Where Has All the Money Gone?

In the turmoil of the collapse of the world financial markets, the Bernard Madoff scandal, and the lesser Mark Dreier scheme, the question is obvious: where did all of the money go? Who knows how much money the banks have lost. What we do know is that TARP has already given the banks $350 billion out of a possible $700 billion bailout, not including the other $140 billion the Federal Reserve provided banks by a little noticed change in the tax code. Bernie Madoff claims to have lost $50 billion in his ponzi scheme and Mark Dreier, who remains in jail, stole $380 million. This doesn't include the loss of funds to the down trend on the world stock markets, the loss of 401 (k) assets, pensions, and savings.

In addition to the losses that have left college endowments depleted--Harvard, Wellesley, Yale, to name a few of the prestige schools have sent out letters to students and alumni about losses, there is Yeshiva University that lost $110 million to the Madoff ponzi scheme. Anthony Romero sent out an email alert to contributors to the American Civil Liberties Union claiming that it lost over $850 million in grants from two foundations for the uncoming year. One of those funding sources is no doubt the JEHT Foundation, known for its progressive funding of criminal and social justice programs--$26 million last year alone--which closed its doors after the Levy Church family lost its family fortune to Madoff.

This morning the New York Times ran a story about the Sandlers, Herbert and Marion, who started World Savings Bank, sold to Wachovia in 2005, and seen as one of the causes of Wachovia's near collapse.

World Savings Bank developed something called an option ARM — and named “Pick-A-Pay” by World Savings. Pick-A-Pay allowed homeowners to make monthly mortgage payments that were so small they did not cover their interest charges. That meant the total principal owed would actually grow over time, not shrink as is normally the case.

The Sandlers walked away from the sale of World Savings Bank with $2.3 billion in cash and stock in Wachovia. The ARM--Pick-A-Pay that made World Savings such a mortgage giant, although it didn't sell the mortgages like other lenders, is now under federal investigation. Far too late, since everything World Savings did was quite public for a very long time. (Also in this morning's Times, is a story about how few criminal prosecutions for stock fraud the Bush administration has initiated.)

Which places another progressive funding source in jeopardy: Sandler Family Foundation. After the sale of World Savings, the foundation received a gift of $1.3 billion in cash, the second largest charitable gift in 2006. However, according to Herbert Sandler, the foundation is fine, it's his personal fortune that has diminished because he and his wife retained ownership of stock in Wachovia, which has tumbled. That will diminish the size of the Foundation after the Sandlers die; they are both in their late 70s.

The Sandler Foundation is a primary source of funding for ProPublica.org, the investigative journalism website--up to $30 million over three years--, as well as the liberal think tank, Center for American Progress, started by John Podesta, who is now heading up Barack Obama's transition team.

Progressive funding is never easy to find. Organizations that try to change the power dynamic, want to examine and eliminate the causes of poverty, ill-education, despair, aren't easy sells to wealthy peoiple who often made their money exploiting these faults in the system. But with banks, corporations, and now private family foundations decimated, our philanthropic infrastructure is fragile and failing.

Barack Obama issued a Christmas statement this morning, in text and video, which speaks about working for common purpose at this time. It's really the only solution: for us to work together in our own communities and not wait around for government to reform itself and start working again.