On August 15, 1939, the Tennessee Valley Authority, which had been established by the President Franklin D. Roosevelt administration to develop and regulate flood control and hydropower in the Valley, assumed control of Hales Bar Dam after purchasing TEPCO's assets through Eminent Domain.

The TVA worked for two decades trying to fix a leakage problem that had plagued Hales Bar since its construction.

Before the construction of Hales Bar, this was a particularly unpredictable and dangerous section of the river, with numerous navigation obstacles.

Downstream from the dam site, the river begins to steady as it enters the hills and flatlands near Guntersville.

While various 19th-century canal projects had minor success in extending navigation across the shoals, the Tennessee River Gorge remained largely untamed.

Two self-contained communities, Guild (now Haletown) and Ladds, were built to house the thousands of construction workers needed to build the dam.

With the help of attorney Wendell Willkie, TEPCO challenged the constitutionality of the TVA Act in federal court.

A few months later, TEPCO was forced to sell most of its assets, including Hales Bar Dam, to TVA for $78 million (equivalent to $1.34 billion in 2023[5]).

Dye tests carried out in 1960 suggested that many of the leakage channels had interconnected, increasing the possibility of a future dam failure.

[3] In the 1960s, TVA began expanding the size of its dam locks to accommodate the increase in river traffic in the Tennessee Valley since the end of World War II.