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New York Foundation: Celebrating 100 Years

December 16, 2009

Birthday_celebration The "Great Recession" of 2008-09 is often compared to the "double dip" recession of 1980-82 and the Great Depression of 1929-33, the searing economic calamity we seem to have avoided (for now).

But more than a few economists and historians think the more appropriate analogy is the Panic of 1907, when a failed attempt to corner the stock of the United Copper Company triggered a sequence of events that eventually caused the New York Stock Exchange to fall 50 percent and led to numerous runs on banks and trusts. The crisis was finally contained when New York financier J.P. Morgan, acting as the lender of last resort in the absence of a central bank, pledged large amounts of his own money (and convinced others to do the same) to restore liquidity to and confidence in the system.

The similarities between that long-ago panic and our own recent crisis are striking. At their root, both were precipitated by aggressive and largely unregulated risk-taking on the part of Wall Street insiders; both led to a paralyzing crisis of confidence in the integrity of financial markets and market participants; and both seemed to blindside all but a handful of observers.

A century ago, one of the few who saw disaster looming was New York banker Jacob H. Schiff. In 1906, according to Taking Risks That Matter (20 pages, PDF), a new report from the New York Foundation that celebrates the foundation's first hundred years, Schiff "issued a stern warning that America would face critical failure if the nation didn't modernize its banking and currency systems. There would be 'such a panic', he said, 'as will make all previous panics look like child's play."

Schiff turned out to be right, and his pre-panic call for the creation of a central bank "with adequate control of credit resources" became reality in 1913 when President Wilson signed the Federal Reserve Act into law.

Schiff's most enduring claim to fame, however, was the role he played -- along with Edward C. Henderson, Isaac Seligman, and Paul M. Warburg -- in creating the New York Foundation, one of the first philanthropic foundations in the country and one that, a century after its establishment, remains true to its founders' vision: that New Yorkers, given the tools and means, can create social change.

Well versed, as the report notes, in "the world of risk/reward ratios," Schiff, Henderson, Seligman, and Warburg "imbued their new foundation with a principle borne of the vicissitudes of life on the Street: the greater the expected return, the greater the investment risk." From its earliest days, the foundation worked to address issues and problems that others perceived as controversial or unfashionable. Whether that meant funding efforts to improve conditions for garment workers in the wake of the horrific Triangle Factory fire in 1911 or making one of the first grants to the fledgling National Association for the Advancement of Colored People; funding social welfare work during the Great Depression or supporting the emerging field of community organizing in the 1950s; backing resource-starved community organizations during the fiscal crisis of the 1970s or standing resolutely for the rights of successive waves of immigrants, the New York Foundation has helped and been an inspiration to countless numbers of people who, regardless of race, creed or color, have flocked to the greatest city in the world in search of opportunity and a better life.

Why should we care about the century-old legacy of a medium-sized foundation? It's a fair question, and I like the way the report answers it:

It's important to understand [our] roots, especially in an age when, due to a faltering economy, community needs keep escalating, making philanthropy and its inherent risks matter more than ever. It is also important to note [our] faith in the abilities of community residents. Civic organizations play a crucial role in articulating and advocating community interests. While social theorists, pundits, and political theater customarily stress the necessity of calling in experts to investigate social problems, the New York Foundation has shown a century-old conviction in the irrepressibility of New Yorkers; it has striven to cultivate their capacity to engage social, political, and economic forces while respecting their will to act as the sole arbiters of their fate....

Happy 100th birthday, NYF. We couldn't agree more.

-- Mitch Nauffts

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