The American Red Cross 

They took your blood and your money. Now it’s payback time. 

Outgoing American Red Cross President Bernadine Healy. 

On Tuesday morning, those do-gooders at the House Energy and Commerce Oversight and Investigations Subcommittee decided to sponsor a Red Cross blood drive to benefit the victims of Sept. 11. Dr. Bernadine Healy, the American Red Cross’ outgoing president, was the only donor. She was strapped down, jabbed with needles, and then methodically drained of her life fluids by a half-dozen enraged members of Congress.

The blood-letting of Healy was the chief goal of Tuesday’s subcommittee hearing on “fraud, waste, and abuse” involving the Sept. 11 charities. Immediately after the terrorist attacks, Healy had established a special Red Cross “Liberty Fund” earmarked for Sept. 11 relief. It collected $564 million before it closed at the end of October—almost as much as all the other 9/11 charities combined. The Red Cross has already spent more than $150 million of that—orders of magnitude more than any other charity—including $70 million for immediate disaster relief and nearly $50 million parceled out to victims’ families in checks of $20,000 and more.

The members of Congress were driven into their vampiric frenzy by the American Red Cross’ decision to sock away much of the $564 million rather than disburse it all to victims. The Red Cross diverted $50 million to establish a “strategic blood reserve” that will allow the organization to store large supplies of frozen blood. (In the next crisis, hospitals could draw down the iced blood rather than depend on blood drives.) And the organization planned to reserve at least $200 million for longer-term needs, including relief for victims of future terrorist attacks.

So when Healy showed up to testify, she took a bipartisan beating for what members viewed as a bait-and-switch. Rep. Bart Stupak, D-Mich., thundered that the Red Cross “took advantage of a very tragic situation.” Another representative hinted that Congress should consider changing consumer regulations to forbid a charity from misleading solicitations. New York State Attorney General Eliot Spitzer, a witness on the same panel as Healy, called the Red Cross’ decision to “sequester” money “anathema to the American public’s expectations. … People believed victims were going to get this money.” Spitzer has also threatened legal action against the Red Cross for violating consumer-protection laws. House members pounded on tables and shouted down Healy when she tried to defend herself. (They also walloped Healy for the Red Cross’ reluctance to participate in a centralized database for Sept. 11 charities.)

There is something rich in the idea of members of the U.S. Congress—the grand champions of hiding pork—lecturing anyone for 1) collecting too much money from the American public; and 2) not spending funds exactly as promised. And it’s perverse that virtually the only American institution that Congress has criticized since Sept. 11 is the one that has done the most to help victims of Sept. 11.

The American Red Cross’ fundamental problem post-Sept. 11 is that it’s been too American, not enough Red Cross.

The American Red Cross is one of the nation’s great civic institutions. Founded in 1881, the American Red Cross boomed under the leadership of Clara Barton, who transformed it into the most important American charity. The American Red Cross is recognized by the original International Committee of the Red Cross in Switzerland and embraces its principles of neutral humanitarianism. (How does the American Red Cross connect to the international Red Cross? Click here to find out.)

Today, the American Red Cross boasts more than 1,000 chapters, tens of thousands of employees, and 1.2 million volunteers. It provides aid at nearly 70,000 disasters every year and collects half the nation’s blood supply. Its last two leaders, Elizabeth Dole and Healy, the former director of the National Institutes of Health, have been among the most formidable women in American politics. The American Institute of Philanthropy considers the American Red Cross one of the best-run U.S. charities, spending $90 of every $100 raised on program services. The American Red Cross has maintained its largely stellar reputation by imitating its Swiss sponsors. By the standards of American nonprofits, the Red Cross has been exceptionally apolitical and self-effacing.

But since Sept. 11, the American Red Cross has been acting more American than Swiss. Restraint, self-effacement, and modesty have been tossed. Its mistakes are mistakes of excess. The Red Cross raised too much money and collected too much blood. It started collecting as soon as the planes hit the towers, and it kept going. Healy, a camera hog, kept appearing on television to beseech donors to open their wallets and their veins. Red Cross ads appeared everywhere. The Red Cross kept collecting millions even when it had no idea what it would do with the cash. The Red Cross kept sucking blood even when it was apparent that there were few survivors who needed it. The rival blood agency stopped stockpiling days before the Red Cross.

The Red Cross treated Sept. 11 opportunistically—a chance to do good in the short term and to make plans for the long term. Healy and Co. kept banking blood because they saw the chance to increase the nation’s blood reserve from a few days’ worth to more than a week’s. Like any self-respecting American business, the Red Cross figured it would use its boom time to break into new markets. Healy seized the moment to initiate the frozen blood reserve. She also proposed spending some of the $200 million reserve to prepare for a disaster caused by weapons of mass destruction, something the Red Cross has never before addressed. The Red Cross has expanded its traditional relief function beyond feeding the hungry and sheltering the homeless. It is spending millions on grief counseling for Sept. 11 victims.

Even its bait-and-switch advertising campaign, while unseemly for such a respected charity, fits comfortably in the tradition of American do-good fund raising. Charities always “parade around an example that is particularly gut-wrenching” in order to pry open wallets, says Daniel Borochoff, president of the American Institute of Philanthropy. (And, to be fair, while the Red Cross implied that its relief efforts would help the Sept. 11 victims, it always left wiggle room. Healy incessantly talks about “Sept. 11 and its aftermath.”)

Besides, it’s hard to argue with the logic of the bait-and-switch. The Red Cross shouldn’t simply hand over enormous checks to victims. It has a responsibility, in the cool light of day, to exercise good judgment by analyzing what our national disaster relief needs really are. To expect, as Congress seems to, that the Red Cross be simply a cash conduit between donors and victims is terribly shortsighted. One of the jobs of charities is creative deception: They trick donors with the most extreme and heart-rending stories because they know that that’s the only way to open wallets. Then charities use their good sense (we hope) to spend the money wisely. The Red Cross raised far more than it needs to tide victims over until federal compensation starts flowing in the spring. It would be foolish for the Red Cross to give all that money to victims when 1) they don’t need it; and 2) there are so many other good ways to use it. Would the Red Cross have raised $564 million if they told donors that the money would go to a blood reserve? Of course not. But will the nation be better off having a $50 million blood reserve? Probably. The Red Cross exploited the national broken heart to fill its coffers, but it did so for the right reasons.

But the Red Cross seems to be abandoning its sensible if politically obtuse policy. It announced yesterday that it will conduct a “top-to-bottom” review of its plan, signaling that it would reverse, or at least limit, its decision to reserve half the $564 million for future needs. Instead, it probably will give more of the cash immediately to indirect victims, folks who have lost jobs because of Sept. 11.

This change of heart comes too late to save Healy, who has paid for the Red Cross’ excesses with her job. The board ousted her two weeks ago—officially she resigned—for unspecified reasons, but clearly they dumped her to dull their image. She had politicized the organization: She withheld the American payment to the International Red Cross Federation to protest the exclusion of Israel’s Red Cross equivalent (Magen David Adom) from the Red Cross Movement. Click here for more on this tempest. She’s also famously abrasive. (This is a woman whose own husband told the Washington Post, “I don’t have a problem with her, but I could be in the minority.”) Healy is the blood sacrifice for the Red Cross’ forcefulness. The board replaced the telegenic, belligerent Healy with a bland and neutral figure: the Red Cross’ lawyer, Harold Decker. The United States, replaced by Switzerland.