The NonProfit Times - February 1, 2008 - (Page 12) GENERAL RAMBLINGS PAUL CLOLERY Culling The Herd Red Cross responds late to its own disaster “You’re one of those environmental lawyers? They’re evildoers.Yesterday, it’s a tree. Today, it’s a salmon. Tomorrow it’s, ‘Let’s not dig up Alaska for oil because it’s too pretty.’ Let me tell you something, I came out here to enjoy nature. Don’t talk to me about the environment.’’ -- Denny Crane commissioner, was running the shop. OK, so his attention might have been diverted slightly while having an affair with a subordinate that got him fired. It must have been run up at least partly during the 18 months the board was looking for Everson to fill the chair and when they were assuring Congress that a reorganized board would be more accountable. The organization now is poised to layoff about 1,000 workers at headquarters and other areas because fundraising is down. Yes, it’s a $3.45billion operation and $200 million is just 5.7 percent of budget and the organization has an $800-million endowment. But, it’s still $200 million. It’s not as if you didn’t get change back from your dollar at McDonald’s. At what point does someone in accounting start to worry that the books aren’t balancing? In Denny Crane’s logic, this would be: “Don’t talk to me about running a massive deficit. I’m talking about accountability.” people off roofs. Short of buying those helicopters, the Red Cross stocked up, spending millions. Now many donors have turned and walked away. In Denny Crane’s logic, he once told a client, “It’s as simple as this.You don’t get on the stand and say, ‘I’m sorry for not doing the right thing.’ You testify, ‘I did the right thing!’ That’s how you win lawsuits.You’re right! Even when you’re wrong.” The Red Cross board has always used that as a credo. It’s time to stop doing so. This is the new, reconstituted board. It’s time to take responsibility. It’s time to make the hard cuts and get this valuable institution back on its feet. It’s time for zero-based budgeting. It’s time for the biomedical division to stop getting fined millions of dollars by the federal Food and Drug Administration for its handling of the blood supply. The Red Cross just might be running out of chances. NPT N o, this isn’t an obsession. If a third column, say next month, started with a quote from the senior partner of Crane Poole and Schmidt from Boston Legal, now that would be an obsession. But right now we are talking about the American Red Cross. And, who better than Denny Crane to argue the Red Cross’s convoluted case. After all, this was the organization that screamed for board accountability during reorganization and now is running a $200-million deficit. That tab didn’t run up during the just six months Mark Everson, the former IRS Donors have obviously spoken – first with their voices and now their wallets. And it too, is double talk. Donors demanded to know why the Red Cross could not respond to certain aspects of relief during Hurricane Katrina. Some were quoted on television demanding to know why the Red Cross didn’t have helicopters picking OPINION RICK COHEN Foreclosed, But Not Forewarned Subprime mess will put pressure on charities Subprime mortgage interest rates have been frozen, hurray! Problem solved. Crisis over. Right? Fat chance. And the ongoing subprime mortgage crisis is going to -- no, already has -- landed squarely in the lap of the nonprofit sector due to years of government and corporate “see no evil” inaction. Get ready for impacts on a wide swath of nonprofits that will be expected to deal with the craters in the government’s illconsidered, derisory response to the biggest housing, banking, and financial markets crisis since the savings & loan scandals of the 1980s. The plan, announced by President George W. Bush and Treasury Secretary Henry Paulson this past December, brazenly divides subprime mortgage holders into winners (who will be protected under this deal) and losers (the people who will still face foreclosures and evictions). For subprime homeowners who got their mortgages between 2005 and the middle 2007 and are current in their mortgage payments but likely can’t meet the demands of much higher (say, 11 percent) adjustable rate mortgage (ARM) increases, they are theoretically eligible for a five-year freeze in their low introductory “teaser” interest rates. During that 12 time, those homeowners can get help with refinancing into more affordable long-term mortgages. But, look at who’s not covered: • Homeowners who are or have been delinquent on their current mortgages for more than 60 days on at least one payment during the past year; • Homeowners who the banks and servicers deem able to pay the higher exploding ARM rates; and, • Homeowners who got their mortgages from banks and mortgage Almost half of those polled believe that subprime borrowers shouldn’t be “bailed out.” How does the subprime mortgage crisis end up on the shoulders and programs of nonprofits? Take your pick: • Action Research: The phenomenally powerful reports of groups like the Center for Responsible Lending (CRL) and others during the past year or two counted the numbers of subprime mortgage holders likely to face foreclosures in the near term -- and House Banking Committee which is examining various legislative solutions, noted that the five-year, interestrate freeze is like “kicking the can down the road.” But the nation has to figure out what to do to solve this problem more comprehensively in that period. Community reinvestment, fair housing, and civil rights organizations will need big-time support to meet this advocacy challenge. • Elections: Compare the subprime mess to the savings and loan scandal or the Enron-inspired corporate meltdowns of the beginning of the new millennium. The subprime disaster can and will be among the very top domestic issues in the upcoming national elections. Without engaging in inappropriate electioneering, election-related education activities will be required of nonprofits to counter the likely deluge of selfserving public relations from the financial markets. Government officials who were asleep at the switch watching the subprime mess crest should be called on the carpet.The Bush/Paulson plan for limited voluntary actions that help only a small slice of subprime borrowers shouldn’t be permitted to take the place of desperately needed legislaOpinion, page 14 The whole thing might implode due to opposition from investors and from the public at large. servicers that have not signed on as members of the so-called Hope Now Alliance working with The Department of the Treasury on this plan. What’s the importance of the list of homeowners left by the wayside? It is that millions of homeowners won’t be assisted in this deal.They will still likely face foreclosures. Even the “winners” in the White House announcement might find themselves receiving less than a fix to their situations. The whole thing might implode, anyhow, due to opposition from investors and from the public at large. FEBRUARY 1, 2008 the significant proportions of AfricanAmerican and Latino and immigrant families in that count.They are models of the intersection of solid research and public policy advocacy. With the White House’s half-baked solution to the subprime mess, geared to help investors and the markets, but not troubled middle and lower income homeowners, nonprofits again will have to make sure that the public and Capitol Hill legislators pay attention to unsolved parts of this picture. • Policy Advocacy: Rep. Barney Frank (D-Mass), Chairman of the www.nptimes.com THE NONPROFIT TIMES http://www.nptimes.com
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