posted on: Thursday, November 13, 2008

By Aaron Dorfman

According to an article published on October 23, 2008 in the New York Times, former chairman of the Federal Reserve Alan Greenspan “admitted on Thursday that he ‘made a mistake’ in trusting that free markets could regulate themselves without government oversight.”

If there is a silver lining to the current economic crisis, it is the new consensus emerging that government regulation, in proper proportions, is absolutely necessary. The lesson is applicable to all sectors, not just in the country’s financial industry.

NCRP has long held the position that self-regulation is insufficient, and that proper amounts of government oversight and regulation are needed to ensure that philanthropy and nonprofits are accountable to the public and serve the common good. It seems likely that those who do not share this view will have a tougher time making their case in the coming months and years, given how deregulation has been thoroughly discredited in the financial sector.

On November 7th, I debated Heather Higgins, president of The Randolph Foundation, at the Philanthropy Roundtable’s annual conference in Naples, Florida. The session description was as follows:

Public Accountability for Private Foundations: What Is the Role of Government in Policing Our Boardrooms? What kind of public accountability is appropriate for private foundations? Is favorable tax treatment for foundations a “tax subsidy,” or, as one Congressman put it, an “earmark”? Are foundation assets “the public’s money”? Should foundations be subject to political direction in how they govern themselves and where they give away their money? Or should foundations remain private organizations, and, so long as they use their assets for genuinely charitable purposes, should they be free to make their own governance and charitable decisions, with minimal regulation and requirements for disclosure?

The debate, in front of approximately 200 foundation leaders, was spirited and thought-provoking. Ms. Higgins and I found some common ground, but we also had profound disagreement in some areas. The Chronicle of Philanthropy wrote up a short summary of the debate.

As I said in my remarks: “Foundation dollars are partially public dollars, and the public is therefore entitled to know that its contributions are being used wisely. In a free society, all people should enjoy full liberty to donate to whatever causes they choose. But that doesn’t mean the government should subsidize all types of spending or giving. The subsidies provided to foundations create a strong rationale for proper regulation of philanthropy.” The full text of my opening remarks for the debate can be found by clicking here. I argued for three regulatory changes that are needed to prevent abuses of philanthropy for personal gain and to improve the practice of grantmaking in this country.