On This Day In Finance: June 30 - The End Of The Reconstruction Finance Corporation

By Investopedia Staff | June 30, 2009 AAA
On This Day In Finance: June 30 - The End Of The Reconstruction Finance Corporation

On June 30, 1957, the Reconstruction Finance Corporation was officially shut down by the United States government. The RFC was originally created in 1932 to act as a public agency to provide emergency loans to troubled banks, and increase the financial stability of America's then troubled banking system.

Following the stock market crash of 1929 thousands of banks across the nation began to fail, leaving bank customers in a panic over the security of their deposits. With bank failures increasing year after year, and bank-runs becoming a common site, it was clear that something had to be done to stabilize the nation's banking system. The RFC's mandate was to offer emergency loans to troubled banks, and aid them during the difficult economic landscape that was the Great Depression.

Although the RFC was originally only approved to operate for 10 years from its inception, the agency lasted much longer. The RFC expanded its reach and authority to include lending to railroads, businesses, farmers, mortgagors and the creation of eight subsidiaries during World War II. However, following the war, RFC loans decreased dramatically and few felt a need for the government agency to continue operating in the post-war economy.

Today, many view the RFC as a dangerous precedent in government bailouts, and question the overall effect the corporation actually had on the U.S. economy during its lifespan. (To learn more about the events that led to the creation of the RFC, read What Caused The Great Depression?)

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