Long live the RFC!

Most readers do not have access to the electronic archive of the New York Times (1851-present) or other major newspapers. If they did, they could read the rhetoric of 1930-1931 about the banking crisis of that time (the real banking crisis began a year after the Stock Market Crash). In late 1931, President Herbert Hoover called for a massive bailout through a newly-created “Reconstruction Finance Corporation,” albeit one that was to be “temporary” (the government agency lasted until 1953, when a new Republican government pulled the plug and replaced it with the Small Business Administration).

For a feeling of those times, check out the splendid online archive of presidential speeches, news conferences and radio addresses, “The American Presidency Project.” Search for “Reconstruction Finance Corporation” or other terms that interest you. Here is an excerpt from his annual message to Congress, 8 December 1931:


In order that the public may be absolutely assured and that the Government may be in position to meet any public necessity, I recommend that an emergency Reconstruction Corporation of the nature of the former War Finance Corporation should be established. It may not be necessary to use such an instrumentality very extensively. The very existence of such a bulwark will strengthen confidence. The Treasury should be authorized to subscribe a reasonable capital to it, and it should be given authority to issue its own debentures. It should be placed in liquidation at the end of two years. Its purpose is that by strengthening the weak spots to thus liberate the full strength of the Nation’s resources. It should be in position to facilitate exports by American agencies; make advances to agricultural credit agencies where necessary to protect and aid the agricultural industry; to make temporary advances upon proper securities to established industries, railways, and financial institutions which can not otherwise secure credit, and where such advances will protect the credit structure and stimulate employment. Its functions would not overlap those of the National Credit Corporation.

and the link to his signing of the RFC legislation.

As Robert Higgs has shown, the RFC and other government remedies only extended the depression as business became the plaything of both Hoover and Roosevelt.

Little wonder Herbert Stein combined Hoover and F.D. Roosevelt in the opening chapter of his Presidential Economics book.

Jonathan Bean is a Research Fellow at the Independent Institute and editor of the Independent book, Race & Liberty in America: The Essential Reader.
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