Working Paper #2011-19 – The German Influence on the Origin of U.S. Federal Financial Rescues

Department of Economics
University of Delaware
Working Paper #2011-19

The German Influence on the Origin of U.S. Federal Financial Rescues

James L. Butkiewicz

ABSTRACT

While federal financial rescues have become a common response to crises, federal provision of finance was not one of the original powers of the federal government. One man, Eugene Meyer, is largely responsible for the origin of federal financial rescues, through both the War Finance Corporation and Reconstruction Finance Corporation. Meyer learned laissez faire economics from William Graham Sumner at Yale. However, German economist Adolph Wagner’s state-socialism philosophy heavily influenced Meyer’s thinking, and Meyer developed an interventionist philosophy. Serving in key government positions, Meyer put his beliefs into practice. These channels of influence and the resulting policies are examined.

JEL Codes: B, N

Keywords:  Financial rescues, War Finance Corporation, Reconstruction Finance Corporation