jan 22, 1932 - Reconstruction Finance Corporation (RFC)

Description:

- After National Credit Corporation failed (true to republican ideals)
- Made loans to solvent but illiquid banks, savings banks, insurance companies, and railroads. → $500 million = help businesses and maintain work → ‘Trickle down’ theory: by shoring up the nation's financial backbone →
bank failures would stop
credit would open up
businesses would resume hiring → benefits would trickle down to ordinary workers.
- Highly significant: it shattered the traditional Republican boundary against government intervention → proved that the economic crisis was too vast for the private sector/ local charities to handle. BUT it WAS limited by the ideological framework (refusing direct federal relief to individuals, prioritizing corporate bailouts, and strictly demanding collateral/repayment)
- the RFC did not solve the Great Depression under Hoover because its lending was too cautious and restricted.

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