National Credit Corporation
| Company type | Independent agency |
|---|---|
| Industry | Financial services |
| Founded | 1931 |
| Founder | Mortimer N. Buckner |
| Fate | Succeeded by Reconstruction Finance Corporation in 1932 |
Area served | United States |
Key people | Mortimer N. Buckner (President) |
| Products | Interbank lending facilitation |
The National Credit Corporation was an independent agency created in 1931 to combat the extensive bank failures occurring across the United States. It functioned as a facilitator within the interbank lending market, utilizing a $500 million fund pooled from bankers to aid banks facing imminent insolvency. While it contributed to restoring liquidity, deflationary pressures and high unemployment constrained its capacity to fully renew public trust.
In 1932, the agency was succeeded by the Reconstruction Finance Corporation, a federal lender of last resort with an expanded scope, providing loans not only to banks but also to state and local governments, railroads, mortgage institutions, and various businesses.
History
Amid a sharp increase in bank failures—from 600 in 1929 escalating to 2,293 by 1931—the Hoover administration established the National Credit Corporation to enable financially stable banks to extend credit to those in distress. The organization managed a $500 million capital pool contributed by prominent banks. Mortimer N. Buckner, who was chairman of the New York Trust Company and president of the New York Clearing House, held the position of president of the corporation.
Loan disbursements were planned to commence in October 1931, aiming to reinforce confidence within the banking system. In November of that year, the corporation approved a $2 million capital merger between Bank of America Safe Deposit Company and National City Safe Deposit Company.
By December 1931, Buckner reported that operations spanned all twelve Federal Reserve Districts and that all loan applications had been met without requiring member banks to make payments on gold notes.
Nevertheless, on January 14, 1932, Buckner called for a second installment payment amounting to 10% on gold note subscriptions—equivalent to $50 million—bringing total payments close to $100 million. Later that month, a third call for an additional 10% installment was issued, also totaling $50 million. It was anticipated that once the Reconstruction Finance Corporation became fully functional, it would take over the responsibilities of the National Credit Corporation and lead to its eventual termination.
By March 1932, approximately $20.25 million (around 15%) of notes had been repaid. In April 1932, a third repayment installment was announced, lowering outstanding notes to $79.775 million.
Analysis
Numerous large financial institutions refrained from investing in failing banks due to concerns about security risks. Those that extended credit typically demanded that distressed banks offer their most valuable assets as collateral to reduce potential losses should repayments default.