National Credit Corporation

The National Credit Corporation was an organization created in 1931 in the United States by President Herbert Hoover's administration to try to stop bank failure stemming from the Great Depression,[1] and was a forerunner of the Reconstruction Finance Corporation.

History

The "$500,000,000 bankers' pool was set up to help "save hundreds of small banks throughout the county."[2] The Corporation attempted to convince large surviving banks to loan money to failing banks as a solution to bank runs.[3] The president of the Corporation was Mortimer N. Buckner, the chairman of the New York Trust Company and president of the New York Clearing House.[4]

Loans were supposed to be ready in October 1931,[5] which lead to an increase in the "tone of confidence."[6]

In November 1931, the New York State Banking Department approved a merger between the Bank of America Safe Deposit Company into the National City Safe Deposit Company under the latter's name with an authorization certificate from the Corporation for $2,000,000 capital.[7]

By December 1931, President Buckner stated that the Corporation was "functioning in every one of the twelve Federal Reserve Districts" and had granted all loans asked by banks.[8] All "needed funds had been supplied by loans to the corporation on the part of the large New York City banks without the necessity of issuing a call for payment by member banks of part of their subscriptions to the corporation's gold notes."[8]

On January 14, 1932, however, Buckner "issued a call for payment of a second installment of 10 per cent of subscriptions to the gold notes of the corporation." The $50,000,000 call, brought the total payments made to about $100,000,000, or one-fifth of the corporation's subscribed funds.[9] Later that same month, the Corporation issued another call for payment of the third installment of 10 per cent, or approximately $50,000,000, on subscriptions to its gold notes payable at the Federal Reserve Bank in each district.[10] At the same time as the third call, it was noted that after "the Reconstruction Finance Corporation begins functioning, it is understood it will take over the activities of the National Credit Corporation. When the latter was formed, it was the consensus that it would be dissolved as soon as possible after legislation had been enacted to permit the Federal Government to render such services."[10]

By the end of March 1932, the Corporation had paid off $20,250,000, or roughly 15 percent of notes.[11] By mid-April 1932, the Corporation announced a third repayment of part of the funds subscribed to it by banks throughout the country, leaving $79,775,000 of its notes outstanding.[12]

Analysis

Many large banks did not believe that investing in failing banks would be secure, so most of them did not support the failing banks. Banks that did provide loans would require that the failing banks put up their most valuable assets as collateral, which would partially reimburse the losses of the loaning bank in case the borrowing bank could not repay the loan.

See also

References
  1. "Reconstruction Finance Corporation". EH.net Encyclopedia. Archived from the original on October 29, 2013.
  2. "Mortimer N. Buckner". The New York Times. 27 February 1942. Retrieved 25 August 2020.
  3. Times, Special to The New York (16 October 1931). "FIRST BENEFIT SEEN FROM BANKING POOL; Under-Secretary Mills Says Credit Corporation Already Serves to Restore Confidence. CIRCULATION GIVES A SIGN Gain Up to Oct. 14 Less Sharp Than In Preceding Week After Month's Record Climb. Decline in Gold Stocks. No Alarm on Gold Outflow. Money Market Tightens". The New York Times. Retrieved 25 August 2020.
  4. "BUCKNER PRAISES NEW DISCOUNT PLAN; National Credit Corporation Has Granted All Loans Asked by Banks, He Says. WIRE TRANSFERS ARE MADE Funds Are Remitted on the Day of Application in the Twelve Reserve Districts. Statement Issued by Buckner. Machinery Works Smoothly". The New York Times. 5 December 1931. Retrieved 25 August 2020.
  5. Photo, Times Wide World (18 October 1931). "Bank Pool Is Ready to Start This Week; the Members of the National Credit Corporation at First Meeting". The New York Times. Retrieved 25 August 2020.
  6. "TONE OF CONFIDENCE NOTED IN BUSINESS; Week Marked by Organization of the Banking Pool and Rise in Money Rates. RAIL CREDIT AID AWAITED Move in New York State to Ease Restrictions on Bonds Heartens Carriers. SOME GAIN IN STEEL TRADE plane Mapped for Stimulation of Oil Industry-Reports From Federal Reserve Areas. Credit Corporation Organized. Aid for Rail Credit Planned. PHILADELPHIA AREA QUIET. Warm Weather Delays Demand for Heavier Clothing. TONE OF CONFIDENCE NOTED IN BUSINESS NEW ENGLAND UNCHANGED. Worsted Industry Continues the Outstanding Bright Spot. CLEVELAND IS UNSETTLED. Department Stores in Akron Oain, Others Lose. INCREASE IN LOANS SHOWN. Better Conditions Prevail Generally In the St. Louis District. DALLAS GAINS IN ALL LINES. Cool Weather and Cotton Action Help--Building Active. SOUTHEAST IMPROVING. Both Wholesale and Retail Sales in Seasonal Advance. MINNEAPOLIS TRADE SPOTTY. Department Store Sales Good, but Other Lines Are Poor. ATLANTA BUSINESS IS "FAIR." Department Stores Gain and Building Trades Continue Up. CHICAGO RETAIL SALES R". The New York Times. 18 October 1931. Retrieved 25 August 2020.
  7. Times, Special to The New York (14 November 1931). "BANKING CHANGES ALLOWED; State Issues Certificate to National Credit Corporation". The New York Times. Retrieved 25 August 2020.
  8. "BUCKNER PRAISES NEW DISCOUNT PLAN; National Credit Corporation Has Granted All Loans Asked by Banks, He Says. WIRE TRANSFERS ARE MADE Funds Are Remitted on the Day of Application in the Twelve Reserve Districts. Statement Issued by Buckner. Machinery Works Smoothly". The New York Times. 5 December 1931. Retrieved 25 August 2020.
  9. "BANK AID COMPANY CALLS $50,000,000; National Credit Corporation Asks Its Subscribers for Second 10 Per Cent Instalment". The New York Times. 14 January 1932. Retrieved 25 August 2020.
  10. "CREDIT BOARD CALLS THIRD $50,000,000; Subscriptions Due on Monday Will Make $150,000,000, or 30% of Bank-Aid Fund. RESULTS ARE INDICATED Corporation, to Be Absorbed Later by Reconstruction Finance Body, Increases Activities". The New York Times. 23 January 1932. Retrieved 25 August 2020.
  11. "National Credit Corporation Pays $20,250,000 of Notes". The New York Times. 29 March 1932. Retrieved 25 August 2020.
  12. "National Credit Corporation To Cut Notes to $79,775,000". The New York Times. 13 April 1932. Retrieved 25 August 2020.
This article is issued from Wikipedia. The text is licensed under Creative Commons - Attribution - Sharealike. Additional terms may apply for the media files.