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Midwest floods leave Red Cross in the red

The American Red Cross has run out of money as it struggles to meet the needs of tens of thousands of Midwestern flood victims, agency officials said.
/ Source: and NBC News

The American Red Cross, its disaster funds already depleted by scandals and dwindling donations thanks to the souring economy, has run out of money as it struggles to meet the needs of tens of thousands of Midwestern flood victims, agency officials said.

The agency said its domestic Disaster Relief Fund had been wiped out by flood relief expenses that had reached $15 million by Monday. With a balance of zero in the fund, the Red Cross will now seek loans to support its 2,500 staff workers and volunteers on the ground in Wisconsin, Iowa, Illinois and Missouri, the officials said.

“That’s putting this in the category of a very significant disaster for the Red Cross, historically, when you would look at what we spend on relief efforts,” Joe Becker, the agency’s senior vice president of disaster services, said in a conference call with reporters Monday.

“We have had a large number of midsize disasters or ‘silent’ disasters that have cost us a considerable amount of money where we’ve not been able to raise what it’s cost us to provide that service,” Becker said.

Hundreds of homes have been destroyed and and tens of thousands of people have been evacuated by floods that local officials describe as the worst in several generations after the Cedar, Iowa and Mississippi rivers breached their banks.

“It’s unreal. It’s unreal. We were only hoping to get the 100-year [flood], and they hammered us with more than a 500-year,” said Jeff Gillick, a Cedar Rapids, Iowa, city employee.

The floods have been blamed for at least 22 deaths, 17 of them in Iowa, where state officials told NBC News that they expected damage in excess of $1 billion. President Bush was briefed on the damage and was scheduled to visit the area for a firsthand look later this week.

Bush said he would seek emergency legislation in Congress to allocate disaster relief funds for the Midwest. But that process will take time, leaving the Red Cross as the primary resource for now.

Soaring costs meet diminishing donations
Jeff Towers, the Red Cross’ chief development officer, said that the cost of the Midwestern relief effort could soar as high as $40 million. That bill follows closely on the heels of two busy months for the agency, which conducted 27 disaster operations in April and May.

But the Red Cross has managed to raise only $3.2 million, Towers said, because donors squeezed by the economy are finding it difficult to contribute more money.

The agency has also found it hard to win back the confidence of individual and corporate donors after a series of scandals, including criticism of its handling of donations after the terrorist attacks of Sept. 11, 2001, and its response to Hurricane Katrina.

The Red Cross laid off a third of its national headquarters staff — about 1,000 people — in February to address a budget deficit of nearly $200 million, and it fired its president in November for having an extramarital affair with a local director in Mississippi. The new president, Gail McGovern, is the agency’s sixth in six years.

Towers stressed that “the Red Cross remains committed to providing the scale of services that people expect of the Red Cross when disaster strikes.”

But with the disaster fund tapped out, “the way that we are doing that right now is taking out loans to fund our response,” he said. “That’s not a position we want to be in. It’s obviously not sustainable.”