Inside Philanthropy

A blog on philanthropy and nonprofit news and issues. A publication of Philanthropy Journal.

October 30, 2008

Despite joining bailout, BB&T says it prefers free market

By Todd Cohen

BB&T, which has donated over $30 million to colleges to teach free-market principles, says it opted to participate in the federal government’s $700 billion bailout of the financial industry because it was the right thing to do.

“The Treasury is encouraging banks to participate,” says Bob Denham, director of corporate communications for the bank, which is based in Winston-Salem, N.C. “With the way the economy is, we almost have a business obligation to support the Treasury.”

But Denham says BB&T’s decision to accept $3.1 billion in return for giving the federal government preferred stock “doesn’t change” the belief by John Allison, its CEO, in the philosophy of Ayn Rand that champions free markets and paints government as the nemesis of capitalism.

“It’s all about helping the financial market, easing credit in the financial markets and creating liquidity,” Denham says. “We have regulators and it’s important that when they ask us to help solve a liquidity crisis, that we want to be at least viewed as a team player.”

Allison reportedly struggled over the decision, trying to reconcile his belief in free-enterprise principles with his sense of obligation to support the government’s financial recovery plan.

Denham declines to comment on details of Allison’s decision-making process but says BB&T was concerned the bailout would give ailing banks an unfair advantage over healthy banks like BB&T that have avoided financial trouble by refusing to make loans to unqualified borrowers.

“We have an obligation to remain in business and maintain our competitive advantage, and from a business perspective, it simply makes sense to take advantage of the same low-cost capital costs as our other competitors,” Denham says.

Banking industry insiders say the U.S. Treasury Department pressured healthy banks to participate in the bailout plan and has the power to punish banks that do not participate.

Denham says the bailout plan actually hurts healthy banks like BB&T by, for example, increasing the premiums it pays the Federal Deposit Insurance Corporation to protect depositors, and increasing the costs it likely will pay the Federal Reserve Bank for overnight borrowing.

“Now we are being punished by the bailout plan for having followed our values, and everyone else is being let off the hook,” he says. “The bailout plan is for the banks and investment banks that were poorly managed.”

BB&T has been able to weather the credit crisis through years of putting into practice the moral values Rand spelled out in her novel Atlas Shrugged, Denham says.

Under the leadership of Ken Chalk, who recently retired as chief credit officer at BB&T, the bank over the past 20 years has created a “conservative credit culture that really has shined for us these last several years,” Denham says.

“And it really steered us through these crazy loans," he says, "and we decided we were not going to make those loans, we were not going to be involved in that kind of crazy lending.”

Among the principles championed in Atlas Shrugged is that of “trading” that creates a “win-win for both sides,” Denham says. “And the idea is that when we make a loan to a client, it needs to be good for them and it needs to be good for us.”

Over the past 10 years, BB&T has donated over $30 million to over 30 colleges to support the moral study of capitalism, and has made it a condition of those grants that the schools require the teaching of Atlas Shrugged.

“We absolutely believe that government has involved itself too much in this crisis,” Denham says. “We’re already too regulated.”

But BB&T also needs to face the reality of the marketplace, he says.

“We’re a business, and we’ve got shareholders and we’ve got employees,” he says. “We’re probably one of the strongest capitalized institutions in the United States. And here we are being hurt by a rescue plan that is actually a bailout for poorly managed financial companies.”

As details of the bailout emerge, Americans will begin to see how reluctant players like healthy banks and unwitting players like taxpayers have been drawn into a massive financial gamble by the government.

That gamble will pour billions of dollars into the financial sector that otherwise might have been used directly to address critical social problems we face.

And those social problems, which are escalating in large part because of the financial crisis, are putting growing demand on nonprofits and private philanthropy.

October 28, 2008

BB&T touts Ayn Rand but takes taxpayer cash

BB&T should practice what it preaches.

The bank, based in Winston-Salem, N.C., has donated tens of millions of dollars to colleges to support the moral study of capitalism.

The gifts require that the schools require the reading of “Atlas Shrugged,” the Ayn Rand novel that champions free enterprise and portrays government as capitalism’s arch foe.

John Allison, BB&T’s CEO, says he discovered the novel as a college student and wants to give other students the opportunity to read it.

Yet, as reported by The News & Observer in Raleigh, N.C., BB&T will take $3.1 billion of the $700 billion the federal government is spending to bail out the financial industry, with the government in turn taking BB&T preferred stock.

What is truly startling is that, unlike the failing banks that triggered the government’s massive bailout, BB&T is healthy and says it might use the money to grow by buying other companies.

So, to quote the opening line from Atlas Shrugged that invokes the name of Rand’s capitalist hero and suggests the world’s problems are beyond understanding, “Who is John Galt?”

Or in the case of BB&T’s hypocritical acceptance of taxpayer dollars, who is John Allison?

Despite the millions of philanthropic dollars it has invested in helping college students see Ayn Rand’s vision of the threat government poses to free minds and markets, BB&T is taking $3.1 billion of precious taxpayer funds that could be better invested in tackling urgent social problems.

At this precarious moment in U.S. history, BB&T should remember in the marketplace the lessons it wants college students to learn in the classroom.

October 27, 2008

Election critical for nonprofits, giving

Nonprofits have a lot riding on the Nov. 4 elections.

The candidates Americans elect to serve in federal, state and local offices will shape and carry out laws and public policies that affect nonprofits and giving, as well as the people nonprofits serve and the needs it is their mission to address.

So nonprofits should make it their business to make sure voters know where the candidates stand, and to encourage voters to go to the polls.

Over one million nonprofits operate in the U.S., employing over 14 million people and working with 61 million volunteers.

The Nonprofit Voter Engagement Network, which aims to spur nonprofits to work on a nonpartisan basis to engage their staffs, boards, volunteers, clients and constituents in the election process, says it is “not only legal but well within our missions to encourage voter and civic participation.”

And as a new survey makes clear, nonprofit executives expect the new president to help respond to the urgent issues facing America, and have strong ideas about the policies needed to fix those problems.

Four top priorities a broad cross-section of nonprofit executives identified in the survey by the Nonprofit Listening Post Project at Johns Hopkins University include:

* Restoring or increasing funds for their field in the federal budget.

* Reinstating and expanding tax incentives, including those in the estate tax, for charitable giving and volunteering.

* Federal grant support for nonprofit training and capacity-building.

* Improving reimbursements under Medicare, Medicaid and other federal programs to ensure they cover the actual costs of service.

With the economy under severe strain, says Lester M. Salamon, director of the Johns Hopkins Center for Civil Society Studies, “our country needs a strong nonprofit sector more than ever.”

Yet nine of 10 nonprofit executives responding to the survey reported “little improvement in government policy toward their organizations over the recent past, as well as a considerable need for support to meet the challenges the country is now facing.”

And Peter Goldberg, chair of the Listening Post Project Steering Committee and CEO of the Alliance for Children and Families, says that, with government moving “to open the financial arteries of our economy, let’s not repeat mistakes and overlook until it is too late the great stresses and strains spreading throughout America’s vital nonprofit sector.”

Most nonprofit executives responding to the survey also supported policies to:

* Forgive college loans for students who take nonprofit jobs.

* Provide a broad nonprofit investment tax credit to offset the “unlevel playing field” for nonprofits in securing capital to pay for technology, facilities and capacity-building.

* Expand AmeriCorps and other national service programs that work with nonprofits.
Nonprofit executives also want national policy to pay more attention to poverty, provide for university health insurance, and require students receiving student aid for college to perform community service.

What voters decide on Nov. 4 will have a huge impact on nonprofits’ ability to advance their missions of making our communities better places to live and work.

So nonprofits, building on the trust they have established and that is rooted in their good work, need to help their boards, staff, volunteers, clients and constituents understand about the issues and candidates’ positions, and encourage them to vote.

October 20, 2008

Wealth expert upbeat on giving in downturn

Despite fear and uncertainty among nonprofits about the sliding economy and turmoil in the financial markets, a leading expert on wealth and philanthropy is optimistic about charitable giving.

While giving fell in the recession that followed the bursting of the dot.com bubble in 2000 and the 9/11 terrorist attacks in 2001, the rate of the decline was only half that of the decrease in wealth, says John J. Havens, senior associate director and senior research associate at the Center on Wealth and Philanthropy at Boston College.

And despite the recent plunge in the stock market, which already has recovered some of its losses, stocks account for less than 10 percent of households' assets, and stocks affect mutual funds, bonds and pension reserves, which together account for another 15 percent to 20 percent, Havens says.

Americans also own homes and businesses, so the market does not immediately affect the remaining 70 percent to 75 percent of household assets, he says.

Although their wealth affects Americans’ capacity for charitable giving, he says, their giving also reflects their personal income, their employment and their access to credit.

“I tend to be optimistic,” he says. “People are overreacting to the current bad conditions.”

In fact, he says, “large gifts are continuing at a high level.”

Large planned gifts, or those that are deferred or complex or involve assets other than cash such as stock or real estate, for example, have “inertia of their own” because they take time to plan and often involve lawyers, documents and accumulated funds, Havens says.

And that inertia “continues through the first year of a downturn,” he says.
So instead of panicking, he says, nonprofits should watch for trends in personal income, unemployment and government efforts in the U.S. and abroad to ease the credit freeze.

“If personal income were to drop and wealth were to drop off and remain low, we’d be in serious shape with respect to philanthropic giving,” he says.

And if government efforts to loosen credit “do not have a major effect,” he says, “I would anticipate we’re going to have a very long and deep recession, with declines in both wealth and income, and therefore a major impact on philanthropy as well, although probably less so in percentage terms than on income itself or wealth itself.”

But he says he believes those efforts “will have the desired impact.”

Haven, who looked at per-household data on net worth, personal income and charitable giving for the period before and after the most recent recession, says wealth and giving patterns for households tend to be more stable than those of capital markets or personal income.

“So if past is prologue, we would expect the total amount of philanthropy to continue or increase for another several months or two to three quarters, but possibly not as rapidly,” he says.

“The real big question is whether the economy can sidestep this crisis so it doesn’t extend into employment and incomes of people,” he says. “I’m optimistic because I think we’re panicking too much.”

October 13, 2008

Nonprofits can work smarter with volunteers

Volunteers represent an indispensable asset and resource for nonprofits, which can do much more to engage volunteers and put their expertise to work.

New research by the Corporation for National and Community Service finds that while most volunteers do not use their professional skills in their nonprofit work, those who do find their volunteer service more satisfying.

Nearly 61 million Americans age 16 and older volunteered in 2007, giving 8.1 billion hours of service worth over $158 billion, the Corporation for National and Community Service says.

But an estimated 22 million volunteers, or over one in three Americans who volunteer, stopped volunteering between 2006 and 2007.

That “leaky bucket,” the corporation says, underscores the importance of treating volunteers as valuable assets, giving them meaningful work, and using best practices to manage volunteers.

The group’s research also finds many volunteers are involved in fundraising, an important task for nonprofits but one that can divert the volunteers from opportunities to put their skills to work on other organizational needs.

The research also suggests volunteers who use their skills when they serve are more likely to keep volunteering.

A key way to better connect with skilled professionals as volunteers, the Corporation for National and Community Service says, is to build relationships with local businesses, and to be prepared to offer volunteer assignments that match their employees’ skills.

Professional associations also can serve as key partners in promoting the idea of pro-bono service by their members’ employees.

The American Bar Association, for example, helped establish pro-bono service as a common expectation in the legal profession, which at 47.1 percent has one of the highest volunteer rates in the U.S.

Research also underscores the need for nonprofits to be looking for ways to better engage Baby Boomers, young people, women and “intensive” volunteers.

Baby Boomers, or those born from 1946 to 1964, will double the number of older volunteers in the coming decades, and young people are volunteering at higher rates than the previous generation, the research says.

It also shows women volunteer at higher rates than do men, and that women with children and working women volunteer at higher rates than other women.

And the percentage of volunteers giving over 100 hours of service a year totaled 35.6 percent in 2007, the highest level since 2002.

Previous research has shown that volunteers tend to give more to charity than givers who do not volunteer, and that people who start volunteering at an early age tend to keep volunteering.

Volunteers are the lifeblood of nonprofits, and they have a lot more to offer than nonprofits typically ask them to do.

By developing strategies to better recruit volunteers and better match their skills with organizational needs, nonprofits can better equip themselves to operate more effectively and better serve their communities.

October 6, 2008

Fundraising focus critical during slump

With the economy tanking and its impact on charitable giving uncertain, nonprofits should stay calm, stay focused and keep a long-term perspective.

Two new reports suggest Americans keep giving even in tough times, and nonprofits should gear for tough times by tuning up their fundraising fundamentals.

“When the economy shows stress, whether it is a recession or not, giving may grow more slowly,” says a new report by the Giving USA Foundation that looks at historic trends in giving during recessions and economic slowdowns. “It is important to note that giving still grows.”

A separate study for the Association for Healthcare Philanthropy that looks at historical data on economic cycles and charitable giving says total philanthropic giving during the past four decades grew at double the growth rate of gross domestic product, accelerating since 1996.

But the weak economy and political uncertainty could be a short-term drag on charitable giving, and while tax increases could reduce the cost of giving, they also could slow down wealth creation, the study says.

In its report, the Giving USA Foundation says the most important step nonprofits can take to raise funds during a recession or downturn is “to ask people for contributions in a clear and focused manner.”

Key steps to successful nonprofit fundraising, the report says, include:

* Working closely with the board “to make sure each board member is a current donor and an advocate for the organization’s vision and purpose.”

* Developing and following a “fundraising, communications and stewardship plan” that will make it easier to stay focused, maintain momentum and “say no to good ideas that could divert resources unproductively.”

* Focusing on efforts to renew gifts from current donors. “Take no donor for granted,” the report says. “Thank donors, recognize their contributions and let them know of the accomplishments they have made possible.”

* Maximizing the use of all fundraising tactics available, including thank-you calls by volunteers; online giving options; information about planned giving sent to loyal, long-term donors; and effective use of public relations and media relations.

The study for the Association of Healthcare Philanthropy says nonprofit hospitals and health-care systems enjoyed high growth rates since the mid-1960s because of greater professionalism in their fundraising practices.

So a key to effective fundraising in today’s tough economy, the study says, is “continued attentiveness to building the trust of established individual, corporate and foundation donors in the value and openness of our efforts.”

By putting their fundraising fundamentals in order, nonprofits can gear themselves to effectively address critical social needs that only will grow as the economic storm rises.