Reconstruction Finance Corporation

The Reconstruction Finance Corporation was a federal lending agency that provided low-interest loans to businesses. Its power to direct substantial public credit made it a central subject of scrutiny in 1951, when a Senate investigation raised questions about political influence over loans and the conduct of people connected to the White House. The inquiry produced evidence of persistent political access, but the case against William Boyle over a particular loan was not substantiated by the agency’s records.

Role and Lending Authority

The Reconstruction Finance Corporation (RFC) dispensed low-interest government loans to businesses, including multimillion-dollar loans that could sustain or rescue companies. That scale gave decisions about its lending consequences beyond individual firms: investigators examined whether political relationships had affected who received assistance. The evidence describes the RFC through its lending function and the controversies surrounding access to that function, rather than through a fuller account of its institutional structure.

The 1951 Influence-Peddling Allegations

In February 1951, a Senate subcommittee chaired by William Fulbright issued a preliminary report, Study of Reconstruction Finance Corporation: Favoritism and Influence. It implied misconduct in the RFC’s operations and named Democratic Party chairman William Boyle, White House administrative assistant Donald Dawson, and E. Merl Young, a former RFC examiner and friend of Dawson. Young had previously worked for the corporation; according to the allegations, he used that connection, along with his friendship with Dawson, as a Washington “expeditor.”

Young drew particular attention after it emerged that an attorney for a company receiving an RFC loan had paid $9,540 for a pastel mink coat given to Young’s wife, a White House stenographer. The coat became a symbol of suspected corruption. Because Boyle, Dawson, and Young were all from Missouri, the affair also revived accusations of government by personal connections and recalled Harry S. Truman’s earlier associations with the Pendergast political machine. These were allegations and political associations, however, not proof that the RFC’s lending decisions had been improperly directed.

Testimony and the Limits of the Evidence

As the hearings proceeded, investigators confronted a blurred boundary between hearsay, impropriety, and illegal conduct. Some RFC borrowers were corporations of questionable stability that had received multimillion-dollar loans, often seemingly through political influence. Walter L. Dunham, an RFC director, testified that Dawson had told him to clear senior personnel matters with the White House. Dunham’s telephone log recorded 45 calls from or about Dawson and 151 from Boyle or his office, most urging him to meet a “very dear friend” concerning an RFC matter. Yet Dunham specifically said Dawson had never tried to influence him about an RFC loan.

Dawson denied wrongdoing. He acknowledged staying without charge at a Miami hotel on three occasions, describing free accommodation as common practice, and said he had not known the hotel had received a $1.5 million RFC loan. He maintained that his conduct was not improper, while adding that he would not repeat it. The hearings thus documented extensive contact and raised questions about judgment and access, but did not establish that every contact amounted to loan interference.

Boyle and the Lithofold Loan

Harry S. Truman ordered a confidential review of the accusations against Boyle, assigning it to counselor Charlie Murphy. Murphy’s examination of RFC records found no effort by Boyle to influence the loan to the American Lithofold Corporation. The records did show that Lithofold paid Boyle $1,500 in the spring of 1949, while its loan remained outstanding. Boyle’s account was that the company had retained him for general legal services for two and a half months in the spring of 1948, and that he voluntarily relinquished the account in April 1949 when he became a full-time, salaried employee of the Democratic National Committee.

The RFC examiner handling the Lithofold loan had never met Boyle and had not communicated with him, directly or indirectly, about that loan or any other matter. Murphy concluded that the loan was not suspicious and that the evidence gave no reason to criticize Boyle in connection with its approval. The distinction is central to the episode: the RFC’s lending practices and the political traffic surrounding them came under serious scrutiny, but the specific allegation that Boyle had influenced the Lithofold loan was not supported by the records Murphy reviewed.