Government Social Innovation Fund: Strings Attached?

Obama's $50 million Social Innovation Fund seems to have good intentions, but there are causes for concern. I applaud Obama for the initiative but my main question is, what strings are attached to the money being lent?

As I read through several blogs and articles about this fund, other questions came to mind.

How good is the U.S. government at running these types of programs?
Will the government dicatate how money is spent?

When the government gets involved, even with good intentions, we know it can get messy. Looking at the financial crisis, we saw the U.S. government taking ownership in companies like Goldman, AIG, and GM among others. Through regulation they influenced the decisions made by these companies. Intervention was important because the system wasn't working and it prevented a total meltdown of the U.S. economy. However, it also eliminated the "free hand of the market" and stinted capitalism. Will the U.S. Goverment decide how the $50 million is spent by these non-profits or do they give them free reign once the money is handed out?

In the case of the government acting as an enabler to social innovation, isn't it better to teach a man to fish than to give him a fish? Instead of donating $50 million to a few pre-approved organizations, wouldn't it be better to fund development for the inefficient capital market system that exists in social innovation?

The government doesn't know how to run these types of programs. Let’s use the US Postal Service as an example. The US Postal Service lost $2.8 billion dollars in fiscal 2008. They also had a “capital deficiency” of $1.67 billion in 2008. We might assume that this lackluster performance could be blamed on the industry. Not so. FedEx had 2008 revenues of $37 billion and UPS has fared even better with $51 billion in 2008 revenue.

I'm happy the U.S. Government is willing to provide resources for furthering social innovation. It's a difficult task. Another classmate wrote about the "unintended consequences" of some social innovation ventures with an example of someone donating 1 million tshirts and hurting local sellers. Funding existing non-profits or creating too many policies may also cause "unintended consequences". I think we can do a better job of understanding the flaws in the current capital market system in social innovation and then providing a solid infastructure for growth to that system.