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Red Cross Disaster Fund Is Depleted

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By Philip Rucker
Washington Post Staff Writer
Tuesday, June 17, 2008

The American Red Cross said yesterday that it has depleted its national disaster relief fund and is taking out loans to pay for shelters, food and other relief services across seven Midwestern states battered by floods.

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Officials at the charity estimated that efforts in the Midwest will cost more than $15 million and warned that the total could surpass $40 million if the Mississippi River creates floods in St. Louis later this week.

On the cusp of hurricane season, Red Cross executives said the charity has raised just $3.2 million for the Midwest floods and painted a dire picture of its overall disaster relief finances. They said many donors are giving less because of rising gasoline and food prices and the collapse of the housing market. Also, the absence of a major U.S. catastrophe since Hurricane Katrina in 2005 has made it difficult to galvanize donors.

"The disaster relief fund today is completely depleted. The balance is zero," Jeffrey Towers, chief development officer, said in a conference call with reporters.

Towers added that the Red Cross "needs immediate funds to deploy in a variety of ways to provide the scale of services that this disaster demands."

The Red Cross is congressionally chartered to provide disaster relief but operates largely on private donations. The depleted fund is a general reserve that is tapped whenever disasters strike. The financial situation does not affect employee salaries or the charity's blood-collecting operations but could inhibit its ability to assist in disasters.

Red Cross officials did not say how much debt they are accumulating for the Midwest floods or disclose the fund's overall debt. Spokeswoman Laura Howe said only that "this is probably one of the more severe disaster relief fund situations that we've found ourselves in since Katrina."

After Katrina, with the relief fund depleted, the Red Cross borrowed about $430 million to cover costs -- the first time in its history it sought a loan for disaster relief, Howe said. She added that the charity repaid the debt with the $2.1 billion raised in the months after the hurricane.

Over the past two months, the Red Cross has responded to 30 mid-size disasters -- including the April tornado that struck southwest Virginia and the May tornadoes that sped from Oklahoma to Georgia, which has drained its funds, officials said.

"It's a continuous series of storms and disasters that have led us to where we are today," said Joe Becker, senior vice president for disaster services.

He added, "We're not going to stop serving people because we don't have the money. We'll have to redouble our fundraising efforts and present the need to America and ask them to respond."

Peter Dobkin Hall, a Red Cross critic and professor at Harvard University, said the charity has a "credibility problem" that is hurting its fundraising.

"You can't go through so many CEOs in how many years and have an assortment of other problems with the blood business and with the handling of charitable contributions and maintain a sterling reputation with donors," Dobkin Hall said.

Towers said people can donate to the Red Cross national disaster relief fund by calling 800-HELPNOW or going to http://www.redcross.org.


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