The RFC 75% Program

Abstract

The Reconstruction Finance Corporation, hereafter called RFC, was set up by Congress in January, I932, to help stem the tide of the depression, and began operations on February 2, 1932. Originally, it was given a capital of $500,000,000 and authority to borrow $1,500,000,000 more. The scope of RFC's functions has been expanded and modified from time to time by amendatory and supplemental legislation and its borrowing authority increased accordingly. Recently RFC adopted the Blanket Participation Agreement (BPA) program. This is the most attractive participation offer that has been made by that Government institution and is undoubtedly the most progressive move ever made by that organization. Up to July 3I, 1945, about I,364 banks have requested permission to qualify under the program. The BPA program in effect provides for a practically automatic guaranty of 75% (or such lesser percentage as may be requested by the bank) of loans made by approved banks to business enterprises which meet the requirements of the agreement. Such loans would be made by banks upon terms and conditions satisfactory to them without the necessity of filing loan applications with the RFC. RFC took this action in order to adequately and promptly care for the large volume of applications for loans which it is anticipated may develop during and subsequent to the period of conversion from a war-time to a peace-time economy. Industry by this action should be assured of the availability of sufficient credit to carry on in war production and to convert effectively to peace-time production. The Directors of RFC hope that it will also encourage private banking to assist in creating and developing new commercial and industrial enterprises in the postwar period. In this way, business both small and large is benefited and full employment is encouraged. It is and always has been the policy of the Corporation to carry on its business in a manner which fosters private enterprise and avoids competition with banks. It is in furtherance of this established policy that the plan herein described has been made available to banks and industry. In order to qualify for protection under this new arrangement, a bank will