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RECONSTRUCTION FINANCE 


CORPORATION


BY MRS. ZERVOS




Date Started:JANUARY 1932


Purpose:  PROVIDE FEDERAL MONEY TO CORPORATIONS SO THAT CORPORATION WOULD THEN CREATE MORE JOBS.  THE MONEY PROVIDED BY THE RECONSTRUCTION FINANCE CORPORATION WOULD THEN TRICKLE DOWN TO CONSUMERS



Hoover's most ambitious economic program was the Reconstruction Finance Corporation  It was approved by Congress in January of 1932.  It authorized up to $2 Billion for emergency financing for banks, life insurance companies, railroads and other large businesses. The original legislation establishing the RFC did not limit it to lending to financial institutions; it was also authorized to provide loans for railroad construction and crop lands. An amendment passed in July 1932 allowed the RFC to provide loans to state and municipal governments. The purpose of these loans was to finance projects like dams and bridges, and the money would be repaid by charging fees to use these structures.  Hoover believed that the money would trickle down to the average citizen through job growth and higher wages.  Many critics questioned this approach.  They believed that the program would only benefit corporations and that the poor still need direct relief.  Hungry people could not wait for the benefits to trickle down to their tables.

In the first five months  of operation, the RFC loaned more than $805 million large corporations, but business failures continued.  The RFC was an unprecedented example of federal involvement in a peacetime economy, but in the end it was too little, too late.

Success or Failure


Roosevelt saw this corporation as an advantage to the government. The RFC could finance projects without Congress approving them and the loans would not be included in budget expenditures. The RFC did little during the Hoover administration but was more vigorously utilized during the New Deal years and contributed greatly to the recovery effort. 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.

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