Wall Street's woes worry charities

Wall Street's woes worry charities, arts groups
Friday September 26, 12:13 am ET
By David B. Caruso, Associated Press Writer
Wall Street woes worry charities, arts groups that rely on donations from troubled firms

NEW YORK (AP) -- Financial services firms and their well-paid executives have historically been generous givers to museums, colleges, hospitals and social service organizations, both in New York and around the globe.

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Now, nonprofit administrators are watching the crisis on Wall Street with queasy stomachs as reliable donors like Lehman Brothers, American International Group, Merrill Lynch and Bear Stearns change hands or go belly up.

For now, the firms that have taken over struggling companies aren't saying what they'll do, and it may be months before charities learn whether pledges are being honored.

"We've got a big question mark hanging over our heads," said Marsha Stein, executive director of Citymeals-on-Wheels, a group that relies heavily on private donations to deliver food to 18,000 homebound New Yorkers.

Bear Stearns employees, alone, she said, were good for about $500,000 in donations to Citymeals each year -- generosity due partly to the firm's requirement that its 1,000 senior directors contribute 4 percent of their annual compensation to charity.

That support came into question overnight when the firm disintegrated in March and was purchased by JPMorgan Chase.

The crisis is likely to hit nonprofits on several fronts, said Gordon J. Campbell, president and chief executive of the United Way of New York City.

Troubled firms may slash corporate giving while they focus on their own problems. Wealthy individuals may scale back as well as their stock portfolios lose value and their pay bonuses vanish.

And with tens of thousands of layoffs expected, local income tax revenues are expected to slide, meaning that there will be less government money for social service organizations, even as the number of needy people rises.

"We could see an exponential increase in need and potentially fewer dollars coming in the door," Campbell said.

Even now, some past beneficiaries of Wall Street largesse are trying to determine whether major pledges made by struggling firms will be paid.

At this time last fall, Lehman Brothers was pledging $10 million to Spelman College in Atlanta to help establish a center for global finance that bears the company's name. Now, with Lehman Brothers Holdings Inc. in bankruptcy, it's not immediately clear what will happen to that support.

A Spelman spokeswoman said officials at the college were sympathetic to the company's plight and are aware that "the situation is continuing to evolve."

Inquiries about other recent Lehman Brothers pledges produced similar responses. Last year, the investment bank gave away $39 million in the U.S., Europe and Asia.

Administrators at the Robin Hood Foundation and the Harlem Children's Zone, each of which was in the process of receiving $3 million from Lehman through 2009, declined to comment on whether they expected that support to continue. The Apollo Theater, which was one of the 87 cultural institutions supported by Lehman, also said it couldn't comment on the remainder of the $1 million it had been slated to receive over four years.

Some of the philanthropy of the vanishing Bear Stearns and Lehman Brothers is expected to be taken over by the firms acquiring parts or all of those companies, JPMorgan Chase and Barclays.

Both firms declined to comment on their plans, but stressed that they, too, have a record of strong giving. JPMorgan Chase said it gave $114 million to charitable causes last year.

Bank of America, which is acquiring Merrill Lynch, also said it was too soon to speak in specifics about how it planned to handle Merrill's charity programs, said spokesman Ernesto Anguilla. Bank of America gave away $200 million last year. Merrill Lynch made more than $43 million in charitable grants in 2007.

The turmoil is likely to have an impact on programs far beyond New York.

The troubled mortgage behemoths Fannie Mae and Freddie Mac had been major philanthropic powers in the Washington, D.C. area. Freddie Mac's foundation, for example, had given $348 million since 1991, with recent grants going to scores of organizations that house homeless children, support schools and feed the poor.

Each may have to scale back their giving now that they are the subject of government takeovers. The director of the Federal Housing Finance Agency said on Sept. 7 that the charitable programs at both companies would be reviewed. A Freddie Mac spokeswoman said that review is not yet complete.

The insurance giant AIG -- which has accepted an emergency bailout from the government in exchange for a controlling stake -- had given to causes worldwide, ranging from a $5 million grant to an anti-blindness program in Asia and Latin America to cash donated to charities in the United Kingdom and Ireland every time the Manchester United soccer club scored a goal. A company spokesman didn't respond this week to inquiries about the future of its philanthropic endeavors.

The Center on Philanthropy at Indiana University said that in 2007, Americans gave $306.39 billion to charity. About 74.8 percent of that total came from individuals; 7.6 percent were from bequests; 12.6 percent was from foundations and 5.1 percent from corporations.

The Giving USA Foundation released a report last week noting that the drop-off in overall charitable donations by Americans during economic slowdowns is generally mild.

Donations nationwide slid 2.2 percent during the last downturn, in 2001. It stayed flat during the recession of 1982 and dropped 5.4 percent during a downturn in 1974. The average drop-off in giving during all recessionary years since 1967 is 1 percent, according to the report.

Reynold Levy, president of Lincoln Center for the Performing Arts and author of the recent book "Yours for the Asking: An Indispensable Guide to Fundraising and Management," said it was far too soon to say that "the sky is falling" for cultural institutions that benefited from corporate support.

In the end, he said, New York City's opera houses, dance companies and museums may be hurt more by the general economic slowdown and the loss of subscription sales and individual gifts than any cuts in direct corporate giving.

And he predicted that U.S. philanthropists may yet surprise groups expecting a decline in support.

"Giving is quintessentially American," he said.

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