Treasury Secretary Scott Bessent tore into Senator Elizabeth Warren after the Massachusetts Democrat warned that American taxpayers could be left holding the bag if Japan failed to “repay” the Treasury following its intervention in the Japanese yen. Bessent responded that Treasury never loaned Japan any money and that no debt exists to be repaid. He offered Warren and her staff a tutorial on “Foreign Exchange for Dummies.”
The dispute began after Warren, the ranking Democrat on the Senate Banking Committee, sent Bessent an August 13th letter demanding answers about Treasury’s July 31st intervention in the currency market. The United States joined Japan in purchasing yen after the currency fell near a 40-year low. The operation, conducted through the Treasury Department’s Exchange Stabilization Fund, was the first coordinated American-Japanese effort to strengthen the yen since 1998.
“Given that American taxpayers would ultimately bear the cost if Japan were unable to repay the Department of the Treasury, it is critical for Congress to understand the Administration’s justification for the intervention,” Warren wrote. She also questioned the operation’s cost, effectiveness, legal basis, and potential risk to taxpayers. Warren noted that the yen initially gained value after the intervention before surrendering a significant portion of those gains.
Bessent seized on the senator’s repayment language in an August 27th response. As CNBC reported, he told Warren that her attack “unfortunately reveals that you know even less about foreign exchange markets than you do about banking.” He added, “Terrifyingly, the opening paragraph is wrong about where the money came [from], what the transaction was, and whether there was even a borrower.”
The Treasury secretary explained that the department exchanged foreign-currency assets already held by the Exchange Stabilization Fund for yen. “No new congressional appropriation was involved, and no credit was extended to Japan. Japan owes Treasury nothing,” Bessent wrote. “There is therefore no risk that Japan will fail to repay a debt that does not exist.” Warren’s letter later described Treasury’s transaction as the sale of euros for yen and noted that Federal Reserve data showed Japan did not draw on the FIMA Repo Facility for the intervention, but its opening paragraph still raised the prospect of Japan failing to “repay” the department.
Bessent carried the fight to X, where he described Warren’s demand as her latest “sciolistic letter” and said she knew “even less about foreign exchange markets than she does about banking.” He accused the media of lacking the “rudimentary-enough level of financial market literacy” needed to identify her error. “For a fuller explanation, I recommend any entry-level course in international finance for you and your staff, or I can give you a tutorial on Foreign Exchange for Dummies,” he wrote.
Warren also questioned Treasury’s authority to conduct the transaction, although the Senate Banking Committee’s release acknowledged that Treasury had used the Exchange Stabilization Fund. Bessent pointed her to Section 5302, which authorizes the Treasury secretary, with presidential approval, to deal in foreign exchange. “Your legal question is answered by the statute cited in your own footnote,” he wrote. “Treasury’s legal analysis begins with reading the statute. I recommend you try the same.”
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Bessent defended the intervention by arguing that disorder in Japan’s currency market could spread into global markets and raise borrowing costs for American households and businesses. Japan is a major holder of American debt, meaning a rapid liquidation of its Treasury holdings could affect U.S. interest rates. Bessent also defended Treasury’s previous support for Argentina, writing that the fund had been used to address “acute, short-term illiquidity” and prevent a broader crisis. “The best-managed crisis is the one that never happens,” he said.
Warren fired back on X by attacking Bessent’s record rather than conceding his point about the nonexistent loan. “Tough couple weeks for Sec. Bessent,” she wrote. “His effort to prop up a foreign currency hasn’t worked. His failed intervention in Treasury markets was blasted by his mentor as burning ‘two centuries’ of credibility. Trump’s economy is crushing families. Maybe he should focus on that.”
Bessent had already closed his response by returning to Warren’s error. “The American people deserve oversight grounded in facts rather than slogans,” he wrote. “Although I am not holding my breath, I hope your next letter will demonstrate that you have learned the difference between a currency purchase and a swap or a loan.”