Bad moment for Red Cross, nice work by the for-profits

November 21, 2001|By Jay Hancock

AS WE count our blessings and turn our thoughts to charity, I'm thankful that Microsoft, Citigroup and General Electric are running the economy, not the Red Cross.

Trusted with $500 million from people who wanted to assist victims of the terrorist attacks, the Red Cross decided instead to spend a large portion of the money on itself, investing in blood supplies, preparations for future catastrophes, administration and who knows what else.

Protest in Congress and elsewhere prompted a reversal, and last week the organization promised to spend all donations directly on the people who suffered most in the Sept. 11 attacks.

But the original Red Cross plan illustrates one of the primary lessons of philanthropy, which is: Good do-gooders don't stop paying attention once they write the check.

It was easy to get the idea that the move by Red Cross to beat the Sept. 11 drum and then divert donations to non-Sept. 11 purposes was an isolated case of malfeasance. But it was neither unusual nor particularly blameworthy. Nonprofit groups, which see their missions as extending far beyond whatever prompts particular individuals to contribute, do this all the time.

James Watt, President Reagan's slash-and-burn interior secretary, was in some ways the best thing that happened to environmental groups in the 1980s. After Watt became the black-hat star of the Sierra Club's mass mailings, money poured in, political heat rose and Watt resigned.

Did the Sierra Club return the donations it had raised on Watt's back? Of course not.

Does the World Wildlife Fund spend all its money on the giant panda on its logo? Did the March of Dimes, founded in the 1930s to combat polio, go out of business after polio was licked?

Even before it got into trouble, the Red Cross noted that Sept. 11 contributions would not only help terror victims but also would pay for building up the U.S. blood reserve, for counseling and loans for military families and even for administration and public-information costs.

But the message got lost in the roar of half a billion dollars cascading into Red Cross accounts.

It should have quickly become clear that, despite its magnitude, the Sept. 11 tragedy was unusually local and personal.

You wanted your money to help that American widow and those poor motherless kids on TV, not to underwrite the "database management," "contribution processing" and blood-banking mentioned in Red Cross fine print.

But the Red Cross didn't even do a good job of distributing funds to the victims. Numerous relatives of people killed on Sept. 11 have complained of the difficulty in obtaining money.

The Red Cross had to scramble Nov. 6 when it learned of the impending congressional testimony of Russa Steiner, the widow of an insurance executive who worked in New York's World Trade Center.

Almost two months after she lost her husband, Steiner still hadn't received much charitable help and was having trouble with bills.

Embarrassed Red Cross officials managed to get her a $27,507 check minutes before the hearing began.

Recent reports show that other communities, recovering from past hurricanes, floods and other disasters, have also had trouble getting Red Cross to pay up.

Now compare the Red Cross track record in New York with what we might call the for-profit relief agencies.

Two months after the attacks, the New York Department of Insurance had received only 10 complaints about Sept. 11-related insurance claims - out of thousands of health, property, life, liability, disability and other cases being processed.

Two months after the attacks, Verizon had restored 95 percent of the lost telephone dial tones. The New York Public Service Commission praised Consolidated Edison for restoring power in lower Manhattan with what the utility called "36 miles of extension cords."

Marching under the order imposed by contracts, property rights, shareholders and the profit motive, insurers and utilities left Red Cross in the lower Manhattan dust.

And there was no confusion about who should pay for what. Every Verizon customer is paying for New York repairs as well as Verizon employee benefits and the salary of Verizon boss Ivan Seidenberg, but Congress hasn't held any hearings about it.

Society needs charity. Even efficient markets fail to solve poverty, pollution and other problems. Nonprofits go where no corporation would dare.

But the Sept. 11 aftermath shows again that, without plenty of help and oversight, good intentions can fall short.

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