On the morning of April 24, 1933, five thousand Chicago schoolteachers stormed the lobbies of the five largest financial institutions in the Loop. The Chicago School Board was ten months behind on their salaries, amounting to \$30 million owed. Earlier that day, the teachers had marched to the Governor Henry Horner's mansion to demand pay, but when Horner appeared, he explained that the municipal government’s vaults were empty—“the only way that we can get money is through taxes”—and receipts were already two years overdue. The teachers turned to the monetary control centers instead.2
At City National Bank they demanded to understand why chairman Charles Dawes hadn’t lent the city money, despite the fact that his bank had just received a \$90 million loan from the government via the newly formed Reconstruction Finance Corporation (RFC), a government-sponsored enterprise whose express mission was to loosen credit conditions for the wider economy by lending to banks. Dawes had impressive financial credentials: in 1925, he won the Nobel Peace Prize for organizing an international flow of money from US coffers to save the Germans and the French after the indemnities imposed by the Treaty of Versailles proved unworkable, the so-called “Dawes Plan.” Now, his bank flush with loan money from the state, the teachers demanded to know what was keeping him from saving Chicago’s finances. Reluctant to lend to a city two years behind on tax receipts in the middle of the Great Depression, Dawes refused to discuss the matter. In the lobby of the Continental-Illinois National Bank, the protesters pressured the bank president to seek an RFC loan so that he could lend to the city directly, but they were again turned down. The crowd grew agitated, but the police did not disperse it—their paychecks were in arrears too. “Outside their doors a revolt is brewing,” Senator J. Hamilton Lewis of Illinois said of the Chicago situation. “We are on the eve of a revolution unless we use a little common sense.”
The crisis continued through the summer until, on August 25th, it was over: Congress had passed legislation allowing the RFC to lend directly to the Chicago School Board, bypassing the private banks.3 In this moment, the RFC became a direct link between the abstractions of finance and the concrete demands from those in the street.4
Inventing a tradition — war
The origins of the RFC go back to America’s chaotic entry into World War I, when rampant inflation, weakened transportation networks, and tightening corporate financing constraints necessitated state action. Woodrow Wilson charged Treasury Secretary William Gibbs McAdoo and his protégé Bernard Baruch with handling the situation, and Congress summoned into existence a series of administrative agencies for the task.