(This is the last installment of a three-part essay. The other parts are here and here.)
A Capital Bank
As its title suggests, the best-known history of the RFC, James Stuart Olson’s (1982) Saving Capitalism: The Reconstruction Finance Corporation and the New Deal, 1933 -1940, is nothing if not a sympathetic review of that agency’s undertakings. Yet according to it, most of those undertakings—or most of them until World War II began—were no more successful than the Reconstruction Finance Committee’s commercial lending venture. The RFC’s support of state relief agencies and public works “did little to stimulate…employment” (ibid., 20); its early agricultural lending projects were failures (ibid., 21; see also 144), as were its efforts to keep the financial system from crashing (ibid., 29) and to raise commodity prices by financing gold purchases (ibid., 110). The Corporation’s loans to railroads “had not improved the railroad bond market” (ibid., 23); its Mortgage Company, formed in 1935 with $10 billion in capital, was a “cumbersome failure” that “never lived up to its expectations,” as were its other attempts to “buttress the real estate mortgage markets” (ibid.; 156; 174; 176). The RFC’s Business Loans Division sputtered out (ibid., 163–4); and the experience of the Export-Import Bank, of which the RFC “was firmly in charge” starting in 1936, “was no different,” its commercial loans having been “hardly enough to affect recovery” (ibid., 153; 164 and 174). The most obvious exception to this otherwise poor record was the corporation’s preferred share purchase program. But as we’ve seen, although that program “set the stage” for recovery by helping to stabilize and repair the nation’s banks and trusts, it was supposed to get banks lending again, and with regard to that objective it, too, was a failure.
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