As financial institutions were continuing to collapse, panicking real estate and Wall Street investors, the Jewish philanthropic sector was struggling to figure out how to move forward to meet its fund-raising goals.
Charitable organizations that rely on donations to operate are bracing for drop-offs in funding as donors make reassessments, while those same organizations are expecting increased demand for their services from people hit hard by the economic downturn.
“Certainly anyone in the not-for-profit sector has to be nervous about what’s going on,” said Mark Charendoff, president of the New York-based Jewish Funders Network, an international association of family foundations, public philanthropies, and individual funders to aid the quality and growth of Jewish philanthropy.
He cited the timing just two weeks before Rosh HaShanah as another problem for Jewish charities.
“So much of their energy goes into raising funds after the High Holidays are over and before the end of the year,” he said. “So the timing is just terrible.”
New York, he predicted, will be hit harder than other areas because of the concentration of financial services in the city. Philanthropists, he said, are hit in one of two ways during an economic downswing.
“The first is they physically have less money to give away,” he said. But, he added, “the bigger problem is that people just lose confidence [in the economy].”
Donors contemplating large gifts will either decrease their contributions or put them off altogether until they feel the economy is better.
“That second category affects far great numbers of people,” Charendoff said. “That’s the side that not-for-profits have to worry about.”
Nonprofits can try to get donors to stretch out payment of gifts over a longer period of time to avoid feeling a crunch, Charendoff suggested. But, he said, now would be a better time to lay groundwork for future giving.
“They’d be well-served to spend times like this developing relationships with donors as opposed to trying to close gifts,” he said.
Fund-raisers at UJA Federation of Northern New Jersey spent the week talking to donors as part of its annual leadership kick-off. Howard Charish, UJA-NNJ’s executive vice president, said on Tuesday that the federation was already 8 percent ahead of last year’s leadership event, although he offered no specific numbers. Solicitors are making special requests for help to donors who have not been hit as hard as others.
“We’re asking them to maximize their giving because we’ve already gotten calls from people saying they’re not going to be able to match or give as much as they did last year,” he said.
Because of the worsening economic situation, the federation has witnessed an increase in demand for the services of its subsidiary agencies, such as Jewish Family Service. (See related story.) Charish predicted a rise in demand for counseling services, rent assistance, and Meals on Wheels. He noted that the Hebrew Free Loan Society has already seen an increase in requests. While fall has not even begun, Charish said there has already been a 20 percent increase in requests for summer camp scholarships.
“When the crisis occurs, the community steps up,” he said. “It’s true for Israel and now we’re seeing it’s true for local [causes].”
While many are turning their attention to the economic crisis this week because of the collapse of some major financial institutions, Charish said that the economic crunch has been building for more than a year.
“This has happened over 14 months,” he said. “We have felt the impact of the financial turbulence over the past year.”
The federation began its 2008 annual campaign with a $14.5 million goal. That campaign was supposed to close last month, but Charish said the federation is waiting on a handful of specific donors to push the campaign to its adjusted goal of $13.3 million. Although work on the 2009 campaign has begun, no goal will be set until the ’08 campaign closes.
“We need people now to help pull the wagon because [the number of] those riding the wagon of assistance is much greater,” he said.
Understanding how America got to this point is key to pulling out. Carl Guzman, managing director of Greenback Capital Mortgage Corp. in Teaneck, said that the economic woes are a result of a mishandling of the mortgage market.
Guzman, who will speak during an Orthodox Union seminar on Monday called “The Credit Meltdown and Practical Solutions,” said the financial crisis began last year when mortgage lenders loosened their criteria for applicants. While trying to make the process more efficient, lenders began to “give borrowers with excellent credit scores the benefit of the doubt” without much scrutiny, he said.
“No one verified anything,” he said. “Because anyone was able to get a mortgage, the housing market ignited. You had a big demand for properties because the financing was there.”
Then people began to default on their loans.
“Now all of a sudden you had the big blow up in the market because defaults started happening,” he said, citing “all these people who got mortgages who shouldn’t have gotten mortgages.”
Instead of blaming the banks that handed out the loans, Guzman said that a handful of “unscrupulous people” eager for commissions were the real cause for the collapse.
Not everybody is hurt by the fallout, though, Guzman said.
“Investors who have deep pockets will be able to come in right now,” he said, predicting a new line of millionaires in the next five to 10 years.
That’s small comfort for investors watching their stocks plummet.
“People are kind of paralyzed by what’s going on in the markets,” said Jonathan Rochlin, one of the organizers of the Bergen Networking Group, a business association that grew out of the membership of Temple Sholom in River Edge. “We’re all trying to deal with it in our own way.”
The market will eventually rebound, Guzman said. The economy is cyclical and will emerge from this downward cycle.
“If you want to go based on history, it will eventually come around,” he said. “The question is when. Nobody really knows that now.”
Some have likened the current situation to the Great Depression but Guzman said the situation is not yet at that level.
When the Federal Reserve announced earlier this week that it would bail out insurance company AIG with an $85 billion loan, the government demonstrated confidence in the system, Guzman said. Those with patience and means will be able to capitalize on the low prices on Wall Street, while those not invested in the affected companies should be able to ride out the turmoil.
“The key is not to get psyched out,” he said. “If you’re making your money and paying your mortgage and don’t have to sell, you’re not going to feel it as much.”
The Jewish community has programs in place for those worried about how they will pull through the crisis. Barnert Temple of Franklin Lakes has two support systems to help people cope, said Rabbi Elyse Frishman.
“My hunch is people are privately dealing with – perhaps even reeling from – whatever they need to cope with,” Frishman said. “We are there to help in any way we can.”
A network of volunteer congregants is available to help with rÃ©sumÃ© writing and networking. The program has been in place since the 9-11 attacks, while the shul began a mental health network in 2003 to match people with mental health professionals. Frishman is offering both programs to congregants dealing with financial fallout.
“I don’t have an alarmist view of things, but we’re in what I call a thoughtful period,” Frishman said. “There’s initial shock. There’s turmoil. The question is how will it play out.”