According to the Federal Deposit Insurance Corporation (FDIC), 12 banks have failed so far in 2008 and the year has another quarter to go. Only three failed in 2007 and none in 2006 and 2005. That list includes the collapse of IndyMac, the largest domestic bank failure since the Depression. The failure list does not even include numerous commercial banks that were sold at fire sale prices such as Countrywide Financial or investment banks that have disappeared like Bear Stearns, filed for bankruptcy like Lehman Brothers, or been absorbed by other entities such as Merrill Lynch, among others.

Add these failures, bankruptcies, and fire sales to the several other tottering pillars of the banking sector—as well as the federal government takeover of the two behemoth Government Supported Enterprises (GSEs), Fannie Mae and Freddie Mac, plus the mammoth insurer, American International Group—and the product is a crisis for the American economy and for U.S. corporate grantmaking.

The significance of the financial sector in U.S. philanthropy is huge. According to Conference Board statistics published in the Financial Services Roundtable’s most recent Factbook, banks were the second largest corporate givers to U.S. groups and beneficiaries in 2006, ranking behind pharmaceuticals. Insurance companies ranked 11th and financial firms (other than banks and insurers) ranked 15th. Because a huge proportion of drug companies’ philanthropy is in the form of cost write downs on prescription drugs and donations of surplus drug supplies, as cash donors, the banks could well top the list.

If the banking sector (plus securities firms and diversified financials) are in disarray, prompting this past week’s announcement of the Federal Reserve’s likely half trillion dollar intervention to stabilize the markets, the ripple through philanthropy will be visible and painful.

Consider the largest corporate grantmaking foundations as of 2006 as counted by the Foundation Center: Bank of America ranked second, behind Aventis and ahead of Wal-Mart, with $144.8 million in giving; the JP Morgan Chase foundation was fifth at $79.9 million; the Citi Foundation sixth at $73.9 million, followed by the Wachovia Foundation with $64.4 million in grantmaking and the Wells Fargo Foundation at $64.4 million. If you add in the GE Foundation ($88.3 million in grants), since GE is routinely classified as a diversified financial services company rather than an electric lamp manufacturer nowadays, that makes six of the top 10 corporate foundations in the banking and finance sector.

Other financial sector corporations in the top 50 corporate grantmaking foundations included the Fannie Mae Foundation, MetLife Foundation, NCC Charitable Foundation, the Prudential Foundation, the Freddie Mac Foundation, the Merrill Lynch and Co. Foundation, U.S. Bancorp Foundation, State Farm Companies Foundation, New York Life Foundation, American Express Foundation, the Allstate Foundation, and the Deutsche Bank Americas Foundation. And the official grantmaking from corporate foundations, disclosed on the firms’ 990PF filings, does not necessarily reflect other forms of direct charitable grantmaking, which is not a required disclosure to the public or even shareholders.

Corporate grantmaking is usually strategic, geared to particular sets of grantees in specific fields. The continuing plunge in the nation’s banks and financial services firms threatens housing and community development nonprofits first and foremost, followed by education and youth groups—and in the case of Fannie Mae, nonprofits in the metro Washington DC area where Fannie was the area’s second largest local grantmaker (after the community foundation).

For example, take Washington Mutual (WAMU), probably the shakiest of the nation’s still-functioning banks (ranked as the top U.S. thrift company by assets in 2006, ahead of the now disappeared Countrywide, which ranked second, and IndyMac Bancorp, which ranked seventh in the nation before going belly up). According to the Foundation Center, in 2005, Washington Mutual’s corporate giving program handed out $44,000,000 in charitable grants for community and economic development; elementary and secondary education; housing and shelter; and human services activities. No surprise that WAMU was not touting its 2006 or 2007 philanthropic giving numbers as it was swept up in an array of disastrous subprime investments.

Headquartered in Charlotte, North Carolina, Wachovia was the nation’s fourth largest commercial bank by assets. Wachovia acquired Golden West Financial in 2006, on top of which, Golden West’s owners, Herb and Marion Sandler, donated $370 million in stock to the Wachovia Foundation. The result was that the Wachovia Foundation’s grantmaking jumped in 2007 to $96.9 million.

Now, however, Wachovia is looking for a several billion dollar bailout along the lines of the deal being sought by WAMU, in part because the Golden West purchase included a disastrous slug of Golden West’s subprime mortgage portfolio. And the Golden West gift to the foundation? It was in the form of 5.6 million shares of Freddie Mac stock, this past year a plummeting asset prior to the federal takeover.

If Wachovia’s philanthropy chokes on the Golden West subprimes, who loses? From 2003 through 2006, the Foundation Center tracked $161.7 million in Wachovia foundation grants to 2,658 recipients: $48.8 million to education; $41.2 million to philanthropy and volunteerism; $30.3 million to arts and culture; $14.5 million to human services; and $14.2 for community development, housing and shelter.

How about Lehman Brothers, in 2007 it was the fourth largest global security firm in the world based on revenues, now it is negotiating bankruptcy. Prior to its virtually overnight collapse, Lehman’s foundation gave out $11.5 million in grants in 2006 and $15.5 in 2007, on top of the corporation’s direct charitable deduction in 2007 of $26,000,000. The Foundation Center’s mapping of $22.6 million in foundation grants between 2003 and 2007 revealed one-third went to education, a little less than a third went to human services, and another large slice went to health groups.

You won’t find official data on Countrywide Financial’s charitable giving on the Foundation Center webpages, as the foundation was largely a shell and the corporate philanthropy unreported. But the Chronicle of Philanthropy did get corporate grantmaking numbers from the firm for 2005, amounting to $8.7 million in distributions, predominantly in housing and community development. More recent numbers aren’t available, due probably to the firm’s leading role in the subprime crisis. A spin-off from Countrywide, the now-defunct IndyMac does not show up as having made any philanthropic gifts in recent years.

Countrywide did help undermine another major grantmaker, accounting for roughly a third of Fannie Mae’s business in 2007 and, over the years, sometimes accounting for as much as half. The nation’s eighth largest corporation in terms of total assets, Fannie’s foundation arm accounted for $138 million in grants (above $10,000) for housing and shelter between 1998 and 2006, usually making it the largest or second largest housing/shelter grantmaker in the nation most of that time. It put an additional $106 million toward community improvement and development groups.

Nationally, Fannie’s impact had been waning, especially when it closed its foundation in 2007 in order to take all of its grantmaking in-house, overcoming what it preposterously had asserted had been a “firewall” between the foundation and the corporation’s business and political priorities in recent years. Regardless of Fannie’s overtly politically strategic use of its philanthropy, lots of good groups benefitted and now will be hard pressed to find a substitute. In all likelihood, Fannie’s new federal “conservatorship” status means that it will be all but out of the grantmaking game in the near future, throwing metro Washington DC groups into a panic.

It’s hard to imagine which bank or financial services corporation will be next. Will it be JP Morgan Chase or Goldman Sachs, both of which just converted from investment bank to bank holding company status because of pressures on their liquidity? Or will a financially healthy commercial bank like Bank of American have to cut back on its grantmaking because of a lack of discretionary cash, having just acquired the assets and headaches of Countrywide and Merrill? One almost hates to open the newspaper each morning to see which entity has gone by the boards.

What should be clear is that the sector that accounted for as much as one-third of the nation’s corporate profits in recent years is hardly likely to post numbers in the black, forget about much profit-making. Just looking at the potential losses of a very generous segment of corporate America omits the impact on private foundation endowments and on private donors’ assets as the commercial and investment bankers drag down the Dow Jones and Standard & Poor’s indexes. But nonprofits accustomed to generous grants from banks and financial services firms, especially those in housing and community development fields, should all be prepared for some long, hard efforts to make up for some potentially prolonged fundraising shortfalls.