Milford chronicle., 1932-01-22
WHAT THE RECONSTRUCTION
FINANCE CORPORATION ACT IS

Financial relief for agriculture,
commerce and industry in the sum
total of two billions of dollars is the
purpose of the newly enacted Recon-
struction Finance Corporation Act,
which forms the hub of President
Hoover's twelye-spoke program for
the rehabilitation of the nation.
Reduced to simple terms, the act
is designed primarily to bolster the
fast faltering banking structure by
aiding both solvent and insolvent
banks ito prevent a collapse of the
rail transportation systems of the
country which find themselves un-
abl to carry on necessary refinancing
because of unfaYorable security mar
ket conditions, and to aid Interme-
diate Credit Banks, Agricultural
Credit Corporations, building and
loan associations and insurance COM
panies.
With the failure last year of 1920
banks with deposits of $1,759, 100000
it is apparent that swift and effec-
tive action must be taken if relief is
to be afforded in time to prevent
most serious and far reaching de-
velopment. The outstanding diff
Guilty. confrontin gthe country springs
from the loss of confidence and the
general state of fear that has been
created by these widespread bank
failures.
Meantime, banks that are members
of the Federal Reserve System find
themselves without such negotiable
paper as can be offered for re-dis-
count at the Federal Reserve Banks
and so are unable to find the neces-
sary assistance from this Federal
system. AS a consequence of these
developments deposits in large
amounts have been tied up in banks
now solvent; confidence has been
seriously shaken and there has been
a rebak-down of local credit facili-
ties with widespread decreases in
values and general decentralization
of business.
In this situation there must be an
improvement in the banking system
before there can be any expectation
of return to normal conditions in
the nations economic life. With this
end in view the Reconstruction FL
nance Corporation Act will provide
credit facilities that will afford re-
lief to many banks that are worthy
of credit and are unable at this time
to command necessary accOmmoda-
tions.
In addition to the relief which will
be given to these institutions, pro-
vision is made for loans upon the as
sets of any banks that are closed,
insolvent or in process of liquida-
tion to aid in the reorganization or
of such banks. 1t is the |
hope that this provision will afford
large measure of relief to cOmmuni- |
ties that have been deprived of nor
NAL banking accommodations and so
aid such communities in attaining
economic recovery.
The depression has hit the rail
roads hard, causing tremendous de-
creases in both their freight and
passenger traffic income. In addi-
ton, the condition of the financial
market affects their ability to re-
finance maturities that are coming |
due and which are in some instances
most pressing. The total amount of
which fall due this year
Is I110,782,506.
With retinancing of these obliga-
lions made impossible under present
market conditions the whole trans
system is threatened with
disaster if relief is not afforded. The
reconstruction Finance Corporation
IS authorized to make loans to such
carriers as are unable to obtain
unds upon reasonable terms through ,
banking channels or from the gem
,ral public.
With this vast aid to banking in ,
agricultural credit organ
cations and to the railroads, it is the
confident belief that the credit situa- {
ion will be eased all along the line
With adequate facilities provided for
he large refinancing agriculture, {
commerce and industry. And it is :
he purpose to get the new corpora
ion functioning without delay. An
initial capital of $500,000,000 will be (
urnished by the treasury so that i'm r
nediate pressing loans may be made.
II duulJiOl lue COIpOTdIlOu WOulu
ssue one billion, five hundred million
ollars of its own securities to be b
sed in making additional loans in 3
he next year or two.
The great necessity at this time is 3
he restoration of credit and conf 8
ence. 1t is the hope and the belief [.
like of public Officials and the z
eads Of the great agricultural, in :