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CO!. UMBlA UN!VtRSl"IY
L!ERP.R!ES
AUG 2 21946
F!ECEiVSD
Co;y of article contributed by Nr. Charles 8.
Henderson, Chainnan, Reconstruction Finance Cor;oration,
for use of The .Associated General Contractors of America,
Jnc., in
The .Association's History
of Defense and 1iar
Construction .Activities of The United States Government •
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·,t""'-1 CCN3Tn;JCTION n.CTIVITIES
FINANCE COfil'OR.~TION
~CONSTdUCTION
THE
OF
by
Charles B. Henderson
Chairman, Reconstruction Finance Corporation •
Under the National Defense Act of 1940, the Reconstruction
Finance Corporation was authorized to make loans to, or to purchase
the capital stock of, any corporation for plant construction, ·expansion
and equipment, and working capital, to be used by the Corporation in
the manufacture of equipment and supplies necessary to the national
defense. It was f'urther authorized to create or to organize a corporation or corporations with power, among other things, to purchase and
lease land and plants, to build and eXpand plants, and to purchase and
produce equipnent, supplies and machinery, for the manufacture of arma,
ammunition and implements of war; to lease such plants to private corporations to engage in such manufacture; and, where necessary, to engage
in such manufacture itself.
Three days after this enactment, or on June 28, 1940, RFC
created as subsidiaries the Rubber Reserve Company and the Metals Reserve
Company. Within two weeks the Corporation autliorized its first detenae
loan under the Act. Two additional wartime subsidiaries were establiahed
soon thereafter; the Defense Plant Corporation on August ..22, 1940, and,
one week later, the Defense Supplies Corporation.
RFC's program of constructing and equipping plants, and ot
installing tacilities in privately-owned plants for war production work,
was concentrated largely in the Defense Plant Corporation (see Table I).
or approximately $10 billion of RFC authorizations for this purpose,
commitments of nearly 89 billion were under direction or Defense Plant
Corporation. Construction of facilities needed in projects sponsored
by Metals Reserve Company and Defense Supplies Corporation was directed
almost in their entiret1 by Defense Plant Corporation, and the entire
construction program ot tacilities sponsored by the Rubber Reserve
Company was handled by .Defense Plant Corporation.
Froa August 22, 1940, through December 31, 1945, Defense
Plant authorized projects totaling t8,972,532,0CO for constructing and
equipping war tacilitiesJ Detense Supplies authorized $272,335,000 in
the torm or advances to petroleum refiners for the construction or
aviation gasoline refineries; Metals Reserve authorized $7,797,000 tor
inveat.ment in mining• facilities, in addition to which it authorized
mining development loans and advances totaling ~130,365,000, of which
all but $5 million was authorized to projects located outside the
continental United States. Over and above these amounts, the Reconstruction Finance Corporation itself authorized loans involving
$5.30,340,000 or construction, equii::ment and machinery, including loans
to contractors. This amount includes thousands of business loans to
muJ.l suppliers and subcontractors, as well as larger defense loans
for the purppse of financing companies engaged in the construction,
-2-
principally, ot gasoline, aluminum, and steel plants. RFC authorizations tor war taoilities ot nearly $10 billion represented about halt
ot all Federall;r-tinanced projects tor the expansion during the period
E5ot ind~strial manufacturing facilities, the total authorized by all
Federal departments and agencies having been estimated by the Civilian
:;
Production
Adlliniatration at over $18 billion.
f,)
..
·
RFC construoted or equipped over 2000 industrial plants tor
;;; use in war production. In addition, it constructed and equipped 62
w fifing schools and 150 other facilities essential to the war effort.
LL.
TM majority ot RFC-tinanced plants were leased to private industry
tor operation, although a number or important projects, such as the
$200 aillion Geney& steel plant, the Texas City tin smelter, and the
approximately $700 million synthetio rubber plants, were operated by
private organizations tor the account or the Reconstruction Finance
Corporation.
·
Wartime construction ot practically all of the Nation's
facilities needed tor the manuf'acture ot aluminum and magnesium, and
all or those required tor producing high-octane gasoline and synthetic
rubber was financed by RFC, acting under directions from other govern11e11tal agencies. Tbree-tourths ot the wartime expansion or steel,
pig iron, aircraft, and machine tool manufacturing taoilitiea resulted
trom projects direoted by RFC. or total Federal authorizations tar
the construction ot additional transportation facilities, two-thirds
were RFC-handled, these activities included the •Big Inch" and •Little
Big Inch" pipelines, which, at a time when the German subllarine :menace
•sat its worst, brought mid-continent oil production within reach ot
the industrial East. More than one-halt ot Federal autborizationa tor
the construction or facilities needed in the manut'acture or oheaicala
were RFC-authorized. Unique 1n the American industrial tield •• Rl'C'a
wartime project or tinancing construction ot the Tena Cit7 tin aaelter
tor treating South Aaerican ores and insoring a wartime euppq ot this
basic •tal in the United States which, before the war, had nner
produced aa aich as one per cent or its requirements ot tin.
As a collateral develoi:aent or its wart~ oonstruoti011
activities, RFC, early in the war, began placing orders tor mohine
tools in order to guarantee a ready' market later to manufacturers ot
•chine tools. As soon as these tools were sold by the matera to
industrial manufacturing cuatomers, RFC'a obligation under the orders
•a cancelled. By placing a backlog ot tirll Government orders in the
market, well ahead or time in order to •et contemplated later production require•nts, thousands ot •chine tools were available on
relatively short notice at a time when the7 were critically needed b7
industry to pertora under rapidly mounting war contracts. Under thi1
pl.an ot pre-sea8Clll bu11ng, RFC' issued total aachine tool order c01m1itments ot roundl7 $1,900,000,000J nnertheless, RFC's net investment in
tools, which it •s required to take up under these orders, amounted
to leas than $3 ld.llim.
Authorizations made by RFC and its subsidiaries embraced
virtually every type or industrial production facility and a wide variety
ot special war production purpo11e11 (see Table II). These included
plants and facilities to produce aircraf't, aircraf't engines and part11J
aluaimm, aviation gasoline, chemicals and machine toolsJ magnesium and
111.nerala; guns, tanks, shells, bombs, and other ordnanceJ ships and
parts, steel and pig iron, synthetic rubber, and industrial machinery-J
heap and other rope tibrtes, and medical supplies.
Close cooperation by industry with Governaent made it
po1111ible tor the Nation to increase vastl7 its production tor war,
and to accomplish this phase or the program in the early years or
conflict when all types or materiel wre critically needed. Plana
tor needed construction wre dratted and approved with mininum
tille loss; authorizations increased sharply in the months illmediately
following Pearl Harbor (see Table III). Government and the construction industry moved n1rtl7 to meet the Axis challenge.
All RFC-oned facilities were provided by RFC at the
direction or other Govermaent agencies. The War Department and the
War Production Board wre the largest sponsors. (See Table IV).
In approxillately 70 per cent or these cases the sponsoring agency
agreed to immediatel,- reimburse RFC tor a fixed percentage or the
ooat ot tacilitie11 ri.th the understanding that it would reillburse
the Corporation with the raainder of the coat at a later date,
provided appropriations were made available tor that purpose. These
wre known as •take out agreeant11".
On December 31, 1945, approxiutely $2 billion wa11 due
tram sponaora under these "take out agreements" •and negotiations are
oontinuing to determine the ultimate disposition or such agreements.
RFC 1 s investment in land, plants, mchiner,- and facilities
in the defense plant program aggregated $6,763,ooo,ooo on June .30,
1945. Thia figure was reduoed to approximatel7 $6 billion by June 30,
1946, aJJd is expected to be further reduced to approximately $4 billion
b7 June 30, 1947. Thia latter amount is exclusive or $673,000,000
which RFC has invested in the synthetic rubber program.
RFC 1 s wartime subsidiaries primaril,- involved in defense.
oonstruction or plants and racilities--including Defense Plant Corporation, Metals Reserve Company, and Defense Supplies Corporation--were
dissolved July 1, 1945, under the provisions ot Public Law 109, 79th
Congress, approved JlDle 30, 1945, aJJd their flDlctions were merged ri.th
the Reconstruction Finance Corporation. Rubber Reserve Colllp&D1' was
similarly dissolved, and conaolidated into RFC proper, and is continuing to fill its post-war tunotion as RFC 1 a Ottice or Rubber Reaerve.
Table I
Suaaar1 ot RFC Authorisation•
in Connection With Construction and Equipping
ot DerenN and War Facilities
June 25, 1940 - December 31, 1945
BY AGENCY AND USE OF FUNDS
(Thousands or Dollars)
AMQUJn' AUTHORIZED
•'
AGENCY
Total
'
' Construction '
'
(6)
Machinery and
Equipaent
(7)
'
Other
'
TOTAL• RFC and SUbaidiariea (1)
Reconstruction Finance Corporation
Deten• Plant Corporation (3)
DetenN Supplies Corporation (4)
lietals Reserve Corporation ( 5)
(2)
$9,783,004
$ 3,.371,llS
530,340
8,972,532
2,992,698
1,m
29,957
630
r/2,.3)5
347,830
$6,159,166
$252,723
72,589
109,921
142,802
5,837,032
242,378
7,167
---
(8)
(9)
(1)
The Defense Plan·c. Corporation, DetenN Supplies Corporation, and Metals Reaerve Corporation were
absorbed in the parent organization on Jul7 1, 1945, and are now known aa the otrice or Defense Plant,
Office of Defense Supplies, and Otrice of _Metals ReserYe.
(2)
Represents the amount loaned to business enterprises tor new facilities or additions to existing facili•
ties, and includes participating banlca share amounting to $26,999,000. Excluded are RFC loans to its
subsidiaries as well aa loans to buaineaa enterprises (other than building contractors) tor such
purposes as 110rking capital or payment ot debts which did not involve the creation or additional facilities.
(3)
Facilities acquired bf the Defense Plant Corporation were Government-owned and wre operated privately
under leaee or aanagement agreement. Data exclude $2,004,587,000 approved tor •chine tool, gauge and
cutting tool programs, as well as $1,125,000 approved tor surplus machiner,' warehou•••
Table I (continu.ed)
(4) Represents loans •de b7 Defense Supplies Corporation to petroleua o~tors tor the building ot
refining facilities tor an.ation gasoline production.
(5) Represents facilities owned b;y the Metals Reaene Corporation. Excluded are loans and advances tor
mining develoi-ent totaling $130,365,000, ot which onl.7 85,000,000 was authoris,d to locations within
the continental United States.
(6)
Includes buildings, building installations, rehabilitation and rearrangement.
(7)
Includes production equipunt, rail and automotive equipment and portable tools.
(8) Represents loans to contractors engaged
(9)
1n defense and war construction work.
Repreaents authorisations tor acquisition ot land.
Table II
S\11UDal'1 of RFC Authorisaticma
1D Connection With Construction and Equipping
or Detense and War Facilities
June 25, 1940 - December 31, 1945
BY TYPE OF FACILITY AND AGENCY
(Thousands or Dollars)
AGENCY
TYPE OF FACILITY
TOTAL
Manufacturing Facilities
Total
RFC and
Subsidiaries
$9,78.3,004
9,081,647
Reconstruction
Finance
Corporation
Defense
Plant
Corporation
Defense
Supplies
Corporation
$530,.340
3.34,609
$8,972,5.32
8,466,906
$272,3.35
272,3.35
Metals
Reserve
Corporation
$7,797
7,797
Aircraft, Aircraft Engines,
40,606
3,207,361
3,247,967
----60,066
1,291,299
1,351,365
----651,744
55,272
324,137
272,335
-213,828
220,212
--....
6,384
2,605
90,939
93,544
--•
5,272
178,453
Minerals
191,522
7,797
6,.361
495,211
501,572
--Ordnance
1,850
119,599
121,449
--Radio and Communication Equi;,ment
200,827
19,067
219,894
Shipbuilding
--•-•
1,147,629
1,259,978
112,349
Steel and Pig Iron
----1,055,671
1,055,671
Synthetic Rubber
----166,729
141,952
24,717
----Other Manufact,h-ing
•
505,626
701,357
195,731
Ion-Manufacturing Facilities
--47,406
7,040
54,446
Flying Schools
--60,265
42.3,059
483,324
Transportation
----62,961 (1)
29,496
92,457
Housing
----5,665
71,130
65,465 {2)
Miscellaneous
----(1) Represents loans to contractors engaged in the construction or defense and war housing.
{2) Represents loans to contractors engaged in defense and war construction other than housing ($46,960,000)
and unciassified projects (ilS,505,000).
and
parts
Aluminum and Magnesium
Aviation Gasoline
Chemicals
Ma.chine tools
---
Table III
RFC Authorizations
in Connection With Construction and Equipping
of Defense and War Facilities
June 25, 1940 - December 31, 1945
BY DAT~ OF AUTHORIZATION AND USE OF FUNDS
(Thousands of Dollars)
-
I
DATE
OF
lUTHORIZATION 1
AMOUNT AtrrHORIZED
I
' Total
Construction
, EquiJDent,
I
I RFC Loans to
Land
I Construction
(DPC Projects), Contractors
'
$9,783,004
$3,371,115
$6,159,166
$142,802
$109,921
l940:
3rd Quarter
4th Quarter
31,380
289,626
14,147
92,052
16,785
191,755
425
4, .344
2.3
1,475
1941:
1st
2nd
3rd
4th
Quarter
Quarter
Quarter
Quarter
185,501
282,057
679,226
636,1.38
45,458
116,628
213,575
170,373
136,904
155,043
453,/443
439,513
1,742
10,351
11,226
26,097
1,397
35
982
155
Quarter
2,599,098
1,616,729
552,426
378,579
727,149
454,778
242,979
255,056
1,836,971
1,136,708
289,649
107,346
27,752
11,792
7,370
4,984
7,226
13,451
12,428
ll,193
690,872
276,041
284,32.3
254,521
464,427
44,037
210,858
91,320
205,528
221,591
61,276
153,929
9,893
3,941
4,247
J,855
11,024
6,472
7,942
5,417
263,056
175,882
111,909
45,824
109,166
13,482
27,553
6,886
141,429
150,347
81,35.3
36,005
.3,320
2,433
1,648
673
9,141
9,620
1,355
2,260
285,987
115,284
26,582
1,96.3
52,213
9,973
8,357
~8
227,533
98,.317
16,457
1,284
4,530
1,751
397
1,711
TOTAL
1942:
1st
2nd
3rd
4th
1943:
lst
2nd
3rd
4th
1944:
1st
2nd
3rd
4th
1945:
1st
2nd
3rd
4th
Quarter
Quarter
Quarter
Quarter
:~uarter
Quarter
Quarter
Quarter
!~ter
Quarter
Quarter
Quarter
Quarter
Quarter
Quarter
Jl
5,243
1,371
--
Table IV
Defense Plant Corporation Authorizations
in Connection With Construction and F.quipping
of Defense and Wo.r Facilities
August 22, 1940 - December 31, 1945
BY SPONSORING AGENCY
(Thousands of Dollars)
SPONSORING AGENCY
AMOUNT AUTHORIZED
$8,972,532
TOTAL
War Department (1)
Navy Department
4,156,536
(1)
694,119
Maritime Commission
War Production Board
104,823
(1)
2, )96,612
Petroleum Administrator for War
525,713
Rubber Reserve Company
836,304
Otfioe ot Defense Transportation
155,099
Other Agencies
(2)
lOJ,.326
(l)
Includes joint sponsoring arrangement with other agencies.
(2)
Includes Department of Agriculture, Commodity Credit Corporation,
Mei.ala i<eservt:1 Corporation, Solid Fuels Administration, Civil
Aeronautics Authority, Office of Strategic Services, Office ot
War Information, War Shipping Administration, Foreign Economic
Administration, Treasury Department, War Relocation Authority,
and National Hou3ing Administration.
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