Center for Archival Collections

Here spread out are the courses and connections by which the New Deal is attempting the financial irrigation of the U.S...trace the flow from the great reservoir of the U. S. Treasury, and from the lesser ones of the PWA [Public Works Administration] and RFC [Reconstruction Finance Corporation]...

--Fortune Magazine (December 1934)

The Reconstruction Finance Corporation (seen as a sub-reservoir at right) began under the Hoover Administration in 1932 and was responsible for distributing aid to state and local governments and making loans to banks, railroads, farm mortgage associations, and other businesses. Continued by the New Deal, it played a major role in setting up relief programs. Almost all loans made by this agency were repaid.

At left are some of the many agencies established to deal with the financial segment of the economy. Banks all over the nation had collapsed and thousands of people had lost their life savings and were in danger of losing their homes and businesses. Thanks to this safety net, banks were placed on a secure footing and money began to flow again. Many of these agencies remain at work today.

The spending programs were not financed simply by taxpayer dollars. Windmills on the map indicate funds coming from private investors. Further, the various agencies sold securities they received as collateral to the RFC, which in turn sold them to the public as investments.

In addition to the crisis in banking and the stock market, there was also an ecological disaster in the form of the Dust Bowl, a severe drought in the central plains which bankrupted farmers and businessmen in the region and made huge numbers of people homeless.

The Public Works Administration allowed $3.3 billion to be spent on the construction of roads, dams, and similar projects to provide employment, stabilize purchasing power, improve public welfare, and contribute to a revival of American industry.

The Works Progress Administration, not created until 1935, was the largest New Deal agency, employing millions of people, and included not only construction but white collar jobs as well. For more information about the local effects of these programs, see our earlier issue of the Archival Chronicle.

A list of agencies is provided.

The next issue of Fortune magazine followed the revenue streams back to their sources. Click on the image above for a full view.

"Through the center of the valley flows the old creek of customs upon which the buildings largely depended. ...Creeks and wells however do not suffice the New Deal. Above at the left and right are certain rain-making operations which have filled the Treasury rain barrels with water soft enough to work the most calcareous banker into a rich and creamy lather."

--Fortune (January 1935)

New Deal programs were not without controversy. While the public treasuries were being tapped heavily, constitutional and other legal barriers protected some money streams. Depicted here as a reservoir of savings in tax-exempt bonds, the magazine reported wryly that "sinister boring operations are already underway," referring to the Roosevelt Administration's desire for a more sympathetic court system. Other blockages in the system included a lack of revenue from liquor taxes thanks to Prohibition, that was soon to start flowing again.

In the foreground of the large view (click above), "where the outgoing water is aerated through the spouting fountain of the RFC a lush spray of loan repayments is beginning to blow back over the dam," thus replenishing the supply of funds.

With the money supply flowing once again, it seemed that business and industry leaders were confused about whether and where to take the best advantage of it. The commentary noted, "The Industrial Horse in the lower left would be delighted to drink if the huddle of horse leaders could decide just where they propose to lead him."