Unprecedented Power

In this poignant and timely biography, Unprecedented Power: Jesse Jones, Capitalism and the Common Good shows how the Reconstruction Finance Corporation (RFC) saved the United States economy during the Great Depression and militarized industry in time to win World War II. RFC strategies and Jesse Jones’s approaches can be adapted now to address the impacts of the new coronavirus and climate change.

President Herbert Hoover had established the RFC in 1932 to make loans to banks, railroads and insurance companies and appointed Jesse Jones—Houston’s preeminent developer and a former finance chair of the Democratic National Committee—to the bi-partisan board. With clear implications today, Jones complained the RFC was slow and a year late and said if it had judiciously loaned five to seven billion dollars in 1931 and ’32, economic collapse would have been prevented.

Soon after his inauguration, President Franklin Roosevelt supercharged the RFC, made Jones chair and the government agency began buying preferred stock in banks to stabilize and help them lend again. Jones knew capital rather than debt was needed to save the banks and revive the flow of credit, just as it was when the program was duplicated in 2008 as the Troubled Asset Relief Program, better known as TARP. Under Jones’s leadership, the RFC became the largest investor in the nation and rescued banks, businesses, homes and farms; saved the railroads; rebuilt communities after environmental calamities; built bridges, dams and aqueducts across the nation; and brought electricity and appliances to rural America. The RFC helped people and saved businesses during the Great Depression through judicious lending, not spending, and remarkably returned a profit to the government and its taxpayers.

As war spread, Jones and FDR shifted the RFC’s focus from domestic economics to global defense. In its second cover story about Jones, TIME magazine reported, “In all the U.S. today there is only one man whose power is greater: Franklin Roosevelt … The President knows Congress will give more to Jones without debate than he can get after a fight … Emperor Jones is the greatest lender of all time.”

Accordingly, after Germany’s European victories, Congress on June 25, 1940, gave Jones and the RFC the authority to build, buy and lease plants to develop and manufacture metals, ships, airplanes, tanks and guns; to train aviators; and, with FDR’s approval, to do anything required to arm the Allied Forces. Almost half of its outsized investments went to corporations to help convert their production to war-time needs. One of its largest new plants—the Dodge-Chicago plant—covered 145 acres and took in raw metal at one end and produced finished airplane engines at the other. Like all its new factories, the plant was built and owned by the federal government’s RFC, leased to corporations to operate and sold to private interests after the war. Likewise, coordinated national large-scale efforts and government investments can be made to address today’s daunting challenges.

Unprecedented Power dramatically describes how Jesse Jones and the RFC used every option to save life, democracy and capitalism during two of the 20th century’s most threatening events. Unprecedented Power provides models for today by looking at successes from the past.