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The Rise of the Public AuthorityStatebuilding and Economic Development in Twentieth-Century America$

Gail Radford

Print publication date: 2013

Print ISBN-13: 9780226037691

Published to Chicago Scholarship Online: September 2013

DOI: 10.7208/chicago/9780226037868.001.0001

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The Truncated Career of Autonomous Federal Agencies

The Truncated Career of Autonomous Federal Agencies

(p.89) FOUR The Truncated Career of Autonomous Federal Agencies
The Rise of the Public Authority

Gail Radford

University of Chicago Press

Abstract and Keywords

This chapter traces the history of federal corporate agencies. Modeled after the Emergency Fleet Corporation and the Federal Land Banks, government-owned corporations became a familiar part of the federal government's administrative repertoire during the First World War, and these mechanisms were again called into service during the Great Depression by both the Hoover and Roosevelt administrations. While President Hoover initiated this practice when he asked Congress to establish the Reconstruction Finance Corporation and the Federal Home Loan Banks, it was Franklin Roosevelt and his officials who extensively used these devices as they struggled to expand government capacity under emergency conditions.

Keywords:   federal corporate agencies, government corporations, public authorities, Franklin Roosevelt, President Hoover

At the same time as quasi-public agencies were gaining traction at the local level, parallel structures, inspired by the organizational innovations represented by the Emergency Fleet Corporation and the Federal Land Banks, were being created at the national level. Chartered by Congress or incorporated under the laws of a state, these new federal agencies became known as government corporations, and they were extolled as the optimal means to carry out economic activities. The Wilson administration employed such agencies extensively to mobilize the economy during the First World War. In the interwar period, groups from across the political spectrum called on the federal government to launch corporate agencies to carry out goals the group espoused. By the mid-1930s a helter-skelter array of these entities had been created, with more to come during the Second World War.

At the same time, many people became suspicious and even alarmed by the expanding use of the government corporation format. This reaction was not to socialistic rationales for corporate agencies by those who employed them—there were no such rationales to react to. In contrast to Great Britain, where those who advocated using these mechanisms contended that they would provide the optimal administrative machinery for running socialized sectors of the economy, proponents in the United States justified their use with legalistic and technical arguments. No conspiracy to cloak true intentions was involved. American liberals were not closet socialists, although they did harbor an inchoate vision of a more activist national government. In common with groups across the political spectrum, liberals turned to these kinds of agencies on an ad hoc basis to solve specific problems. Yet even those who latched onto them enthusiastically in particular circumstances could be uncomfortable with their use more generally. Such ambivalence—well illustrated by the contradictory relationship both Herbert (p.90) Hoover and Franklin Roosevelt had with government corporations— combined with the hostility of small government advocates, would ultimately spell their decline.

Herbert Hoover and the Grain Corporation

Entry of the United States into the Great War involved far more than raising an army and transporting it to European theaters. Modern industrial warfare called for the federal government to exert an unprecedented degree of control over the economy. To implement this control, the government needed new forms of what the experienced private-sector administrator Herbert Hoover termed “social machinery.”1 The Wilson administration experimented with a variety of novel bureaucratic structures, calling them councils, boards, commissions, administrations, and corporations. Of these, the seven so-called war corporations departed most from conventional practice. These were the United States Shipping Board Emergency Fleet Corporation; the Food Administration Grain Corporation; the War Finance Corporation; the United States Housing Corporation; the United States Sugar Equalization Board; the United States Spruce Production Corporation; and the United States Russian Bureau, Inc. (The last two were created so close to the end of the war that they never really functioned.) The war corporations were similar to each other in their independence from traditional governmental departmental agencies, but otherwise quite varied in their powers, functions, management, capitalization, sources of income, supervision, and methods of incorporation.

One of the most important of the war corporations was the Food Administration Grain Corporation, and its story illustrates the attractions of quasi-public agencies from the standpoint of federal officials anxious to accomplish tasks that involved the government directly in the economy. The grain corporation was set up by Herbert Hoover, the head of the U.S. Food Administration. Hoover had come to this key position by virtue of his reputation as the brilliant humanitarian administrator who had coordinated food aid for Belgium after the Germans occupied the country. At the time the war broke out the millionaire mining engineer was living in London mulling over ways he could turn his exceptional management talents to public service. The Belgium food crisis provided the opportunity. Hoover’s Committee for Relief in Belgium shipped 2.5 million tons of foodstuffs across enemy lines into Belgium and occupied northern France, saving over nine million people from destitution, if not outright starvation. So effective and egalitarian was the distribution system devised by Hoover that studies (p.91) found child mortality rates in the region to have actually declined during the occupation compared to the period before the war.2

A little over a month after the United States declared war in April 1917, President Wilson tapped Hoover to manage the nation’s food supply. The challenge was significant: to feed the American military and supply increasingly desperate European allies, while holding down domestic prices—and all this in a situation of short harvests! By spring 1917, the situation was already serious. Belligerents and neutrals alike were bidding against each other in American agricultural markets, sending overall food prices up by 45 percent from prewar levels.3

Most worrisome was the spike in the cost of wheat. Wheat was critically important for the allies, because bread made from wheat flour provided the mainstay of working-class diets. With traditional suppliers in Eastern Europe and Russia out of the picture due to blockades and revolution, India and Australia too distant, and Argentina experiencing crop failure, European purchasing agents scrambled to buy up the smaller than normal American wheat harvest. Increased demand, decreased supply, and speculation sent wholesale prices rocketing upward. By April 1917, when the United States entered the war, a bushel of Number 1 Northern Spring Wheat, the premier grade, was selling for $2.43, an increase of 50 percent over the cost in the last half of the previous year.4 Workers’ incomes were rising in the tight labor market, but food prices climbed faster, and consumers became increasingly agitated. Earlier in the year, food protests, sometimes violent, had broken out in several large cities. In New York City in late February, police had used clubs and horses to disperse a crowd of over a thousand women who converged on city hall demanding that the mayor “make prices go down.”5 Pressure mounted to restrict European purchases, an idea that outraged farmers and that Wilson resisted because he hoped to use the threat of an embargo as leverage to get the British and French to accept his plan for a negotiated peace.6 Meyer London, the lone Socialist Party member in the House of Representatives, proclaimed that the situation demonstrated the failure of the “so-called law of supply and demand,” and called for a national commission “to regulate the transportation, marketing, preservation and distribution of food.”7

Hardly a socialist, Hoover nonetheless agreed with London that the situation could not be left to the free play of market forces and that the government would have to take political control over the agricultural sector, at least for the duration of the war. The question was how to do it. Even before any formal requests were forthcoming from the White House for Hoover to play a role, he let it be known through intermediaries that he would accept (p.92) the responsibility only if he were given substantial control. New to government and despite an offputtingly cold demeanor, the tenacious Hoover proved himself an effective bureaucratic infighter.8 Whereas everyone, including the secretary of agriculture, expected food control would be administered by the Department of Agriculture, Hoover maneuvered to have the operation established as, in his words, “an independent executive organ operating directly under the President.”9 In addition, he successfully badgered a reluctant Wilson into agreeing that executive control of the powerful agency be concentrated in a single person (himself), rather than a board, even though the strong-willed president professed himself to have “a troubled mind” after capitulating on the question.10 Anxious to establish facts on the ground, Hoover got the Food Administration up and running weeks before Congress finally passed legislation giving the agency statutory authority. He accomplished this by setting up a management team of elite volunteers and paying for clerical help out of his own pocket.11

As successful as Hoover had been at getting his way with regard to the structure of his operation, the hard-driving new government bureaucrat set his mind on wresting from the president one more significant concession. He insisted to Wilson that the Food Administration be allowed to employ incorporated agencies. Making his case, Hoover argued that it would be impractical to purchase and sell foodstuffs without, as he put it, “conforming to the usages of the trade,” by which he meant that if his agency was going to enter the market directly, it needed to do so on the same basis as private business players. For example, it would need to be able to sue and be sued, which required a separate legal identity. Also, his operation needed to have control over its own finances, including independent authority to borrow, because as he put it, trying to run commercial transactions through the Treasury would be “fatal.” Pointing to the recently established Emergency Fleet Corporation, he reminded the president that “this arrangement is not without precedent.”12 Hoover was able to convince Wilson, who after all had helped conceptualize the format for the fleet corporation, but neither talked openly about the plan while the bill to formally establish the Food Administration was under consideration in Congress. Indeed, when the press raised the subject, Hoover publicly denied any intention to set up government-owned corporations, insisting to the New York Times that such an idea was “but a rumor.”13

Wilson and Hoover kept quiet about their plans for employing government-owned corporations because the food control bill, with its grant of practically unlimited power for government over the agricultural sector, was already throwing rural areas of the country into an uproar. Farmers, (p.93) fearing that they would be sacrificed on the altar of low prices for American consumers in the event of government intervention, objected to interfering with the free play of market forces. Debate in Congress was lengthy and emotional, going so far as to include personal attacks on Hoover. Senator Thomas P. Gore, a Democrat from Oklahoma who chaired the Agriculture Committee, predicted that the food administrator, in restraining the free flow of commerce, could become “a blood clot on the brain of business.”14 Senator James A. Reed, Democrat of Missouri, objected on the grounds that the man who would wield the “despotic and unconstitutional powers” envisioned in the bill was insufficiently American.15 He charged that Hoover, having been out of the country fairly continuously for practically twenty years pursuing his international mining career, was “quite a stranger here.”16

After a grueling ten weeks of debate, Congress finally passed the food control bill, and Wilson signed it into law on August 10, 1917. The legislation assigned the president responsibility for assuring “an adequate supply and equitable distribution” of food and other stipulated necessities while the country was in a state of war, and to carry out this task, he was empowered “to purchase, to store, to provide storage facilities for and to sell for cash at reasonable prices, wheat, flour, meal, beans and potatoes.” In order to carry out these functions, the statute authorized the president “to create and use any agency or agencies.” Based on this grant of authority, Wilson signed an executive order setting up the Food Administration the same day. Four days later he signed another executive order, this time creating what the New York Times described as a “Big Corporation to Control Wheat.”17

Wilson’s executive order establishing the Food Administration Grain Corporation explained that the agency would allow the buying and selling activities authorized by Congress to be carried out “in the manner and by methods customarily followed in the trade.” The order stipulated that the agency be incorporated under the laws of the state of Delaware, and that it be capitalized with $50 million of the $150 million that Congress had appropriated for food control. Four directors of the corporation were named, including Hoover, all of whom were directors of the Food Administration, as well. The four were to name three more, with the consent of the president. All directors were subject to removal by the president.18 Although the grain corporation was formally an independent organization, later analysts would agree that “in reality it was so closely identified with the Food Administration which created it that often their joint functions could scarcely be separated.” This near unity is unsurprising given that Hoover and the volunteer leadership he assembled ran both.19

(p.94) Hoover’s term as food administrator is commonly recalled as a triumph of patriotic enthusiasm, when the country rallied to his calls for “wheat-less” and “meatless” meals, and with only minor grumbling, ate “Victory Bread” that included ever-increasing proportions of corn, oats, buckwheat, barley, rice, sweet potatoes, soy beans—and even peanuts and bananas!20 It is true that Hoover’s efforts were strikingly successful. Most dramatic was the fact that, although the disappointing wheat harvest of 1917 was barely enough for domestic consumption, the Food Administration was able to export over 100 million bushels of this key commodity to sustain the Allies, while at the same time keeping prices stable at home.21 Yet despite the stress that Hoover’s public relations department put on voluntary cooperation, more was involved in achieving these impressive results than housewives signing pledge cards and school children singing about “The Patriotic Potato.”22 Rather than voluntarism, the key to the Food Administration’s success was its program of centralized planning, regulation, and direct participation in agricultural markets through the grain corporation. As Hoover frankly stated in his memoirs, he aimed to control the nation’s food supply “from the soil to the stomach.”23

To accomplish this, Hoover rejected production quotas and rationing, believing such methods would require a huge bureaucracy and in any case had not succeeded in Europe. Instead, his plan was to insert the grain corporation directly into the distribution chain in order to set prices at a level that would placate urban consumers while still motivating farmers. During the bitter debates over the food bill, Hoover had insisted to Congress that “price fixing” was not on the agenda. However, on August 12, 1917, only two days after passage of the legislation, he announced that he intended to establish a “fair price” at which the government would purchase wholesale wheat. At the end of the month, an advisory committee composed of farm organization leaders, labor union officials, and academics set the price at $2.20 a bushel for the highest grade of wheat at Chicago, the largest interior terminal market, with other grades at other terminals prorated down from this basis.

Hoover was disappointed that the committee pegged the price this high, but farmers found it unreasonably low (despite the fact that before the war wheat was selling for less than $1.00 a bushel). Earlier in the month the price had soared to over $2.50 on the open market, and experts predicted that it would settle at $3.00 if no controls were enacted. While technically, Hoover’s price did not “fix” the price for all transactions, it essentially was the only one available, given that the grain corporation was the most powerful actor in the wholesale market, either buying or supervising the (p.95) purchase of all the wheat supplied to the U.S. armed forces, the Allies, and neutral nations. Moreover, Hoover warned via press release that if commercial dealers failed to follow suit, he was “prepared to take the whole harvest if necessary in order to maintain a fair price.”24 (Figure 4.1 shows a cartoonist’s not entirely positive take on Hoover’s style.)

The Truncated Career of Autonomous Federal Agencies

Figure 4.1. This humorous depiction of the man in charge of the country’s food supply as a military commander hints at a reality that Hoover downplayed. Hoover always emphasized the importance of voluntary cooperation in meeting conservation goals and keeping retail prices from skyrocketing. In reality, however, it was his control of the grain corporation, through which he could force companies to sell grain at a price he determined, that gave him the power to shape markets and achieve his goals. (Reproduced courtesy of the “Ding” Darling Wildlife Society.)

In an effort to conciliate disgruntled farmers whose hopes for windfall profits he had just crushed, Hoover argued that the grain corporation’s price should not be considered a ceiling, but rather a floor that would protect them in the event that a sudden end to the war released the vast wheat stockpiles of the Southern Hemisphere onto the world market. Farmers and their spokesmen in Congress were little comforted. The irascible Senator Reed, on behalf of his wheat farmer constituents in Missouri, took to the Senate floor to denounce Hoover’s price management program as “a crime (p.96) against liberty.” Despite the dissatisfaction, the price Hoover set turned out to be high enough to encourage increased investment in agricultural machinery and a 30 percent increase in acreage of planting in 1918, leading to one of the biggest crops in American history. To stick with its guarantee, the grain corporation needed an infusion of $100 million, the rest of the congressional appropriation for food control. In addition the corporation borrowed $385 million in private capital markets.25

After the war, the public corporation recommended itself to a variety of constituencies. Hoover’s grain corporation, along with the other war corporations, demonstrated how well this administrative device could influence the way the economy worked, based on its ability to engage directly in commercial operations. But in addition, observers noted how a corporate agency could provide an escape hatch from the sometimes paralyzing regulatory framework of federal bureaucracy. With the grain corporation, Hoover was able to sidestep civil service rules and hire the personnel of his choice. He was not constrained by the rigid purchasing rules involving time-consuming public bidding required of ordinary units of the federal bureaucracy. In addition, the agency’s initial capitalization, plus its ability to retain earnings and borrow, freed it from the cycle of annual appropriations. This meant that Hoover was able to dispense with having to continually cultivate powerful legislators to keep appropriations flowing. Moreover, he was free to plan beyond a particular year’s budget and had virtual autonomy over specifics of policy. Yet along with all this freedom, Hoover’s grain corporation still reaped the benefits that normally accrued to a government agency, such as freedom from state and local taxation. Given all these appealing features, it is hardly surprising that once the war was over a range of groups advocated the creation of similar bureaucratic instruments by which to advance their own interests.

Some groups lobbied for maintaining particular wartime corporate agencies and in a few instances achieved some success (the most extreme example being the Emergency Fleet Corporation, which as described in chapter 1, continued in existence until 1936). The postwar history of the grain corporation provides a good illustration of this phenomenon. The end of the war brought more large harvests, and although the Food Administration was phased out, Congress extended the life of its affiliated corporate agency, changing the name to the United States Grain Corporation and pumping a billion more dollars into the organization. The corporation continued its buying operations through the spring of 1920, and despite the sharp decline in international demand during its last year, managed to close its books with a net profit of over $27 million (in part because (p.97) Hoover insisted on charging purchasers from neutral nations high administrative fees in retaliation for what he deemed their extortionate shipping rates).26

The Government Corporation Idea in the 1920s

Farmers, bitter foes of the grain corporation when it seemed to be closing them off from the possibility of bonanza earnings during the war, suddenly turned enthusiastic about the concept of a government-owned agricultural corporation when the market collapsed after hostilities ended. As emphatically expressed by one farm organization leader: “The government grain corporation was used during the war to keep the price of grain down. IT CAN BE USED NOW TO KEEP THE PRICE OF GRAIN UP.”27 It was a sentiment that clearly resonated. Through the 1920s some version of a corporate agency became a regular feature of the legislative proposals put forward to deal with the problem of mounting surpluses and falling prices of basic crops.

The first of these proposals was introduced by Senator George Norris, Republican of Nebraska, in 1921. The Norris bill proposed a Farmers’ Export Financing Corporation capitalized at $100 million that would operate as a not-for-profit middleman, buying agricultural staples for cash, shipping them abroad using Emergency Fleet Corporation ships, and marketing them to foreign buyers on credit. The rationale was that, given the disruptions of the war, “the foreigner is not able to pay cash for these products. He is exceedingly anxious to buy, but must have time in order to pay.” To support itself, the corporation would sell tax-exempt bonds to private investors. These would be guaranteed by securities provided as collateral when foreign buyers made credit purchases.28

Herbert Hoover, by now secretary of commerce under President Harding, opposed the plan, arguing that if the government were to embark on this business venture it would only exacerbate the unfortunate international trend toward “nationalization of all overseas trade.” He called on Congress to uphold the country’s “tradition of individualism” by passing an administration-sponsored substitute measure that would reorient the War Finance Corporation (WFC) into a government bank for agriculture. The WFC had been established during the war to aid the mobilization by providing financial help to war-related industries and banks connected to them. The administration proposed that instead of Norris’s export corporation, which would be a public entity operating directly in the agricultural market, the role of government should be confined to financial support, (p.98) with all buying and selling performed by private entities, such as livestock dealers, export companies, and financial firms. As it became clear that the administration was going to be successful in quashing his bill, Norris bitterly commented that Hoover’s plan put the government in business just as much as his own did, but “the Government is all right in business if the middleman and the banker and the trust company can get their rake-off. If they are eliminated it is a crime…. It is populistic.”29

With passage of the administration bill, in August 1921, the War Finance Corporation became a source of agricultural loans of “intermediate” duration, that is, for briefer periods than loans available through the government land banks, but running longer than short-term credit available from commercial banks. This period was defined in the legislation as up to three years. To give a sense of the extent of its activities in its new role: the WFC ended up lending $383 million to the agricultural sector under its new authority, more than the $306 million advanced under its war powers. Given the demonstrated demand for this kind of credit, Congress in 1923 established the Federal Intermediate Credit Banks as permanent additions to the government-coordinated agricultural credit system begun in 1916 with the Federal Land Banks, discussed in chapter 2.30 (Later in the decade, the controversial and never-enacted McNary-Haugen bills, aimed at raising prices for farm products, would also propose using a federal corporation.)31

Once the concept of an administratively and legally independent, self-supporting agency that could intervene directly in the market was in play, other constituencies besides farmers picked up the idea. The United States Building and Loan League, the national trade group for what are now known as savings and loans, campaigned for a government organized system of “building-loan banks.” These were modeled explicitly on the Federal Land Banks. Like the land banks, the proposed institutions would provide a secondary market for mortgage loans, in this instance on urban residential property. The head of the league, testifying before Congress in 1919, began with arguments as to why the plan would promote the welfare of the whole society, but his bottom line was that “if this exemption from taxation was given to the farm loan system … [,] we may establish a claim here.” In other words, it was only fair that the federal government, having created tax-advantaged credit agencies to direct private capital into one sector of the economy, should do the same for theirs.”32

Labor joined the chorus of advocates of new government corporations with the proposal for public ownership of the nation’s railroads. During the war, transportation snarls that threatened to cripple mobilization efforts prompted the administration to seize control of all the private lines (p.99) and run them as an integrated system. After the war, a lively debate ensued over whether and how to return the lines to private ownership. Glenn E. Plumb, general counsel for the railway unions, put forward “Labor’s Solution of the Railroad Problem,” which came to be known as the Plumb Plan. According to this proposal, the federal government would buy all the railroad lines and administer them in a unified way, just as the Railroad Administration had done under Secretary of the Treasury William McAdoo during the war. In this case, a permanent government corporation would be established, which would be directed by a board composed of representatives from three groups: rank-and-file railroad employees, administrative personnel, and the public.33

Public power advocates also picked up the idea of corporate agencies in this period. Their proposals emerged during debates over the future of federal facilities on the Tennessee River at Muscle Shoals, Alabama, which included a partially finished hydroelectric dam that was to have provided power for production of synthetic nitrogen to be used in explosives. After the war, Wilson’s Secretary of War Newton Baker drafted a bill to create a government corporation to take charge of the property in order to produce nitrates for fertilizer and, if needed, munitions. (As mayor of Cleveland, Baker had presided over the building of the largest publicly owned electrical plant in the country.) Baker’s bill was the first of many that envisioned this kind of administrative structure for the property, which as time went by became more prized for its hydropower potential than as a possible source for cheap fertilizer. From 1922 until Franklin Roosevelt’s first term, Senator George Norris introduced at least one bill into every session of Congress calling for public ownership of Muscle Shoals. From the start, Norris’s bills assumed administration by a freestanding, incorporated agency along the lines of what would eventually become the Tennessee Valley Authority.34

Even though the government corporation became a familiar concept in the 1920s, the Republican-dominated congresses of this period were not receptive. Despite their hostility, they did approve two new corporations: the previously mentioned Federal Intermediate Credit Banks and the Inland Waterways Corporation. The latter was set up at the insistence of the War Department, which had been tasked with running barge lines on the Mississippi River and its tributaries that the federal government had operated during the war.35 The balance shifted once the economy plunged into depression, however, and the pressure to create corporate-type agencies became harder to resist. Both Hoover and Roosevelt set them up, even though both manifested unease about this organizational form, and neither articulated any general rationale for its use.

(p.100) The Depression Heyday of the Government Corporation

Hoover demonstrated his conflicted feelings regarding government corporations in his December 8, 1931, “Third Annual Message to Congress,” which he gave against the background of an economic downturn that after two years showed no signs of bottoming out. In this address he condemned the “large administrative functions independent of the Executive” exercised by the shipping board and recommended that it be absorbed into the Department of Commerce. By now the Emergency Fleet Corporation was so well institutionalized that Congress, in 1927, had renewed the agency’s charter and given it the more permanent sounding title of the Merchant Fleet Corporation. As the shipping board and its corporate offspring were so intertwined as to be virtually identical (similar to the relationship between Hoover’s Food Administration and the grain corporation), the president was obviously taking on the autonomy of the fleet corporation. Thus, even though he had been adamant during his days as food administrator that he needed to work through an agency outside normal lines of authority of the executive branch, and thus free of standard controls, he was clearly not comfortable with this kind of arrangement as a general rule.

Yet, even as the president implicitly disparaged the fleet corporation for its splintering impact on the executive branch, he pointed to the deflationary spiral that was threatening to bring down the economy and called for putting “some steel beams in the foundation of our credit structure” with a program that included two new kinds of autonomous instrumentalities. His first recommendation was for a “system of home-loan discount banks.” These would be structured along the lines first proposed over a decade earlier by the urban home mortgage bankers who had advocated a government-organized secondary market for mortgage loans similar to the Federal Land Banks. The administration’s bill to establish a Home Loan Bank System to extend credit to home financing institutions was passed into law the following summer.36

Hoover’s second initiative utilizing the format of a corporate agency was a government-owned bank “of the nature of the former War Finance Corporation.” He had resisted taking this step and did so only when his favored solution, a private credit pool organized by the nation’s leading bankers, had demonstrably failed to help struggling banks. From the start, leading bankers had offered only grudging acquiescence to Hoover’s proposals for private-sector solutions, leaving him to bemoan the difficulty of securing the cooperation of “the financial institutions of the country who have little cohesion and little leadership.” With the economy deteriorating (p.101) precipitously, the beleaguered president finally abandoned his aspiration for an effective response through voluntary collective action. Bowing to the wishes of the big banks, congressional Democrats, and the conservative eastern wing of his own party, he endorsed the creation of a government bank to extend credit to financial institutions and railroads. Little more than a month after his speech, Congress passed legislation establishing the Reconstruction Finance Corporation (RFC), capitalized at $500 million and authorized to borrow up to $1.5 billion more. The legislation specified that the RFC would be a short-term operation, lasting only two years at most, a provision that presumably helped assuage Hoover’s apprehension over launching this new autonomous vehicle. In fact, however, the RFC became so popular that it lived on much longer than its original legislation stipulated, lasting into the early 1950s when it was finally dismantled under the Eisenhower administration.37

Despite widespread support for setting up the Reconstruction Finance Corporation, not everyone was enthusiastic. Two kinds of criticism emerged. Some objected because they saw it as aiding the very people who were to blame for the disastrous state of the economy. Representative Louis T. McFadden, a Republican from rural Pennsylvania, vilified the RFC as a “supercorporation,” set up “for the sinister purpose of helping a gang of financial looters to cover up their tracks.” Others, such as Senator Robert Wagner of New York, were bitter that the RFC legislation contained no provision for aiding localities with the mounting costs of relief. Wagner complained that when the bankers came to Washington, no one preached the value of rugged individualism. Yet, when ordinary Americans “cry out in despair ‘Give us work,’ we suddenly are overwhelmed with devotion for the preservation of self-reliance.”38

Under President Franklin Roosevelt, the lack of a clear strategy for employing quasi-public agencies at the federal level became more apparent, even as the momentum for setting them up increased. Eight federal corporations existed in 1933 when Roosevelt took office. By 1939, New Dealers had created twenty-three more. The war period brought another sixteen.39 (A complete list of these bodies, including their purpose and authorization, is found in the appendix.) In their haste to tackle problems and in the absence of much preexisting bureaucratic apparatus, New Dealers made almost indiscriminate use of this organizational device. They created so many autonomous incorporated agencies so quickly that after only eight months, the New York Times would proclaim: “New Deal Rules by Corporations.”40

New Deal corporate agencies were extremely heterogeneous. Not only was there no consistent format for their structure and powers, there was no (p.102) consistent basis on which they were legally justified. Of the twenty-three created from the outset of the Roosevelt administration through the end of the decade, ten were established without any explicit authorization from Congress. While some in this latter category were based on executive orders from the president, several were formed solely on the authority of an administrative official.41

Almost all the major New Deal figures participated. For example, Secretary of the Interior Harold Ickes and Secretary of Agriculture Henry Wallace joined Federal Emergency Relief Administrator Harry Hopkins to incorporate the Federal Surplus Relief Corporation (FSRC) in October 1933 in Delaware. They created this agency to be a mechanism that would buy, process, and distribute surplus crops to needy people. At the same time, they hoped that removing agricultural surpluses from the market would cause prices to rise. The president publicly gave his approval, telling the press that he believed “the corporation can be organized quickly and in such manner as to become the best agent for decisive action in the emergency.” Yet he issued no executive order to this effect (even though he would do so only two weeks later when Wallace set up the Commodity Credit Corporation to make loans on crops subject to production control under the Agricultural Adjustment Act). Thus, Hopkins, Ickes, and Wallace essentially set up the FSRC as an autonomous agency on their own authority, citing as justification several pieces of legislation, including the Agricultural Adjustment Act, the National Industrial Recovery Act (NRA), and the Federal Emergency Relief Act.42

While Ickes and Wallace took part in other corporate ventures (Ickes was particularly active in this area), this was the only one in which Hopkins was actively involved. Hopkins did, however, in late 1934, develop a plan for a permanent semiautonomous agency to provide public-sector jobs for the unemployed. The idea created a stir when rumors about it were leaked to the press. In one sensationalized account, the New York Times termed his program “EPIA (End Poverty in America),” thus comparing it to the EPIC (End Poverty in California) plan proposed by socialist Upton Sinclair, who campaigned for governor of the Golden State promising to create a California Authority for Land and a California Authority for Production to take over idle farms and factories, run them on a nonprofit basis, and hire the jobless to work in them.43

In some cases corporate agencies begot more corporate agencies. The most extreme case was the thirty corporate subsidiaries of the Federal Subsistence Homesteads Corporation (FSHC). Harold Ickes established the FSHC to carry out a program mandated by a cryptic, anomalous section of the (p.103) National Industrial Recovery Act that authorized the president to spend $25 million “through such agencies as he may establish” to carry out an undefined program described as “subsistence homesteads.” The term subsistence homesteads referred to an amorphous idea that had to do with model rural communities. Depending on the advocate, these communities would cater either to unemployed urban workers or poverty-stricken farmers living on submarginal lands. In either case, the communities would demonstrate better land management techniques to inhabitants of the surrounding region. Senator John Bankhead of Alabama, who had inserted the proposal for subsistence homesteads into the legislation, explained that his purpose was to help in “the restoration of the small yeoman class which has been the backbone of every great civilization.”44

By executive order, Roosevelt transferred the authority vested in him to his secretary of the interior, including “full authority to designate and appoint such agents, to set up such boards and agencies, and to make and promulgate such regulations as he may deem necessary or desirable.”45 Ickes then created a Division of Subsistence Homesteads within the Interior Department to set up experimental communities where residents could combine subsistence farming with part-time wage work. To carry out the kind of tasks the program would entail—including land acquisition, contracting for construction, and making loans to prospective residents— Attorney General Homer Cummings suggested to Ickes that a “Government-controlled corporation” would provide an efficient vehicle. Thus, just as Hoover had established the Food Administration Grain Corporation and the Sugar Equalization Board to be the operating arms of the Food Administration, Ickes incorporated the FSHC under the laws of Delaware to be the administrative mechanism that would carry out the program of the Division of Subsistence Homesteads. As the corporation’s general counsel candidly explained, the purpose of setting up an incorporated entity was “to free the program from as many as possible of the procedural technicalities and delays inherent … in established administrative procedures.”46

To M. L. Wilson, the visionary agricultural economist Ickes tapped to run the Division of Subsistence Homesteads, the corporate device presented itself as the ideal institutional structure to foster grassroots democracy. Wilson came up with a plan by which the individual projects would be incorporated as subsidiaries of the national-level corporate entity. The subsidiary corporations would have boards of directors that included representatives of local business groups, labor unions, and state agricultural schools, in addition to some of the homesteaders themselves. As a corporate entity, each subsistence community would be able to undertake the (p.104) tasks necessary to develop itself on the basis of “ordinary business procedures.” Wilson saw this setup as superior to centralizing all control in Washington, the only practical course if each project had to adhere to government procedures for financial transactions—procedures that were not only complex but also best suited to the regularized, predictable activities of government bureaus, not commercial undertakings. With a perspective reminiscent of that of Senator Henry Hollis and Representative Robert Bulkley when they designed the Federal Land Banks, Wilson believed that the experience of actually running the subsidiary corporations would encourage residents to become engaged participants in the program, rather than passive recipients of government aid. Less than four months after the FSHC was incorporated, thirty corporations were established in eighteen different states.47

Despite this energetic start, the plan faltered. The obstacle was John Raymond McCarl, the conservative and legalistic comptroller general, whose animosity prefigured a larger backlash to come. McCarl insisted that all accounts of the community corporations had to be audited on the same basis as standard government agencies, meaning that his office had to approve all transactions before they took place. This ruling by the comptroller general meant that the community corporations lost most of the advantages sought by setting them up in the first place. In the scenario Wilson had hoped to avoid, the program was centralized in Washington, with local input advisory only. The few subsistence communities that were set up were not terribly successful, and as the program was always a headache for Ickes, he was probably relieved when President Roosevelt, in 1935, shifted it into the newly formed Resettlement Administration, under Rexford Tugwell.48

The comptroller general’s opposition was predictable, although seemingly unanticipated by Ickes and Wilson. Ever since his appointment in 1921 by President Warren Harding to head the newly established Government Accounting Office (GAO), McCarl had protested the idea of exempting any federal government expenditures from his oversight. Congress had set up the GAO as part of an effort to provide better financial management of the federal government. The agency, which was to function independently of the executive branch, was charged with auditing its accounts. McCarl interpreted his role broadly, and he worked to control spending before it happened through pre-audits, rather than merely reporting after the fact. In his pre-audits, he sought to determine whether proposed payments were, in his opinion, legal. With regard to the subsistence homestead corporations, McCarl justified his ruling on the basis that these agencies had not been given “specific statutory authority” by Congress. It is true (p.105) that the comptroller general was a stickler for explicit congressional authorization.49 He once disallowed $3,000 in travel costs for a committee that President Coolidge had sent to tour the national parks on the grounds that there were no specific statutes in place to justify the expenditure. But ultimately, McCarl’s efforts to police government expenditures were not about trying to protect the constitutionally mandated prerogatives of the legislative branch. His real bugaboo was activist government, as he made clear after his fixed term ended and he publicly excoriated Congress for going along with what he identified as the New Deal trend toward “government-run-everything.”50

Pushback against Federal Corporations

The rapid proliferation of corporate agencies and the seemingly haphazard manner in which they were formed posed questions for friends as well as foes of the New Deal. Republican Senator Thomas Schall of Minnesota probably had little support—after all, he was reputed to be the second most unpopular person in the Senate—when he railed hysterically that the New Deal corporate agencies were part of a conspiracy to effect “world revolution” by subverting constitutional government and “tak[ing] the place of all business activity in the country.”51 Nevertheless, the miscellaneous and obscure character of these agencies did raise legitimate worries, making them easy targets for those who wanted to couch their critique of activist government in legal and constitutional terms.

Various issues were involved. One was what it meant for federal agencies to be chartered under the laws of states—especially those of Delaware, which, as one quip had it, allowed its corporations to do practically anything “except solemnize marriages and hold religious services.”52 More fundamentally, when a corporation was chartered by a state rather than by Congress, it raised the question of whether state or federal rules applied with respect to issues such as taxation and police powers. Separate from the ambiguity of the federal-state relationship was the murky connection between the incorporated agency and the federal government. The fact of incorporation implied that the agency was legally independent, but when disputes arose, would courts agree? Should they? Another issue had to do with whether the powers granted these agencies in their corporate charters were congruent with the legislation on which they were based. Particularly problematic was the fact that charters for several corporate agencies established to carry out purposes of the 1933 National Industrial Recovery Act (NRA) stated that they would be permanent, even though the NRA itself (p.106) was enacted as a temporary measure with a two-year deadline.53 Critics found it particularly provocative when Harold Ickes put the word “emergency” into the titles of two of his corporate agencies that he justified on the basis of the NRA—the Public Works Emergency Housing Corporation and the Public Works Emergency Leasing Corporation—and then included in their articles of incorporation the provision that they be endowed with “perpetual existence.”54

FDR himself was one of those who was troubled by corporate agencies, even though he found them convenient in the short run. Like Hoover before him, Roosevelt worried about the accountability of agencies that operated outside standard departmental structures. He demonstrated his unease by his efforts during his second term to secure legislation that would allow him to reorganize the executive branch.

In 1936 he appointed a committee of public administration experts headed by Louis Brownlow to recommend plans by which the president could take better control of the sprawling, heterogeneous mass of federal agencies he nominally directed. Endorsed by the president and sent to Congress the following year, the Brownlow committee’s report highlighted the negative impact of the long-term trend of creating new agencies not connected to regular departments. The report explained that adding so many “administrations, boards, commissions, committees, governmental corporations, and authorities” meant that “there are now in the Government of the United States over 100 separately organized establishments and agencies presumably reporting to the President.” The key word here was “presumably.” In order to cut back the impossible number of distinct lines of authority leading to the president, the report recommended adding two new cabinet-level departments to the ten already in existence: a department of social welfare and a department of public works. The next step would be to make all administrative agencies, including the government corporations, answerable to one of the twelve departments.55

Another recommendation relating to corporate agencies was to raise the quality of the civil service (above its current “dead level of mediocrity,” as the committee members said privately). During Roosevelt’s first term, in order to fill posts with politically sympathetic, professionally trained personnel, the administration exempted from civil service requirements more than four-fifths of the quarter of a million new people who were hired. Emergency agencies of all kinds, including incorporated agencies, proved a useful device for avoiding the antiquated and slow-moving Civil Service Commission. The report advocated replacing the bickering, ineffectual bipartisan board of the commission with a “well-qualified, nonpolitical Administrator,” (p.107) and providing this person with more and better staff. With greater ability to process trained applicants, the civil service system would be able to function effectively as the central personnel agency of the vast and complex organization the federal government had become. Once this happened, the motivation for setting up nonstandard agencies to get around personnel rules would be significantly reduced.56

Roosevelt endorsed the Brownlow committee’s report as the basis for reorganization bills introduced in 1937, but the legislation did not pass until 1939, and then only in a watered-down version. Timing proved a major problem, as the bills got caught in the firestorm ignited by FDR’s simultaneous effort to expand (detractors said “pack”) a Supreme Court that was striking down New Deal legislation. As the court controversy gained traction, critics charged that the president’s plan to reorganize the federal bureaucracy demonstrated another instance of his drive to amass “dictatorial powers.” While some opponents seem to have been sincere, others appear to have been opportunistic. Former president Herbert Hoover claimed that Roosevelt was trying “to abolish the Civil Service Commission which for fifty years has given fine service” and replace it with “personal political control.” What Hoover failed to mention was that while president he himself had recommended replacing the existing bipartisan committee in charge of the civil service with a single “Personnel Administrator.”57

The uproar over executive reorganization provided political cover for those opposed to expanding the capacities of the national government. Corporate agencies proved soft targets for these forces, which were led by Senator Harry Byrd, Democrat of Virginia. Byrd, who would become a key player in the bipartisan conservative coalition that dominated Congress from the waning days of the New Deal until the coming of the Great Society, grandly pictured himself “the monetary conscience of the Federal Government.” In the eyes of his detractors, however, he was simply a reactionary skinflint.58 During Roosevelt’s first term, Byrd had hesitated to come out in open opposition, given the president’s popularity back in the senator’s home state. Only after Roosevelt had been weakened by the court fight and the first phases of the executive branch reorganization struggle did Byrd go public with his conviction that the New Deal was “the most costly, the most wasteful, and most bureaucratic form of government this republic has ever known.”59 In 1936, promising to develop plans to reduce federal expenditures by 25 percent, Byrd convinced the Senate to establish and name him head of the Special Committee to Investigate Executive Agencies of the Government. This special committee would be the precursor to the Joint Committee to Reduce Non-Essential Expenditures, established (p.108) in 1941, over which he would preside as “Mr. Economy” for the next twenty years.60

As chair of these committees, Byrd pursued his goal of radical retrenchment, although, apart from his attack on corporate agencies, with negligible results. In general, his proposals were either too extreme to be taken seriously—during the Second World War he called for mass firings of a third of the federal workforce—or too minimal to make a difference. In either case, they exhibited no larger vision of government than “cut, cut, and cut again.”61 Even though his nitpicking harassment of programs he disliked failed to make any systemic impact, his campaign to shrink government did earn him the enmity of liberals. Soon after getting to the Senate, Hubert Humphrey charged that Byrd’s Joint Committee for Non-Essential Expenditures was itself “nonessential” and urged that it be abolished, a breach of Senate decorum for which the old-guard southern leadership would freeze out the freshman senator for years. Byrd’s only large-scale success came in his campaign against corporate agencies, and this only because of the professionalized research assistance he received from the Government Accounting Office and the fact that these agencies were low-hanging fruit.62

In the spring of 1943, Senator Byrd told the press that his joint committee had begun a probe into what he described as “a maze of Federal corporations.” The committee’s Report on Government Corporations, appearing in the summer of 1944, leveled a powerful attack on autonomous incorporated agencies. While the report definitely betrayed the conservative viewpoint of the committee chairman (referring at one point to how in recent years the concept of the “general welfare” as a rationale for government action was likely “overemphasized”), the report acquired its power by raising issues that transcended any particular political perspective. In contrast to Byrd’s characteristic superficial style of attack, in which he singled out trivial examples of questionable looking expenditures by agencies he disapproved of, this document was a solid overview of a significant sector of the federal bureaucracy, raising important questions and providing a large amount of relevant data. One table presented the enormous growth of incorporated agencies, showing how in 1933 existing corporate agencies had a total net worth of $3 billion, whereas a decade later, with dozens more in operation, the assets of this sector had increased to $16 billion.63 The report described and documented three major problematic issues concerning these instrumentalities: their extreme heterogeneity in terms of legal basis and structure, their lack of any overall control over their finances, and the incongruity of using state charters to organize them.

(p.109) Hard to refute, these critiques fueled passage of the Government Corporation Control Act of 1945.64 Without ever giving a definition of a government corporation, except for listing the entities to be covered, the legislation did two main things. First, it mandated more accountability, primarily by requiring that all corporate agencies be audited each year by the General Accounting Office, with reports sent to Congress. These were to be retrospective commercial audits, not the continuous legal checking (and sometimes disallowing) of financial transactions before they took place that Comptroller General McCarl had used for regular federal agencies and sought to impose on corporate agencies. Second, the agencies with state charters were required to get statutory approval from Congress by June 30, 1948, or else go into liquidation.

The Government Corporation Control Act did not categorically prohibit the use of this bureaucratic device; however, as it turned out, the legislation marked the end of an era. A number of the agencies that already had federal charters lived on, and although Congress reincorporated several that had state charters, several were allowed to go out of existence entirely.65 Of the 101 government corporations covered by the 1945 legislation, only 75 were operating eight years later. Meanwhile, the pace of creating new ones slowed to a crawl. From the time the act was passed in 1945 through the end of the 1950s, only two new corporate agencies came into existence: the St. Lawrence Seaway Development Corporation and the short-lived Federal Facilities Corporation (FFC), which was set up to manage the tin and synthetic rubber operations the RFC had handled during the war.66 In addition, the 1950s saw the dismantling of the once mighty Reconstruction Finance Corporation, as well as the sale of the Inland Waterways Corporation into private hands. Starting in the 1960s the pace picked up, but only slightly.67

Yet even if rarely employed, the fuzzy template of the federal corporation remains available, and as in its salad days, has been employed for a hodgepodge of purposes. Examples include the Resolution Trust Corporation, established in 1989 to clean up the savings and loan debacle, and the United States Uranium Enrichment Corporation, created in 1993 to operate the two government-owned industrial facilities (in Paducah, Kentucky, and Portsmouth, Ohio) that enriched uranium for use in nuclear power plant fuel. As was the case early on, there is no consistent method of creating a government corporation, nor a generally accepted definition of what one is.68

(p.110) Explaining the New Deal Experience

What accounts for the ad hoc, almost cavalier, manner in which officials went about creating what one critic described as the “New Deal Corporate Maze”?69 To some extent this phenomenon can be subsumed within the larger improvisational—some would say anarchic—style of administration that characterized the entire New Deal. To many commentators, this penchant for constantly setting up new agencies on an ad hoc basis is seen as reflecting a nonideological “pragmatic” approach to politics on the part of New Dealers. As one group of public administration scholars put it, New Deal officials “were primarily interested in results, not in the theory of administrative relationships.”70 Others have explained the “rambling structure” of the New Deal as rooted in FDR’s proclivity for “competitive” administration. According to historian Richard Polenberg, “Encouragement of overlapping jurisdictions may have seemed poor administrative theory, but it often spurred government officials to great achievement.”71

Arthur M. Schlesinger, Jr., has suggested that the New Dealers’ messy administrative style can be explained largely in terms of the personalities of FDR and his talented and lively subordinates, all of whom would have found conventional styles of government organization “claustrophobic.” It was the very “looseness of the New Deal,” allowing as it did for creativity and innovation, that made public service for these individuals “tolerable and amusing.”72

In addition to this interpretation, Schlesinger makes the more persuasive point that Roosevelt had little choice but to circumvent the existing bureaucracy. When the new administration took office the old-line departments of Agriculture, Commerce, Labor, and Treasury were staffed by civil service employees who were neither particularly energetic nor able— Tugwell called them the “best of the worst”—and, at the higher classification levels, primarily stalwart Republicans. Thus, Roosevelt had little choice but to create new, experimental institutions to implement his programs.73

Certainly there is some truth to each of these different perspectives, but unless one gives a lot of credence to Schlesinger’s whimsical portrait of the New Dealers’ psychological makeup, which assumes they consciously embraced bureaucratic incoherence, it is hard to understand why, even if they felt they had to develop new kinds of administrative machinery, they went about it in such a slapdash way. One clue is provided by William E. Leuchtenburg, who argues that much of the New Deal can be traced to memories of the mobilization during the First World War, a time when a Democratic administration led the most far-reaching government interventions (p.111) into the U.S. economy up to that time. As we have seen, the public corporation played a major role during the First World War, so it is not surprising that when liberals faced a new emergency and wanted to respond with alacrity, this institutional form would be called into service again.

Despite the appeal of government corporations for leading New Deal figures, none of them tried to define a long-run strategic role for these kinds of agencies, with the exception of “braintruster” Adolph Berle. Late in the decade, Berle floated the idea that Congress create regional capital credit banks, which would operate along the lines of venture capitalists, actively seeking out worthwhile private and public investment opportunities. Berle’s proposal never gained a following, in part because he offered no convincing explanation for why such powerful independent entities could be trusted to operate in the public interest.74 While it is true that some legal scholars and political scientists wrote about federal-level quasi-public agencies in this period, their studies were largely descriptive accounts of how already-existing government corporations had come into being and functioned and how courts had handled their ambiguous public-private character.75 In any case, there is no indication that their studies influenced the New Dealers involved in setting up or administering these agencies.

The appeal of the government corporation to New Dealers was essentially as an expedient solution by which to sidestep immediate problems. On the one hand, as the general counsel for the Federal Subsistence Homesteads Corporation bluntly stated, they offered an escape from required procedures and legal rules that constrained standard units of the federal bureaucracy.76 On the other hand, these kinds of administrative mechanisms allowed some degree of financial autonomy. For example, the “huge reserves and fiscal independence” of the RFC gave Roosevelt the capacity to sidestep laborious negotiations with Congress to secure appropriations for programs. The RFC supplied large sums to, among others, the Home Owners Loan Corporation ($200 million), Farm Credit Administration ($40 million), Regional Agricultural Credit Corporations ($44 million), Federal Home Loan Banks ($125 million), Rural Electrification Administration ($246 million), and Resettlement Administration ($175 million). When Roosevelt created the Works Progress Administration (WPA) on the basis of the 1935 Emergency Relief and Appropriation Act, the RFC gave the new agency an immediate billion-dollar infusion so it could get started without having to wait for funds to start flowing through normal channels.77

The tactical and untheorized approach to corporate agencies by New Dealers stands in contrast to the situation in Great Britain, where leading politicians dedicated to a more activist role for government were presenting (p.112) arguments for establishing semiautonomous public bodies and putting forward proposals for how they should be structured. Both Herbert Morrison and Clement Attlee publicized their ideas about the government corporation as an administrative form based on their experiences in the Labour government of 1929–1931.

Morrison, while minister of transport, initiated the London Passenger Transport Board, a government corporation to provide “one single undivided consolidated ownership” of the myriad, uncoordinated modes of private and public transportation then operating in the greater London region. In his influential book Socialisation and Transport, published in 1933, Morrison put forward an in-depth rationale for the government corporation. He argued that outright public ownership of passenger transportation made more sense than regulation, explained why such an endeavor should be run by a public agency situated outside the traditional framework of government, and offered plans for organizing this kind of agency (making clear he saw this format as also appropriate for other sectors of the economy).78

Attlee, best known for his later work as prime minister of the reforming Labour government that came to power after the Second World War, was another Depression-era advocate of autonomous agencies. His stint as postmaster general convinced him that the post office was essentially a “nationalized trading undertaking,” by which he meant that it generated income in exchange for services, rather than simply administering tax-supported programs. As such it was not well served by being situated within a ministerial department, because Treasury control was “wholly incompatible with the flexibility necessary in the conduct of a business concern.” Therefore, it made sense to separate the finances of this kind of operation from the general budget.79

The particular institutional structure that Morrison and Attlee advocated during the 1930s—a publicly owned, legally incorporated body operating at arm’s length from the government, both administratively and financially—would be used to manage the wave of nationalizations of almost a fifth of the economy carried out by the Labour government after the war.80 This is not to say that no criticisms were leveled against this model, either from within and outside the ranks of the Labour Party, only that the British politicians tried to develop a coherent rationale and a standardized pattern for setting up quasi-autonomous agencies to pursue public purposes.

It seems only fair to New Deal public officials to note that their counterparts in the British Labour Party did not come up with their ideas about new administrative structures appropriate for government participation in (p.113) the economy in an intellectual vacuum. Also, progressive statebuilders in Britain did not face the same intensity of conservative opposition. In Britain, discussion about when and how government should participate directly in the economy had been going on since the late nineteenth century. Fabians like George Bernard Shaw, focusing primarily on municipal services, took for granted that administration would take place within the departmental structure of government. But Guild Socialists popularized more participatory conceptions of how socialization would work, and such ideas led to calls for moving administrative units outside the existing bureaucracy. For example, the Miners’ Federation bill to nationalize the mines, introduced in Parliament in 1919, envisioned a “Corporation to be known by the name of the Mining Council” that would be legally and financially distinct from government. One half of the corporation’s board of directors would be chosen by the union and the other half by the government.81

Many in the Conservative Party also warmed to the idea of using an independent organizational form to carry out public purposes in the interwar period, although obviously not out of a desire to promote workers’ control of industry. For conservatives, this kind of administrative vehicle seemed more amenable to business principles than an agency directly under parliamentary control. In 1926, faced with a moribund economy and social unrest, Conservative leader Stanley Baldwin’s government displayed what historian Charles Loch Mowat described as “the empiricism of Tory policy during these years” by setting up the Central Electricity Board (CEB). The CEB was assigned the task of integrating the nation’s fragmented, inefficient, and high-cost electrical industry, which private utility companies had been unable to rationalize on their own.82 Universally hailed as a success, the CEB “created order out of muddle” by constructing and operating an interlinked system of long-distance transmission lines known as “the grid” that moved wholesale electricity energy throughout the country.83 As Morrison himself was quick to point out, the financially self-supporting and administratively autonomous CEB foreshadowed his own plan for rationalizing public transportation under the London Passenger Transport Board.84


In general, the officials who employed the administrative device of the government corporation had an expansive, if unsystematic, conception of how a more capable federal government would be able to help achieve a more stable, regionally balanced, and equitable national economy. However, with the exception of William McAdoo, Henry Hollis, and Robert Bulkley, (p.114) who (as described in chapters 1 and 2) provided at least some broad justifications for using the mechanisms they proposed, federal statebuilders who advocated and managed corporate agencies tended not to link their larger substantive goals for government to any particular methodology of public administration. After the template of the government corporation emerged during Wilson’s second presidential term, it was employed chiefly as a means of evading the rules governing standard units within the federal bureaucracy. This approach would reach its apex in the New Deal, when what one proponent of government corporations would sadly describe as their “over-enthusiastic and unplanned exploitation” sparked a broad-based counterreaction that all but snuffed out this line of institutional development.85

The truncated career of federal corporate agencies does not mean they had no lasting impact on the American state. On the contrary. One of the most powerful of the interwar federal corporations was responsible for kick-starting a related institutional trajectory at the state and local levels. This was the Reconstruction Finance Corporation (RFC), the giant government bank set up by Hoover and expanded by Roosevelt. The RFC, which administered Hoover’s public works program, provided the initial incentive for localities to try to set up quasi-public bodies with the characteristics of the public authority so they could take advantage of federal loans. Even after Roosevelt’s own public works agency, the Public Works Administration (PWA), was up and running, the RFC was still supplying capital directly to some public authorities, while at the same time providing financial backup to the PWA. Moreover, the PWA, which itself had some of the characteristics of a government corporation, played an instrumental role by routinizing and popularizing the public authority template. This story will be told in chapter 5.

Administratively and financially independent agencies at the federal level were clearly problematic on a number of dimensions. Nevertheless, it seems unfortunate, given the dearth of mechanisms available to the national government for guiding the economy, that supporters of a more robust national government did not at least try to develop them into useful administrative tools for the long run. Even more unfortunate was the fact that interwar liberals did not try to reform the standard bureaucracy so that it had more of the features they were seeking when they set up quasi-autonomous bodies in the first place, features such as freedom from the mass of stultifying legal rules that handicapped responsive action, and freedom to retain funds beyond the yearly appropriation cycle so as to allow long-range planning. With a person like Hoover, who, although not the advocate (p.115) of laissez-faire portrayed in popular culture, did want private-sector actors to take the lead in designing collective solutions, such behavior is understandable. But the lack of more self-conscious efforts to build the permanent institutional capacity of the national government on the part of New Dealers is discouraging and lends credence to William Leuchtenburg’s characterization of mid-twentieth-century American liberalism as an “impoverished tradition.” Possibly at some point in the future, the American spirit of experimentation will be linked to a more coherent view of the role of the federal government in economic life.86 (p.116)


(1) . George H. Nash, The Life of Herbert Hoover, vol. 3, Master of Emergencies, 1917–1918 (New York: W. W. Norton, 1996), 10.

(2) . David Burner, Herbert Hoover: A Public Life (New York: Alfred A. Knopf, 1979), 94.

(3) . Wesley C. Mitchell, History of Prices during the War, W.I.B. Price Bulletin No. 1 (Washington, DC: GPO, 1919), 52–53.

(4) . Frank M. Surface, The Grain Trade during the World War (New York: Macmillan, 1928), 18–31; and U.S. Department of Agriculture, Yearbook, 1918 (Washington, DC: GPO, 1919), 469.

(5) . William Frieburger, “War Prosperity and Hunger: The New York Food Riots of 1917,” Labor History 25 (Spring 1984): 217–39; Dana Frank, “Housewives, Socialists, and the Politics of Food: The 1917 New York Cost-of-Living Protests,” Feminist Studies 11 (Summer 1985): 255–85, quote at 266; and Meg Jacobs, Pocketbook Politics: Economic Citizenship in Twentieth-Century America (Princeton, NJ: Princeton University Press, 2005), 53–55.

(6) . Tom G. Hall, “Wilson and the Food Crisis: Agricultural Price Control during World War I,” Agricultural History 47 (January 1973): 33.

(7) . Meyer London, “The Government as Grocer,” Independent, March 12, 1917.

(8) . Edward Mandell House to Wilson, May 4, 1917, in Arthur S. Link, ed., The Papers of Woodrow Wilson (Princeton, NJ: Princeton University Press, 1983), 42:220. For reactions to Hoover’s personality, see Nash, The Life of Herbert Hoover, 3:23.

(9) . Quotation from closed-door, unpublished hearings before the House Committee (p.194) on Agriculture, May 7, 1917, quoted in Nash, The Life of Herbert Hoover, 3:13. Robert Cuff makes the point that the independent status of Hoover’s agency should not be seen as inevitable, as witnessed by the fact that food control during the Second World War was handled by the Agriculture Department and during the First World War the Labor Department “managed to retain primacy in its traditional field.” Robert Cuff, “Herbert Hoover, The Ideology of Voluntarism and War Organization during the Great War,” Journal of American History 64 (September 1977): 362.

(10) . Wilson quoted in Francis William O’Brien, ed., The Hoover-Wilson Wartime Correspondence (Ames: Iowa State University Press, 1974), 49. Wilson’s preferred plan was a commission that included representatives of agriculture, industry, and labor, with Hoover as chairman. Nash, The Life of Herbert Hoover, 3:16.

(11) . Nash, The Life of Herbert Hoover, 3:27–34.

(12) . Hoover to Wilson, June 29, 1917, in Link, The Papers of Woodrow Wilson, 43:49.

(13) . “Cut in Food Prices Is to Be Hoover’s First Official Aim,” New York Times, May 30, 1917. Hoover at one point suggested that explicit permission for forming government corporations be included in the food control bill but ultimately decided against this course. See Hoover to Wilson, June 30, 1917 in Link, The Papers of Woodrow Wilson, 43:56.

(14) . Monroe Lee Billington, Thomas P. Gore, The Blind Senator from Oklahoma (Lawrence: University of Kansas Press, 1967), 97.

(15) . Quoted in Nash, The Life of Herbert Hoover, 3:39.

(16) . “Attacks Hoover as Arch Gambler,” New York Times, July 17, 1917.

(17) . 40 Stat. 276 (August 10, 1917), sections 1, 2, and 11. “Executive Order Establishing the United States Food Administration,” August 10, 1917, reprinted in Surface, The Grain Trade, 517–18; and “Big Corporation to Control Wheat,” New York Times, August 16, 1917.

(18) . “Authority to Organize Food Administration Grain Corporation,” Executive Order 2681, reprinted in J. Reuben Clark, Jr., Emergency Legislation Passed Prior to December, 1917 Dealing with the Control and Taking of Private Property for the Public Use, Benefit, or Welfare (Washington, DC: GPO, 1918), 174–76, quote at 175.

(19) . Harold Archer Van Dorn, Government Owned Corporations (New York: Alfred A. Knopf, 1926), 86; and Harvey F. Pinney, “Federal Government Corporations as Instrumentalities of Government and Administration” (PhD diss., New York University, 1937), quote at 278.

Hoover also established a second subsidiary organization to help carry out the program of the Food Administration. In 1918 he set up the Sugar Equalization Board, Inc., to purchase and distribute Cuban sugar in a manner that would not undermine American sugar beet growers. He incorporated this body under the laws of Delaware. In this instance, for reasons that are not clear, Wilson gave his permission in a letter, rather than by executive order. Van Dorn, Government Owned Corporations, 178–79.

(20) . “Modify Wheat Rule as Cereals Advance,” New York Times, February 2, 1918.

(21) . Surface, The Grain Trade, 20. By 1917, the retail price of bread was up by 64 percent over 1913 levels, but advanced only 11 percent during 1918. Van Dorn, Government Owned Corporations, 101–2.

(22) . Burner, Herbert Hoover, 100. For Hoover’s extensive public relations conservation campaign, see also Jacobs, Pocketbook Politics, 56–63; and Maxcy Robson Dickson, The Food Front in World War I (Washington, DC: American Council on Public Affairs, 1944). For Hoover’s commitment to a noncoercive role for government, see (p.195) Joan Hoff Wilson, Herbert Hoover: Forgotten Progressive (Boston: Little, Brown, 1975), 54–63.

(23) . Hoover, “Introduction” to William Clinton Mullendore, History of the United States Food Administration, 1917–1919 (Stanford, CA: Stanford University Press, 1941), 12; David M. Kennedy, Over Here: The First World War and American Society ([1980] New York: Oxford University Press, 2004), 119–120; and Nash, The Life of Herbert Hoover, 3:13, Hoover quote at 74.

(24) . Nash, The Life of Herbert Hoover, 3:81–92, 535–37n107; Surface, The Grain Trade, 70, 74, 83; U.S. Department of Agriculture, Yearbook, 1918, 469; Kendrick A. Clements, The Presidency of Woodrow Wilson (Lawrence: University Press of Kansas, 1992), 68–69; and Mullendore, History of the United States Food Administration, 23. Hoover quote from “Hoover Ready to Buy Whole Wheat Crop,” New York Times, August 13, 1917.

(25) . Reed quoted in Nash, The Life of Herbert Hoover, 3:85: Surface, The Grain Trade, 150, 125.

(26) . Van Dorn, Government Owned Corporations, 99–100, 118–19; and Surface, The Grain Trade, 330, 459.

(27) . Arthur C. Townley, leader of the North Dakota Nonpartisan League, quoted in Hall, “Wilson and the Food Crisis,” 46.

(28) . Quotes from “Farmer’s Export Financing Corporation Act, 1921,” Senate Report No. 192, 67th Cong., 1st sess., 2. Text of Norris’s bill printed in Senate Committee on Agriculture and Forestry, Farmers’ Export Financing Corporation: Hearings on S. 1915, 67th Cong., 1st sess., June 20–29, 1921, 3–6.

(29) . Murray R. Benedict, Farm Politics of the United States, 1790–1950 (New York: Twentieth Century Fund, 1953), 183n 28; and Norman L. Zucker, George W. Norris: Gentle Knight of American Democracy (Urbana: University of Illinois Press, 1966), 88. Hoover quotes from “Hoover Opposes Government Aid to Farm Exporting,” New York Times, June 26, 1921. James H. Shideler, Farm Crisis, 1919–1923 (Berkeley: University of California Press, 1957), 159–62, Norris quote at 162.

(30) . Emergency Agricultural Credits Act, 42 Stat. 181 (August 24, 1921); John McDiarmid, Government Corporations and Federal Funds (Chicago: University of Chicago Press, 1938), 198–99; Van Dorn, Government Owned Corporations, 129–38, 198–205; and Agricultural Credits Act of 1923, 42 Stat. 1454 (March 4, 1923).

(31) . David Hamilton, From New Day to New Deal: American Farm Policy from Hoover to Roosevelt, 1928–1933 (Chapel Hill: University of North Carolina Press, 1991), 19– 21; and Benedict, Farm Politics, 208–31.

(32) . H. Morton Bodfish, History of Building and Loan in the United States (Chicago: United States Building and Loan League, 1931), 207–9; and American Federation of Labor, American Federation of Labor: History, Encyclopedia Reference Book, vol. 2 (Washington, DC: American Federation of Labor, 1924), 298. Quote from Senate Committee on Banking and Currency, Hearing on Federal Building Loans, S. 2492, 66th Cong., 1st sess., October 8, 1919, 20.

(33) . Kennedy, Over Here, 252–58; Glenn E. Plumb, “Labor’s Solution of the Railroad Problem,” Nation, August 16, 1919, 200–201; Glenn E. Plumb and William G. Roy-lance, Industrial Democracy: A Plan for Its Achievement (New York: B. W. Heubsch 1923), 198; David Montgomery, The Fall of the House of Labor: The Workplace, the State, and American Labor Activism ([1987] Paris: Cambridge University Press, paperback reprint 1993), 401; and K. Austin Kerr, American Railroad Politics, 1914–1920 (Pittsburgh, PA: University of Pittsburgh Press, 1968), chap. 7.

(34) . (p.196) Preston J. Hubbard, Origins of the TVA: The Muscle Shoals Controversy, 1920–1932 (Nashville, TN: Vanderbilt University Press, 1961), 1–7; Norman Wengert, “Antecedents of TVA: The Legislative History of Muscle Shoals,” Agricultural History 25 (October 1952): 145–46; Paul K. Conkin, “Intellectual and Political Roots,” in TVA: Fifty Years of Grass-Roots Bureaucracy, ed. Erwin C. Hargrove and Paul K. Conkin (Urbana: University of Illinois Press, 1983), 12–22; and Norman L. Zucker, George W. Norris: Gentle Knight of American Democracy (Urbana: University of Illinois Press, 1966), 118–19.

(35) . Van Dorn, Government Owned Corporations, chap. 9; McDiarmid, Government Corporations and Federal Funds, 31–32; and William J. Peterson, “The Federal Barge Line,” Palimpsest 53 (September 1973): 390–401.

(36) . Herbert Hoover, “Third Annual Message” reprinted in William Starr Myers, ed., The State Papers and Other Public Writings of Herbert Hoover (Garden City, NY: Doubleday, Doran, 1934), quotes at 54, 47, 49; Albert U. Romasco, The Poverty of Abundance: Hoover, the Nation, the Depression (New York: Oxford University Press, 1965), 191; and Federal Home Loan Bank Act, 47 Stat. 725 (July 22, 1932).

(37) . Hoover, “Third Annual Message” 50; and Gerald D. Nash, “Herbert Hoover and the Origins of the Reconstruction Finance Corporation,” Mississippi Valley Historical Review 46 (December 1959): 455–68. Hoover quote characterizing the banking sector from Jordan A. Schwarz, The Interregnum of Despair: Hoover, Congress, and the Depression (Urbana: University of Illinois Press, 1970), 88–89. Reconstruction Finance Corporation Act, 47 Stat. 5 (January 22, 1932).

(38) . James Stuart Olson, Herbert Hoover and the Reconstruction Finance Corporation, 1931– 1933 (Ames: Iowa State University Press, 1977), 24–39, McFadden quoted at 35 and Wagner at 36.

With regard to the issue of expediency, it should be noted that Hoover had endorsed the popular concept of stabilization corporations to deal with agricultural surpluses while a candidate for the presidency in 1928, even though he had consistently opposed establishing such bodies during his tenure as Commerce Secretary. Historian David E. Hamilton describes this shift as “political opportunism.” As it turned out, the stabilization corporations authorized by the Agricultural Marketing Act (June 15, 1929) did not turn out to be effective. During the war, Hoover’s goal with the grain corporation was to stimulate production and hold down prices. The deteriorating economy of the late 1920s presented an opposite set of challenges—ones that were inherently harder to solve. In February 1930, with wheat prices falling since the previous summer, the Grain Stabilization Corporation attempted to create a price floor through buying operations, with the hope that it could dispose of its stores after world prices recovered. No upturn occurred, however, and the corporation exhausted its resources and ended its purchasing program in June 1931. The Cotton Stabilization Corporation, created in June 1930, suffered a similar fate. Benedict, Farm Policies, 262–63; and Hamilton, From New Day to New Deal, 66–108, quote at 42.

(39) . As always with these heterogeneous agencies, there is no single definitive count, because different researchers use different definitions. The figures used here are based primarily on the those in Joint Committee on Reduction of Nonessential Federal Expenditures, Report of Joint Committee on Reduction of Nonessential Federal Expenditures Relative to Government Corporations, Senate Doc. 227, 78th Cong., 2nd sess. (August 1, 1944), 2–3, which lists agencies in existence at the time the report was issued. Homogeneous instrumentalities, for example, the twelve land banks, are counted as single units. Information on corporate agencies established after March (p.197) 1933 but no longer in existence by 1944 from McDiarmid, Government Corporations and Federal Funds, 34–47.

(40) . “New Deal Rules by Corporations,” New York Times, October 22, 1933.

(41) . The ten that were established without explicit congressional authorization were the Commodity Credit Corporation, the Federal Surplus Commodities Corporation, the Public Works Emergency Housing Corporation, the Federal Subsistence Homesteads Corporation, the Electric Home and Farm Authority, the Public Works Emergency Leasing Corporation, the Tennessee Valley Associated Cooperatives, Inc., the Export-Import Bank of Washington, the Second Export Import Bank of Washington, and the Virgin Islands Company. For information on the circumstances of their creation, see the appendix.

(42) . The name would be changed in 1935 to the Federal Surplus Commodities Corporation. Roosevelt quoted in “Huge Corporation to Buy for Relief,” New York Times, October 2, 1933. Certificate of incorporation of the Federal Surplus Relief Corporation printed in volume 79 of Congressional Record, 74th Cong., 1st sess. (February 6, 1935), 1556–57. Executive Order 6340, Creating the Commodity Credit Corporation, October 16, 1933. After listing several pieces of recent emergency legislation, in addition to the Federal Farm Loan Act of 1916, Roosevelt stated in this order that it was “expedient and necessary that a corporation be organized with such powers and functions as may be necessary to accomplish the purposes of said acts.” As justification for his ability to establish an agency independent of the standard departmental structure of the federal government, the president cited the National Industrial Recovery Act, 48 Stat. 195 (June 16, 1933), sec. 2. (a): “To effectuate the policy of this title, the President is hereby authorized to establish such agencies … as he may find necessary.”

(43) . “Work Relief Corporation to Spend 8 to 9 Billions, Hopkins Plan to End Dole,” New York Times, November 29, 1934; “Flurry over Hopkins Finds His ‘EPIA’ at Work,” New York Times, December 2, 1934; and June Hopkins, “The Road Not Taken: Harry Hopkins and New Deal Work Relief,” Presidential Studies Quarterly 29 (June 1999): 306–16. For Sinclair’s authorities, see his I, Candidate for Governor and How I Got Licked ([1934] Berkeley: University of California Press, 1994), 242–49. Hopkins lobbied hard, but ultimately unsuccessfully, for a work relief corporation to be added to the administration’s social welfare proposal that ultimately became the Social Security Act.

(44) . National Industrial Recovery Act, 48 Stat. 195, Title II, sec. 208; Arthur M. Schlesinger, Jr., “The Coming of the New Deal (Boston: Houghton Mifflin, 1959), 361–68, quote at 364; and Paul K. Conkin, Tomorrow a New World: The New Deal Community Program ([1959] New York: Da Capo Press, 1976), chap. 5, Bankhead quote at 87. The sketch of the substinance homesteads program in this section relies heavily on Conkin and Schlesinger.

(45) . Executive Order No. 6209, July 21, 1933.

(46) . Philip M. Glick, “The Federal Subsistence Homesteads Program,” Yale Law Journal 44 (June 1935): Cummings quoted at 1333n27, Glick quote at 1333. Glick was the program’s general counsel.

(47) . Ibid., 1333–37, quote at 1335.

(48) . McDiarmid, Government Corporations and Federal Funds, 40–41, 200–201; and Conkin, Tomorrow a New World, 119.

(49) . Letter from McCarl to Ickes, dated January 11, 1934, entered in Congressional Record, 73rd Cong. 2nd sess. (January 22, 1934), 1053.

(50) . (p.198) Dale L. Flesher, “Remembering J. Raymond McCarl,” Government Accountants Journal 42 (Spring 1993): 22; “J. R. M’Carl Dead,” New York Times, August 3,1940; and John Raymond McCarl, “Government-Run-Everything,” Saturday Evening Post, October 3, 1936, 9. The agency largely abandoned pre-audits after McCall’s tenure ended. It transitioned from focusing on specific expenditures to investigating and analyzing the efficacy of government programs more generally. Reflecting this more expansive conception, in 2004, Congress changed the formal name of the GAO to Government Accountability Office. GAO: Working for Good Government Since 1921, http://www.gao.gov/about/history (accessed June 22, 2011).

(51) . Congressional Record, 74th Cong. 1st sess. (February 6, 1935), vol. 79, pt. 2, 1546, 1547. Reputation as second most unpopular from “Death of Schall” Time, December 30, 1935. The least liked was assumed to be Huey Long.

(52) . Albert W. Atwood, “The New Deal Corporate Maze,” Saturday Evening Post, October 26, 1935, 68.

(53) . National Industrial Recovery Act, 48 Stat. 195 (June 16, 1933), Title I, sec. 2.

(54) . Letter from McCarl to Ickes (January 11, 1934) printed in Congressional Record, 73rd Cong. 2nd sess. (January 22, 1934), vol. 78, pt. 1, 1052–53.

(55) . The President’s Committee on Administrative Management, Report of the Committee (Washington, DC: GPO, 1937), 32–33, quote at 32. The key studies of the administrative reorganization battle are Richard Polenberg, Reorganizing Roosevelt’s Government: The Controversy over Executive Reorganization,1936–1939 (Cambridge, MA: Harvard University Press, 1966); and Barry Dean Karl, Executive Reorganization and Reform in the New Deal: The Genesis of Administrative Management, 1900–1939 (Cambridge, MA: Harvard University Press, 1963).

(56) . Polenberg, Reorganizing Roosevelt’s Government, 22; and President’s Committee, Report of the Committee, 7–9, 121–30, quotes at 7, 64.

(57) . Senator Burton Wheeler quoted in “Wheeler for Curb on Reorganization,” New York Times, March 9, 1938. Hoover quoted in Carl Brent Swisher, American Constitutional Development (Cambridge, MA: Houghton Mifflin, 1943), 763. Hoover’s message to the Senate on reorganization of executive departments is in Congressional Record, 72nd Cong., 2nd sess. (February 17, 1932), vol. 75, pt. 4, 4109–10.

(58) . Byrd quoted in Current Biography 1942 (New York: H. W. Wilson, 1942), 117. Paul Y. Anderson, “Reorganization and Bunk,” Nation 146 (April 8, 1938): 406.

(59) . Byrd quoted in David L. Porter, Congress and the Waning of the New Deal (Port Washington, NY: Kennikat Press, 1980), 94.

(60) . Ronald L. Heinemann, Harry Byrd of Virginia (Charlottesville: University Press of Virginia, 1996), 179, 219; and Current Biography, 1955 (New York: H. W. Wilson, 1955), quote at 90.

(61) . Heinemann, Harry Byrd of Virginia, 227, quote at 221.

(62) . “Byrd Committee Called Wasteful,” New York Times, February 25, 1950; Carl Solberg, Hubert Humphrey: A Biography (New York: Norton, 1984), 160–61, 141–45; and Frederick C. Mosher, The GAO: The Quest for Accountability in American Government (Boulder, CO: Westview Press, 1979), 127n10.

(63) . U.S. Congress, Joint Committee on Reduction of Nonessential Federal Expenditures, Report on Government Corporations, Senate Doc. 227, 78th Cong., 2nd sess. (August 1, 1944), quote at 2, table 7 on 49.

(64) . Government Corporation Control Act, 59 Stat. 597 (December 6, 1945).

(65) . The reincorporated agencies were the Panama Railroad Company, the Commodity (p.199) Credit Corporation, the Institute of Inter-American Affairs, the Virgin Islands Company, and the Export-Import Bank. Allowed to lapse at this time were the Defense Plant Corporation, the Metals Reserve Company, the Rubber Reserve Company, the Defense Supplies Corporation, and the Disaster Loan Corporation. Senate Committee on Government Operations, Audit Reports of Government Corporation and Agencies, Senate Report 861, 83rd Cong., 2nd sess. (January 1954), 7.

(66) . The St. Lawrence Seaway Development Corporation (SLSDC) was chartered by Congress in 1954, 68 Stat. 92, to develop, operate, and maintain, in cooperation with the government of Canada, the seaway between Lake Erie and Montreal. The SLSDC operated as an independent agency until 1958, when it was transferred to the Department of Commerce. In 1967 it became part of the Department of Transportation. The FFC was chartered in 1954 by the secretary of the treasury pursuant to Executive Order 10539 and dissolved in 1961 by an act of Congress, 75 Stat. 418. Data from Guide to Federal Records in the National Archives of the United States, compiled by Robert B. Matchette et al. (Washington, DC: National Archives and Records Administration, 1995), web version.

(67) . Senate Committee on Government Operations, Audit Reports, 8.

(68) . The Resolution Trust Corporation (RTC) was established by the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) of 1989, 103 Stat. 183. By 1986, the Federal Savings and Loan Insurance Corporation (FSLIC), the federal insurer of the thrift industry (banking institutions that specialize in residential mortgage loans), had been left insolvent due to the failure of hundreds of thrifts. FIRREA created a new thrift insurance fund to be administered by the Federal Deposit Insurance Corporation (FDIC) and established the RTC, initially capitalized at $50 billion (later raised to $105 billion), to handle the assets of failed or troubled thrift institutions. By 1999, the cost to U.S. taxpayers to back up the commitment extended to insured depositors of failed thrifts came to approximately $124 billion. Timothy Curry and Lynn Shibut, “The Cost of the Savings and Loan Crisis,” FDIC Banking Review 13, no. 2 (2000): 26–35.

The United States Enrichment Corporation (USEC) was established by the Energy Policy Act of 1992, 106 Stat. 2776, as a wholly owned government corporation for the purpose of privatizing the two facilities. (The process was modeled on Conrail, a government corporation that Congress established in 1976 from seven private bankrupt railroads in the Northeast. After ten years and an investment of $10 billion, the operation was able to demonstrate commercial viability such that private investors came forward and bought the freight rail system for $2 billion.) The USEC was sold in 1998, but the transition was not successful. This was because the company was not able to compete successfully with other for-profit enrichment firms while carrying out the public purposes that Congress had envisioned being continued under private ownership, such as keeping the facilities in both states open and purchasing, at above-market rates, large quantities of weapons-grade uranium from the former Soviet Union as a way of keeping it out of the hands of unfriendly nations and terrorists. Ronald C. Moe and Kevin R. Kosar, Federal Government Corporations: An Overview (Congressional Research Service, March 23, 2006), 14–15; Peter Passell, “The Sticky Side of Privatization: Sale of U.S. Nuclear Fuel Plants Raises Host of Conflicts,” New York Times, August 30, 1997; and Dan Guttman, “The United States Enrichment Corporation: A Failing Privatisation,” Asian Journal of Public Administration 23 (December 2001): 247–72.

(69) . (p.200) Atwood, “The New Deal Corporate Maze.”

(70) . Arthur W. Macmahon, John D. Millett, Gladys Ogden, The Administration of Federal Work Relief (Chicago: Public Administration Service, 1941), 116.

(71) . Polenberg, Reorganizing Roosevelt’s Government, 9, 10.

(72) . Schlesinger, Jr., The Coming of the New Deal, 533.

(73) . Ibid., Tugwell quoted at 534.

(74) . Jordan A. Schwarz, Liberal: Adolf A. Berle and the Vision of an American Era (New York: The Free Press, 1987), 138–39; William J. Barber, Designs within Disorder: Franklin D. Roosevelt, the Economists, and the Shaping of American Economic Policy, 1933–1945 (New York: Cambridge University Press, 1966), 125–26; and Adolf A. Berle, Jr., “A Banking System for Capital and Capital Credit,” chap. 5 in Berle, New Directions in the New World (New York: Harper and Brothers, 1940).

(75) . For example, Harold Archer Van Dorn, Government Owned Corporations (New York: Alfred A. Knopf, 1926); Robert H. Schnell and Robert H. Wettach, “Corporations as Agencies of the Recovery Program, North Carolina Law Review 12 (February 1934): 77–98; Maurice S. Culp, “Creation of Government Corporations by the National Government,” Michigan Law Review 33 (February 1935): 473–511; John Thurston, “Government Proprietary Corporations I,” Virginia Law Review 21 (February 1935): 351–96; John Thurston, “Government Proprietary Corporations II,” Virginia Law Review 21 (March 1935): 465–503; Oliver Peter Field, “Government Corporations: A Proposal,” Harvard Law Review 48 (March 1935): 775–96; John A. McIntire, “Government Corporations as Administrative Agencies: An Approach,” George Washington Law Review 4 (January 1936): 161–210; and John McDiarmid, Government Corporations and Federal Funds (Chicago: University of Chicago Press, 1938).

(76) . Glick, “The Federal Subsistence Homesteads Program,” 1333.

(77) . James S. Olson, Saving Capitalism: The Reconstruction Finance Corporation and the New Deal, 1933–1940 (Princeton, NJ: Princeton University Press, 1988), 45.

(78) . Herbert Morrison, Socialisation and Transport: The Organisation of Socialised Industries with Particular Reference to the London Passenger Transport Bill (London: Constable, 1933), passim, quotes at 77, 156. The greater London region consisted of two thousand square miles, in which over nine million people then lived. Terence H. O’Brien, British Experiments in Public Ownership and Control (London: George Allen and Unwin, 1937), 203.

(79) . C. R. Attlee, “Post Office Reform,” New Statesman and Nation (November 7, 1931): 565–66, quotes at 565.

(80) . Kenneth O. Morgan, Labour in Power, 1945–1951 (Oxford: Clarendon Press, 1984), chap. 3.

(81) . E. Eldon Barry, Nationalisation in British Politics: The Historical Background (Stanford, CA: Stanford University Press, 1965), 116, 147–48, 162–64; and G. N. Ostergaard, “Labour and the Development of the Public Corporation,” Manchester School of Economic and Social Studies 22 (1954): 192–226. The text of the bill appears in Frank Hodges, Nationalization of the Mines (London: Leonard Parsons, 1920), 151–70, quote at 154.

(82) . Charles Loch Mowat, Britain between the Wars, 1918–1940 (London: Methuen, 1955), 342; and John Singleton, “Labour, the Conservatives and Nationalisation,” in The Political Economy of Nationalisation in Britain, 1920–1950, ed. Robert Millward and John Singleton (Cambridge: Cambridge University Press, 1995), 13–33.

(83) . A. Snow, “The First National Grid,” Engineering Science and Education Journal 2 (October 1993): 219.

(84) . (p.201) Morrison, Socialisation and Transport, 123, 153.