ID: Reconstruction Finance Corporation (RFC)
When: January 22, 1932
Who:
- Initiated by: President Herbert Hoover
- Administration: Run by a board of directors appointed by the President.
What:
A government corporation established by Congress to provide financial support to state and local governments, banks, railroads, mortgage associations, and other businesses. It aimed to stimulate economic activity and relieve the effects of the Great Depression by lending money to struggling institutions. Its powers were expanded significantly under the New Deal.
Impact: Why Significant?:
- Initial Purpose: To combat the Great Depression by stabilizing key industries and preventing bankruptcies. Hoover hoped it would “trickle down” aid to smaller businesses and individuals.
- Limited Success Under Hoover: Criticized for being too cautious and not lending enough money quickly enough. It was also seen as favoring large corporations over individuals and small businesses.
- Expansion Under the New Deal: President Franklin D. Roosevelt expanded the RFC’s powers and scope as part of the New Deal, using it to finance a wider range of projects, including public works, agriculture, and housing.
- Increased Lending: The RFC became a significant source of capital for businesses and infrastructure projects during the 1930s, playing a role in stimulating economic recovery.
- Legacy: The RFC demonstrates the increasing role of the federal government in the economy during the Great Depression and New Deal eras. It provided a model for future government interventions in financial crises. It was eventually phased out in the 1950s.