on UAE companies, Whalen said.
Bessent denied any “connection” between these claims and the swap line.
Swap lines are typically approved by the Fed, but such proposals are unlikely to pass the board, according to media reports.
But the Treasury Department has previously issued currency swaps without Federal Reserve oversight, including a $20 billion deal with Argentina in October.
At the start of the COVID-19 pandemic, the Fed issued swap lines to Brazil, Mexico, South Korea and Singapore as economic uncertainty weighed on emerging markets.
