Finance

Who benefited from the reconstruction finance corporation?

Who benefited from the reconstruction finance corporation?

The reconstruction finance corporation was the corporation that belongs to the government of United States that helps in provision of support financially to the local and state government and also in the provision of loan to railroads, banks and many other business.

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The main purpose of the RFC was to enhance the confidence of the country and also help banks in their daily resume functions. This happens after the great depression and RFC only existed between 1932 and 1957 in the United States. RFC was very noticeable under the NEW DEAL it operated for throughout the world war two before they were disbanded in 1957.

The idea of RFC was brought by Eugene Meyer of the Federal Reserve Board of Governors. The RFC was owned by the government of the United States and it was a self-regulating organisation. Even though this idea was suggested by Eugene, it was president hoover that recommended it and was passed by the congress in 1932.

Who benefited from the reconstruction finance corporation?

This organization played a significant role in the recapitalization of banks inn 1930’s and it was very active in reduction of the failure of banks and it also enhanced bank lending. The programme that was taken over by NEW DEAL in 1933 was relieved by RFC.

One of the function of the Federal Reserve System was to play the role of lender of last resort during financial panics to banks. Although the board of governors did not have absolute power and authority to pass a policy or act freely but most of the governors and some members of the congress was aspiring to make the Federal Reserve System to be very active immediately the great depression began.

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For example, one of the thing was to allow increase in the circulation of money in the public and liquidating the financial markets. Challengers to this suggestion was believed that there would be high inflation in the long and would eventually hurt the economy later. For them to be able to solve those problems, the congress mandated the RFC act of 1932 that is Reconstruction Finance Corporation of 1932 and this was followed by dual-party support. President Hoover signed the act into law on January 22, 1932 that just like the Federal Reserve System, the RFC would be give loan to banks.

The exception to the act was that the RFC would only provide loan to the state chartered banks and the small banks that were not part of the Federal Reserve System in the rural areas. Another benefit of Reconstruction Finance Corporation was that it could also give out loan with collateral that other banks or Federal reserve system would not want to accept. Another banking act that was much related was also passed into bill on February 27 and this enhanced the lending capacity of the Federal Reserve System and also the authority to alleviate the economy problems. The Reconstruction Finance Corporation was the Federal Reserve System arm of lending discount and was headed by Eugene who was the governor of the Federal Reserve System.

The Reconstruction Finance Corporation got its fund from the stock and bonds sold to the united states treasury and worth of $500 million and for it to get more funding, it sold to the treasury bond of $1.5 billion which led them been sold to the general public of the united states. 

How Reconstruction Finance Corporation got disbanded

The type of loan in particular demanded from the Reconstruction Finance Corporation was later not in demand after the world war two. The Reconstruction Finance Corporation was terminated by the legislation when president Dwight D. Eisenhower was in office. The agency act was abolished as a free body by the congress act of 1953 and the agency was transferred to the treasury department to squall up the affair of the agency and this got effective in June 1954 and was disbanded totally in 1957.

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The assets of Reconstruction Finance Corporation was taken over by the government while the general services administration handled the abaca programmes including the tin programmes. The programme (commodity credit corporation) which was created to help the framers was the only on in operation as that time. One operation left to continue then was the export-import bank which helps in the encouragement of exports.

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Harish Yadav

Finance and market analyst and chief writer on howtofinance. Passionate to read books and articles on marketing and accounting. Also edits other articles and publish them here.

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