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The Trump administration has made big public investments in private businesses, from a rare earth mineral company to U.S. steel. But it's not exactly a new idea. The U.S. used to have a national investment bank that did just that. Wailin Wong and Darian Woods of NPR's The Indicator have more.
WAILIN WONG, BYLINE: In January 1932, the U.S. was in the throes of the Great Depression. President Herbert Hoover and Congress created a new bank-like institution called the Reconstruction Finance Corporation, or the RFC, and it had a mission that, at the time, was relatively novel for the government. It would extend emergency credit to businesses in danger of going bankrupt.
DARIAN WOODS, BYLINE: President Hoover assembled a board of directors for this new entity, the RFC.
WONG: That same year, 1932, Hoover lost the presidential election to Franklin Roosevelt in a landslide. But the RFC survived the change in administration.
WOODS: Chris Hughes is the author of a book called "Marketcrafters: The 100-Year Struggle To Shape The American Economy." Chris says, the RFC had three phases of its life. The first one was the emergency phase, and it kicked in right as Roosevelt took office.
CHRIS HUGHES: So the weekend that Roosevelt is inaugurated, he declares a bank, quote-unquote, "holiday" all across the country and shuts down virtually all of the American banks. And so over the coming weeks and months, the RFC is working to recapitalize these banks.
WONG: This stabilizing role is reminiscent of what the Federal Reserve does, but the Reconstruction Finance Corporation went further than lending money to banks in trouble. It had the authority from the government to actually buy stakes in these banks. By September of 1934, the RFC was a partial owner of half of the banks in the U.S.
WOODS: But despite that massive investment into the banking system, the Depression got worse, and the RFC moved into its second phase of life.
HUGHES: As the Depression gets bleaker and bleaker, they then begin investing in all kinds of cutting-edge industries. And at that point, housing is actually the most important one for them to invest in.
WOODS: That's because the housing industry employed a lot of workers, and of course, it was building something that people needed. But Americans had to be able to afford these new homes, so the RFC took another step.
HUGHES: The RFC creates Fannie Mae, creates the 30-year mortgage to make it cheaper and easier for people to buy.
WONG: This was a major legacy of the Reconstruction Finance Corporation. It not only created the 30-year mortgage, it also created the market for trading government-backed mortgages, a financial market that still exists today.
WOODS: And the RFC's second phase of life involved investing in agriculture and railroads. Plus, it lent money to businesses that couldn't get credit from skittish private banks.
WONG: The Second World War really got the U.S. economy going, and this era is when the Reconstruction Finance Corporation enters its third phase of life. It financed American airplane manufacturing and training schools for pilots.
WOODS: Chris says the RFC was disassembled after the war, but parts of the RFC have endured, though. We mentioned Fannie Mae and the 30-year mortgage earlier. There's also the Commodity Credit Corporation, which is this agency that supports farmers by purchasing crops and making loans.
WONG: And Chris says there have also been attempts to do similar things as the RFC. President George W. Bush created a loan program under the Department of Energy in 2005. The idea was to finance clean energy projects, and it continued during the Obama and Biden administrations.
WOODS: Darian Woods.
WONG: Wailin Wong, NPR News. Transcript provided by NPR, Copyright NPR.
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