Magazine article The Wilson Quarterly

The Art Recession

Magazine article The Wilson Quarterly

The Art Recession

Article excerpt

THE SOURCE: "The Culture Crash" by James Panero, in City Journal, special issue on New York's Tomorrow, 2009.

THE REMARKABLY UNIFORM plunge in the endowments of New York City's best known arts institutions during the 2008-09 recession raises troubling questions about the prudence of the city's cultural leaders. If the investment goal of the financial managers of storied museums and companies is to preserve capital, why were so many of them long in risky investments in domestic and foreign stocks?

The reason, according to James Panero, managing editor of The New Criterion, is that a great many had memorized the same venture libretto. Many were even using the same "managers of [money] managers" who advised arts organizations to emphasize "total returns," including growth of their endowments rather than hanging on to what they had.

With the collapse of the city's investment banks and the deep recession overall, the result has been endowment declines of from 25 to 40 percent. Cutbacks, layoffs, and furloughs have ensued. And before the recession moves into the history books, he says, some institutions may well have to close their doors.

Commonly, arts institutions and foundations draw their endowment income based on a rolling average of income over several quarters. The last three devastating quarters are only now becoming a significant part of the average. "Eventually,' a spokesman for the Metropolitan Museum told Panero, "the bad periods become the majority of the average. …

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