Reconstruction Finance Corporation

In 1931, amidst the high rates of bank failure, deflation, and unemployment that characterized the Great Depression in the United States, Federal Reserve board member Eugene Meyer proposed the establishment of a government agency empowered to make loans to banks and businesses in critical sectors of the US economy. Modeled after the War Finance Corporation, a government corporation that financially supported industries critical to the war effort during World War I, its purpose would be to stimulate economic growth in the United States and restore public confidence in banking and the economy. It would replace the National Credit Corporation, an agency created in 1931 to restore the liquidity of banks on the brink of failure with loans funded by the interbank lending market.

On January 22, 1932, the Reconstruction Finance Corporation Act was signed into law by President Herbert Hoover after being passed by Congress with broad bipartisan support. The Reconstruction Finance Corporation (RFC) began its operations on February 2, 1932. Like the Federal Reserve, the RFC would loan to banks, but it was designed to serve state-chartered banks and small banks in rural areas that were not part of the Federal Reserve System. Another distinction was that the RFC could make loans on the basis of collateral that the Federal Reserve and other lenders would not accept. The related Banking Act of 1932, signed on February 27, broadened the Federal Reserve's lending powers, and gave it the power to make national policy to mitigate the problems with the economy. Eugene Meyer, who had pushed for both pieces of legislation, after heading up an organization similar to the RFC during World War I, was a governor of the Federal Reserve, and chairman of the Board of the RFC. Essentially, the RFC was the "discount lending" arm of the Federal Reserve.

The initial funding for the RFC came from the sale of US$500 million worth of stocks and bonds to the United States Treasury. To obtain more capital, it sold US$1.5 billion in bonds to the Treasury, which then sold them to the general public. In its first couple of years, the RFC needed a loan of US$51.3 billion from the Treasury and US$3.1 billion from the public.

The RFC lent to solvent institutions that could not be sold to repay their existing liabilities but would be able to do so in the long run. A main reason for such loans was to ensure that depositors got their money back. The Reconstruction Finance Corporation spent US$1.5 billion in 1932, US$1.8 billion in 1933, and US$1.8 billion in 1934 before dropping to about US$350 million a year. In August 1939, on the eve of World War II, it greatly expanded to build munitions factories. In 1941, it disbursed US$1.8 billion. The total loaned or otherwise disbursed by the RFC from 1932 through 1941 was US$9.465 billion.

Chairmen of the Board of Directors

Administrators and Deputy Administrators

After the war, the Reconstruction Finance Corporation established five large storage, sales, and scrapping centers for Army Air Forces aircraft at the Albuquerque AAF, New Mexico; Altus AAF, Oklahoma; Kingman AAF, Arizona; Ontario Army Air Field, California; and Walnut Ridge AAF, Arkansas.

Estimates of the number of surplus airplanes ran as high as 150,000. By the summer of 1945, at least 30 sales-storage depots and 23 sales centers were in operation. In November 1945, it was estimated that a total of 117,210 aircraft would be transferred as surplus. Many thousands ended up sold or gifted by the US military to the air forces of friendly allies around the globe.

Between 1945 and June 1947, the RFC, the War Assets Corporation, and the War Assets Administration (the disposal function of the RFC was transferred to WAC on January 15, 1946, and to the WAA in March 1946) processed approximately 61,600 remaining World War II aircraft, Some 34,700 “utility“ type were sold for primarily commercial purposes, and 26,900 primarily combat types auctioned for scrapping.

Most of the transports and trainers could be used in the civil fleet, with trainers disposed of for US$875 to US$2,400. The fighters and bombers were of little peacetime value, with a smattering being sold for conversions to useful civilian purposes like aerial firefighting (a mere handful survived such second careers to be preserved as warbirds preservation and exhibits in aviation museums).