Why was the RFC expanded?
During World War II the agency was enormously expanded in order to finance the construction and operation of war plants and to make loans to foreign governments. The RFC was intended to be an independent, nonpolitical agency, and during its early years it operated without much interference.
When was the RFC dismantled?
Beginning in 1948 various congressional investigations of the RFC revealed widespread corruption, and, on the recommendation of the Senate Committee on Banking and Currency, the agency was reorganized in 1952. The RFC was finally dismantled under the Dwight D. Eisenhower administration, which sought to limit government involvement in the economy.
What is the RFC?
Full Article. Reconstruction Finance Corporation (RFC), U.S. government agency established by Congress on January 22, 1932, to provide financial aid to railroads, financial institutions, and business corporations. With the passage of the Emergency Relief Act in July 1932, its scope was broadened to include aid to agriculture ...
How long did the reconstruction finance corporation last?
Un-derstanding Reconstruction Finance Corporation (RFC) Despite intentions to last only 10 years, the RFC stayed in business for decades before being dismantled in 1957. 2 During its time of operation, the RFC expanded its authority, ultimately making loans to smaller businesses, railroads and even farmers.
What happened to the RFC after the restructuring?
One year after the restructuring, Congress passed the RFC Liquidation Act under the Eisenhower administration, ending all the agency’s lending power.
Why was the RFC created?
3 . While Congress created the RFC to provide financial relief for a country in economic turmoil following the major stock market crash of 1929, the agency had many faults.
What is the RFC?
Definition of Reconstruction Finance Corporation (RFC) The Reconstruction Finance Corporation was a United States government agency tasked with assisting the failing banking sector in the years after the stock market crash of 1929. In 1932, Congress approved for the RFC to begin business with strict mandates that required ...
Why did the RFC expand during WWII?
The RFC expanded even further during WWII to provide financing for the construction and operation of war plants and loans to foreign governments. The original concept was that the RFC would be a non-political, autonomous agency, and during its earliest years, this concept held.
What did the RFC do after the New Deal?
After Roosevelt took office and the New Deal went into effect, the agency more vigorously sought to provide aid and support for recovery efforts following the initial blow of the Great Depression.
When did the RFC get reorganized?
The Senate Committee on Banking and Currency mandated an immediate reorganization, leading to a restructuring of the RFC in 1952. 5 6
How much money did the reconstruction finance corporation give?
The Reconstruction Finance Corporation distributed nearly $2 billion a year in loans in its first three years of existence, though the money was not enough to lift the country out of its economic woes.
Why was the Reconstruction Finance Corporation criticised?
The Reconstruction Finance Corporation endured criticism for bailing out some banks and railroads and not others —particularly larger institutions instead of smaller, community-based ones. For example, the Reconstruction Finance Corporation was hit for lending $65 million in the early years to Bank of America and $264 million to railroads controlled by some of the wealthiest families and corporations in the nation. The original plan for the agency was to help rescue small banks in rural parts of the United States that typically did not have access to Federal Reserve loans.
What was the Federal Reserve Bank of Cleveland modeled after?
The agency was modeled after the War Finance Corporation, the federal government's effort to "centralize, coordinate, and fund the procurement and supply operations that accompanied formal U.S. entry into World War I in April 1917 ," according to Federal Reserve Bank of Cleveland research officer Walker F. Todd.
When was the Reconstruction Finance Act passed?
Signed into law by Hoover on Jan. 22, 1932 , the Reconstruction Finance Act created the federal lending agency with $500 million in capital from the U.S. Treasury "to provide emergency financing facilities for financial institutions, to aid in financing agriculture, commerce, and industry."
What was the original plan for the agency?
The original plan for the agency was to help rescue small banks in rural parts of the United States that typically did not have access to Federal Reserve loans. According to Hoover: "It is not created for the aid of big industries or big banks. Such institutions are amply able to take care of themselves.
Herbert Hoover and the Great Depression
There is a reason why the Great Depression is considered 'great.' By 1932, one in four Americans was out of work. Farmers lost money if they took crops to market. Cities teemed with beggars and homeless families.
The Reconstruction Finance Corporation
Eventually, the dire situation, and the fact that 1932 was a presidential election year, convinced Hoover decided to take more drastic measures, though direct relief did not figure into his plans. The Reconstruction Finance Corporation (RFC), which Hoover approved in January 1932, was designed to promote confidence in business.
Who created the Reconstruction Finance Corporation Act?
President Herbert Hoover signed the Reconstruction Finance Corporation Act on January 22, 1932, creating the Reconstruction Finance Corporation (RFC) and providing for “emergency financing facilities [loans] for financial institutions, to aid in financing agriculture, commerce, and industry, and for other purposes” [1].
What was the role of the RFC in the New Deal?
Mostly forgotten today, the RFC was a vital part of the New Deal and of American history more broadly , assisting the nation “through periods of recovery, preparedness, war, reconversion, economic expansion, another war and, ...
How much money did the RFC give to banks?
Between 1932 and 1939, the RFC authorized $13.2 billion in loans to banks, agriculture, railroads, industry, public school authorities, state governments, federal agencies, and other entities [7].
What was the purpose of the Emergency Relief and Construction Act of 1932?
This law allowed the RFC to lend money directly to the states and territories to “create employment” and expedite “a public-works program” [3].
What Was The Reconstruction Finance Corporation (RFC)?
Understanding The Reconstruction Finance Corp.
- Congress created the RFC primarily to shore up the nation's banks, which were collapsing under the strain of panic withdrawals from their customers as the Great Depression took hold. It was intended to stay in business for only 10 years, but the RFC continued and even expanded throughout the 1930s and the 1940s.1 Soon after its creation, the RFC expanded its lending acti…
History of The Reconstruction Finance Corp.
- The Emergency Relief Act, created in the summer of 1932, broadened the agency's scope and power.2It allowed the RFC to extend loans to local and state public works as well as farmers and small businesses. In its initial years, under President Herbert Hoover, the RFC made little use of its expanded powers. After Franklin D. Roosevelt took office and the New Dealwent into effect, the …
End of The Reconstruction Finance Corp.
- Post-depression and post-war, the work of the RFC began to wind down. In 1948, Congress began a series of investigations of political corruption within the RFC. One accusation was that the RFC had granted a loan to a customer of Boeing Corp. in return for Boeing's support of President Harry S. Truman. The Senate Committee on Banking and Currency mandated an immediate reorganiza…
Economic Review of The Reconstruction Finance Corp.
- The Reconstruction Finance Corp. filled the role of lender of last resort that in later years has been held by the Federal Reserve. Although it had been created in 1913, the Federal Reserve did not have the ability to lend to state-chartered banks. Nor did banks then have federal insurance to guarantee their deposits. It was those state-chartered banks that served America's small busine…
Creation of The Reconstruction Finance Corporation
Criticism of The Reconstruction Finance Corporation
- The Reconstruction Finance Corporation endured criticism for bailing out some banks and railroads and not others—particularly larger institutions instead of smaller, community-based ones. For example, the Reconstruction Finance Corporation was hit for lending $65 million in the early years to Bank of America and $264 million to railroads controlled by some of the wealthies…
Impact of The Reconstruction Finance Corporation
- The creation of the Reconstruction Finance Corporation is credited with saving many banks and it also provided an alternative to the controversial plan of making the Federal Reserve the so-called lender of last resort to failing financial institutions during this crisis. (A lender of last resort is a term used to describe the central bank of a nation that works to rescue troubled institutions. Th…
Sources
- “Records of the Reconstruction Finance Corporation.” National Archives and Records Administration, National Archives and Records Administration, www.archives.gov/research/guide-fed-records/groups/2...
- Patch, B.W. “The R.F.C. Under Hoover and Roosevelt.” CQ Researcher by CQ Press, Congressional Quarterly Press, 17 July 1935, library.cqpress.com/cqresearcher/document.ph…
- “Records of the Reconstruction Finance Corporation.” National Archives and Records Administration, National Archives and Records Administration, www.archives.gov/research/guide-fed-records/groups/2...
- Patch, B.W. “The R.F.C. Under Hoover and Roosevelt.” CQ Researcher by CQ Press, Congressional Quarterly Press, 17 July 1935, library.cqpress.com/cqresearcher/document.php?id=cqresrre1935071700.
- "Saving Capitalism: The Reconstruction Finance Corporation and the New Deal, 1933-1940." Olson, James Stuart, Princeton University Press, Mar 14, 2017.
