Franklin Delano Roosevelt (FDR) and Congress created the Reconstruction Finance Corporation (RFC) Act of 1932 to fund the New Deal Programs of the 1930s. 

At that time, U.S. Banks were bankrupt and were not capable of financing our recovery after the Crash of 1929. The Roosevelt administration used President Hoover’s Reconstruction Finance Corporation already set up to kick start the nation’s financial needs.

The RNC Act of 1932 provided money and the authority to extend credit to finance the resources that we needed to get our economy going again. With these “resources,” the Federal government loaned or invested more than $40 billion.

This investment financed roads, bridges, dams, post offices, universities, electrical power, mortgages, and farms. The beauty of this 1930s program was the funding source was the sale of bonds. The proceeds from the loans repaid the bonds leaving the Reconstruction Finance Corporation (RFC) with a net profit.

However, the public program was too powerful for the private banking establishment. So, in 1957, during President Eisenhower’s administration, the Reconstruction Finance Corporation was disbanded.

As a result, the U.S. was left without a public development bank. A public bank is an institution owned by a government body, funded with tax dollars, and mandated to serve the public interest. 

Today, Germany is the leader in renewable energy infrastructure with its public development bank, the Reconstruction Credit Institute, and is called “the world’s first major renewable energy economy.” This bank funds their energy revolution by investing in renewable energy infrastructure.

Again, the beauty of this public funding by the German bank does NOT have to focus on short term profits, stock buy backs for its shareholders.

The irony of this German bank is that its funding came from the U.S. through the Marshall Plan in 1948. Many European, Asian and Latin American countries have their own national development banks, as well as belonging to development institutions that are jointly owned by their governments.

Why haven’t we funded our own development bank, you ask? We have crumbling infrastructure, and our response is “We cannot afford it!” 

Wall Street interests do not want the competition from a government-owned bank that could make below market loans for infrastructure and development. We apparently prefer the funding of infrastructure and development through a private-public partnership where the Wall Street boys reap the profits while any losses that may occur are handed off to the local governments. 

Democrats are charging ahead and adopting measures that will transform development banking and will address infrastructure needs of the low-income and working class. Currently, two State public Infrastructure Banks (SIB) exist, in Florida and Missouri. Thirty-one states and Puerto Rico receive funding from National Highway system funding programs. 

Kentucky is NOT in either program. 

Our neighbors like Ohio ($87 billion), Indiana ($3.5 billion), and Missouri ($48 billion) have a safety net for road infrastructure development.

The trick will be to use these state banks as a depository for state and municipal revenues. Rather than lending their capital directly, the bank leverages those deposits 10X in loan programs. 

This will be challenging now that we have a TV watching, Twitter obsessed, climate change denier president and a “nitwit” governor practicing “willful ignorance.”

Democrats in Kentucky and Calloway County need to be pushing for infrastructure development public banks and change the laws. Locally, we desperately need to bring our roads, bridges, dams, libraries, post offices, universities, electrical power, mortgages and farms to 21st century standards. This is a great opportunity to start-up our own Kentucky Infrastructure Bank! 

The Bank of North Dakota is an excellent model. It was started to give farmers credit and serve as the state’s depository for state funds. Today it serves as the State Infrastructure Bank.

We need a bank that can take public deposits, revenues, and resources and leverage them for local projects instead of sending them to Wall Street. A public bank cuts out the middle man!

This movement can be our New Deal, the Great Society, the Landing on the Moon and the Civil Rights movement for a new generation.

We need a development bank program that transforms our economy and infrastructure development into a 21st century model.

Next week, I will discuss this issue more in Part 2.