Bessent-Jab War With Warren Exposes Treasury’s Foreign-Exchange Stance

Treasury Secretary Scott Bessent publicly released a letter Friday defending last month's coordinated U.S.-Japan intervention to support the yen, warning that disorderly currency markets risked raising borrowing costs for American households and businesses.

The disclosure came in response to an August 13 letter from Senator Elizabeth Warren (D-Mass.), who queried the Trump administration's use of the Treasury's Exchange Stabilization Fund (ESF) to join Japan in buying yen in late July. The intervention marked the first joint yen-buying operation between the two countries since 1998 and occurred as the Japanese currency hovered near a 40-year low against the dollar.

Bessent's response, dated August 27 and posted on social media, opened with a personal jab. He told Warren her letter showed she knew "even less about foreign exchange markets" than she did about banking, according to the meaww.com report. Bessent also wrote that he could offer her a "Foreign Exchange for Dummies" tutorial.

In the letter, Bessent argued that the operation was necessary to prevent forced unwinds that could destabilize global markets. "Japan is a major holder of U.S. Treasuries. It is also a critical trading partner and a treaty ally. Disorderly yen markets can trigger forced unwinds," he said, as reported by japantoday.com. He added that excessive yen depreciation could "destabilize global markets and ultimately raise borrowing costs for American families and businesses."

Bessent stated that the Treasury Department swapped existing foreign-currency assets within the ESF for yen, without revealing the scale of the purchases. He told Warren he is legally authorized, with presidential approval, to conduct such transactions "in support of orderly exchange arrangements," according to japantoday.com.

The clash escalated when Warren fired back on social media. She said Bessent's effort to prop up the yen "hasn't worked," citing criticism from billionaire investor Stanley Druckenmiller, Bessent's former mentor and colleague from his years at George Soros's investment firm, according to meaww.com. Druckenmiller had recently criticized Bessent's broader market interventions, warning that efforts to suppress borrowing costs would not succeed and arguing for deficit reduction instead.

Warren's post said: "Tough couple weeks for Sec. Bessent. 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 previously dismissed Warren's specific concerns about whether U.S. taxpayers could be left responsible for Japanese debt. He wrote that Treasury exchanged existing foreign-currency assets for yen and did not extend credit to Japan. "Japan owes the Treasury nothing," he said, arguing there was no debt that could go unpaid.

Warren's original letter also raised the administration's earlier use of the ESF to support Argentina's peso under President Javier Milei. She questioned whether the Japan intervention represented another instance of the Treasury using the fund for major overseas market operations without disclosing the government's financial exposure. Bessent defended the fund's use, citing federal law authorizing the treasury secretary with presidential approval to deal in foreign exchange to support orderly exchange arrangements.

The dispute highlights a broader tension over the Treasury's foreign-exchange policy under Bessent. Warren demanded details on the legal basis, cost, and risks of the yen operation, as well as its effect on American interest rates given Japan's status as a major holder of U.S. Treasury securities.

Despite the joint intervention, the yen has weakened again. Japantoday.com reported that on Friday the yen briefly weakened beyond 160 to the dollar for the first time since the operation.