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October 16th, 2008
THE DIG
A reNewed Deal?

Even before the federal government reworked the bailout plan – to now buy up $250 billion in stocks at large and small banks – a non-partisan initiative, Building America’s Future, had already called for a similar government expansion, but in funding infrastructure projects. New York City Mayor Michael Bloomberg (I), a co-chair of Building America’s Future with Gov. Ed Rendell (D – Pennsylvania) and Gov. Arnold Schwarzenegger (R – California), wrote in the New York Daily News on Aug. 3, “Remember, the New Deal didn’t just help get us through the Depression. It created the foundation for a generation of economic growth. That foundation is now cracking because Congress has been funding projects based purely on pork barrel politics, not merit. It’s time for a new New Deal – one that invests more money, more wisely. It is as impossible to imagine America without FDR’s New Deal as it is to imagine the country without Eisenhower’s interstate highway system. Those massive public investments epitomized both the vision and courage that are desperately lacking in today’s Washington.”

The bailout of U.S. financial institutions this past month is similar to actions made in the New Deal era. According to The New York Times on Oct. 13, “The nearest precedent for the Treasury plan… are the investments made by the Reconstruction Finance Corporation in the 1930s. The agency, established in 1932, not only made loans to distressed banks, but also bought stock in 6,000 banks, at a cost of $1.3 billion…” Though Herbert Hoover commissioned the Reconstruction Finance Corporation, it was FDR that used it as the basis for his New Deal programs that put Americans back to work and, at the same time, expanded the American infrastructure.

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