Do you remember Alan Greenspan’s full-throated promotion of the nonprofit sector while he stood at the helm of the Federal Reserve Bank system? Somehow, Greenspan’s stirring speeches about the nonprofit sector don’t immediately come to mind.
But Greenspan’s successor at the helm of the Federal Reserve, Ben Bernanke, appears aware and supportive of the role of nonprofits in the U.S. economy and its recovery from the rampaging recession – and he said so recently at a Federal Reserve Bank conference on community development. By keynoting the conference along with Jeffrey Sachs of the Earth Institute, Bernanke sounded like the philosophical opposite of Greenspan and an important voice endorsing the service andpolicy roles of nonprofits. Counting Ben Bernanke as a nonprofit advocate should be headline stuff for the leadership of the nonprofit sector.
It might have been hard for Bernanke to do otherwise, given the conference line-up, convened by the Federal Reserve Bank of San Francisco but held in Arlington, Va., on April 28 and April 29. It would have required Olympian mental gymnastics not to see that the nonprofit sector was functioning as the prime generator of creative responses to the nation’s economic collapse expressed forcefully and visibly in the form of devastated neighborhoods, displaced homeowners, and legions of unemployed people with few options. Here’s a peek at the day’s line up:
· Representatives of The Reinvestment Fund talking about methodologies for bringing supermarkets into underserved urban neighborhoods;
· An Urban Institute evaluation of the National Foreclosure Mitigation Program carried out by the NeighborWorks network;
· Two Harvard researchers discussing lessons from the Harlem Children’s Zone experience of community building around schools.
Perhaps Bernanke was aware of following Jeffrey Sachs of Columbia University’s Earth Institute who was the first day’s keynote speaker. In recent years, Sachs has been a strident critic of the for-profit corporate world. Just last week, in an article titled, “Pointing the Finger,” Sachs presented a straightforward critique of the corporate sector that would typically make the participants in a Federal Reserve Board meeting shudder in unison:
“The world is drowning in corporate fraud, and the problems are probably greatest in rich countries –those with supposedly “good governance.” Poor-country governments probably accept more bribes and commit more offenses, but it is rich countries that host the global companies that carry out the largest offenses. Hardly a day passes without a new story of malfeasance. Every Wall Street firm has paid significant fines during the past decade for phony accounting, insider trading, securities fraud, Ponzi schemes or outright embezzlement by CEOs.”
Sachs linked corporate sector malfeasance to politicians of both parties, citing both Florida’s newly elected Republican governor Rick Scott, the former CEO of Columbia/HCA healthcare company, which pled guilty to 14 felonies for fraudulent overbilling of the federal government and paid a fine of $1.7 billion, and President Barack Obama, the titular leader of the Democrats, who hired “Wall Street fixer” Steven Rattner to be in charge of his efforts to resuscitate the auto industry even though he was under indictment for giving kickbacks to government officials. He eventually paid millions of dollars in fines.
Sachs has been particularly critical of the fiscal year 2011 budget deal and the competing fiscal year 2012 budget proposals. Appearing on Democracy Now!, Amy Goodman’s nationally syndicated radio show, he called the fiscal year 2011 budget agreement “a miserable step in the wrong direction,” Rep. Paul Ryan’s (R-WI) fiscal year 2012 budget “extreme right,” the White House’s fiscal year 2012 proposal “Obama’s muddle,” the war in Afghanistan “incredibly wrongheaded policy,” and the President’s economic policies as having “lost the core, the heart, of the political movement that basically supported him to bring him to office.”
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Bernanke might not have launched rhetorical broadsides against both President Obama and his Republican opposition in the manner of Sachs, but his speech at the conference constitutes a reasoned and analytical endorsement of the central importance of the nonprofit sector that nonprofit leaders around the nation ought to read, circulate, and promote.
Bernanke acknowledged that the economy has been so difficult that “some [nonprofit] community development groups are now simply trying to hold onto past progress that they have made in building up the physical infrastructure and human capital of their communities, while others have lost ground and are beginning the process of rebuilding.” It is noteworthy that Bernanke started with a concern about nonprofit CDCs working to counter the recession, not the corporate sector that caused it nor the public sector that Sachs sees as so ineffectual.
Following a compelling litany of statistics of economic distress, Bernanke launched into a search for “solutions in one area [that] will confer wider benefits.” His first example? Nonprofit community development financial institutions that “can stimulate economic activity that generates local tax revenues . . . [that] can be spent on programs to put vacant properties back into active use, helping reduce crime, or on [the] job training or economic development programs, leading to more employment and wage income that can help homeowners avoid foreclosures.”
In a brief statement, Bernanke virtually summarized the role of the nonprofit sector: to respond to market failures and spark tangible changes in the conditions of families and communities. As a specific example, Bernanke cited Boston Community Capital’s Stabilizing Urban Neighborhoods program that acquires foreclosed-upon, but still occupied, homes from lenders at market values and prevents the homes from becoming vacant – and the homeowners from being kicked out. He also cited ACCION Texas-Louisiana, which helps small businesses that are too small or too new to qualify for regular bank loans.
He mentioned his origins as a South Carolinian and described the work of Metanoia CDC, a nonprofit community development corporation working in the poor neighborhoods of North Charleston with programs addressing crime, education, and first-time homebuyers.
Bernanke’s final example extolled the roles of nonprofits as community organizers and policy advocates. In Cleveland’s Slavic Village, the nation’s zip code with the highest number of foreclosures in the nation, in 2007, by 2010 a community in which 1,500 properties out of 11,000 total needed to be demolished, Bernanke observed that “as might be expected, its residents, community leaders, nonprofits, local governments, and companies stepped up their efforts.” He applauded community-based organizations efforts to reach out to borrowers at risk of foreclosure and to alert county prosecutors about fraudulent lending in the neighborhoods.
This isn’t news to Sachs, who eviscerated the Wall Street banks for their “unscrupulous behavior” that he credits with having “fueled . . . the biggest financial crisis in history,” with “not a single financial leader . . . fac(ing) jail.” It isn’t news to NPQ either, as we’ve written about the extraordinary work of community-based organizations in Cleveland fighting rampant subprime foreclosures (here and here).
But it is huge news when the head of the Federal Reserve Bank system recognizes and extols the work of community-based organizations whose programs and strategies are rooted in a mix of organizing and advocacy – the civic engagement, the small “d” democracy that represents the best of the nonprofit sector.
To be fair to Greenspan, he was aware of nonprofits. Speaking at the 2003 community development conference of the Federal Reserve, Greenspan suggested that research on effective and ineffective community development programs was needed so that nonprofit community development corporations could “modif(y) their strategies and structures accordingly.”
Bernanke’s feel for the nonprofit sector might have been described by his predecessor using his famous phrase, “irrational exuberance.” Is Bernanke irrationally exuberant about the role of the nonprofit sector? (Or is Sachs irrationally critical about the disastrous behavior of the corporate sector?) History will be the ultimate judge, but for the moment, the nonprofit sector has just landed its highest level, most respected ally in the form of the chairman of the Federal Reserve Board.