NEW YORK (Reuters) - At Bottomless Closet, a New York non-profit that helps women move from welfare to jobs, Kendall Farrell said she may cut back on workshops and look elsewhere for funds as Wall Street money dries up.
With layoffs, buyouts and cutbacks rippling through financial markets, charities that rely on donations from high-paid professionals are bracing for a slump.
Thirty percent of charitable giving comes from the richest one percent of the population which includes many Wall Street professionals, according FSG Social Impact Advisors in Boston.
“When the economy goes down people tend to tighten their purse strings, and oftentimes charity and philanthropy can be the first thing that is affected,” said Farrell, the executive director of Bottomless Closet.
Several charities will miss Bear Stearns Co, which agreed to be acquired by JPMorgan Chase & Co for $2 per share on Sunday.
Since the 1970s the investment house has required all senior managing directors to give at least four percent of their annual incomes to charity.
The charitable trust of Bear Stearns Chairman James Cayne has been an important donor for Bottomless Closet.
Fourteen months ago, Bear Stearns shares traded at $160 each. Their sale to JPMorgan Chase for $2 has vastly devalued Cayne’s 4.9 percent stake in the company. His trust also holds thousands of Bear Stearns shares.
Corporate donations invariably drop in a recession.
Teen Lifeline, a crisis hotline for teens in Phoenix, is focusing its appeals on individual donors, considered to be more reliable givers in good times and bad.
“Too many times we have been dependent on government and corporate donations and grants, and so more and more non-profits are going back to individual donors who are more passionate and connected to your cause,” said Bill Manson, development director of the Arizona non-profit.
“Private donors stay more connected to you, whereas corporations say, ‘We have a budget’,” he said.
Gifts of stock to charities have become more popular in recent years but their value declines as markets slide.
Smaller charities may suffer from a recession disproportionately, said Susan Raymond, of Changing Our World, a consultant on strategic planning for non-profits. Those with a more diverse funding base are better equipped to survive.
“It can have an out-sized effect on a small community based non-profit, but a larger non-profit can afford to wait it out,” she said.
Donations have already declined since late 2007 when the housing slump deepened, according to Michael Nilsen of the Association of Fundraising Professionals.
“I’m not hearing anybody scream yet, but people are definitely concerned,” he said.
In the last economic slowdown, charitable donations fell only mildly but took three years to bounce back. They dropped by 2.2 percent from 2000 to 2001 around the time of the September 11 attacks, continued to fall slightly for the next two years but jumped almost 7 percent between 2003 and 2004, Raymond said.
Additional reporting by Timothy Gaynor in Phoenix and Jon Hurdle in Philadelphia, editing by Alan Elsner