Saving Our Money for Madoff?

Right Angles

By Noam Neusner

Published February 25, 2009, issue of March 06, 2009.
  • Print
  • Share Share

Of all the shocks of the Bernie Madoff heist, perhaps none was more stunning than the list of victims. Among them were several Jewish foundations and many of our community’s most prominent nonprofits. The losses were staggering, and in some cases crippling.

Yet the real Madoff scandal isn’t the losses; it’s that our community was sitting on vast pools of accumulated wealth, much of it used to little effect. Madoff had his secrets to keep, but so, in fact, did many foundations and endowments. They had money to spend, and they didn’t spend it. Now it’s gone.

Everywhere in the Jewish community we hear of crises — in Jewish literacy and continuity, in a lack of social action and awareness, in a failure of the synagogue and the rabbinate, and so on. Yet all this time, there were individual donors and philanthropy executives sitting on large pools of money that could theoretically have been used to help address many of our biggest concerns. As a community, we now live so much for perpetuity that we fail to deal with the present.

I used to think that the rise of Jewish endowments and foundations represented the pinnacle of our life here in America — financial success, combined with organizational stability and careful foresight. Now, it appears, we are simply incompetent as a community, having so badly matched what we have with what we need. Either we refuse to deploy our assets to our needs, or our needs, as we define them, are in fact not that pressing. Either way, it is a stunning indictment.

Thanks to tax incentives that encourage their growth, philanthropic foundations have ballooned over the past decade. According to a report from New York’s Foundation Center, foundation assets doubled from $330 billion in 1997 to $669 billion only ten years later. In their 2007 monograph “A Study of Jewish Foundations,” Gary Tobin and Aryeh Weinberg note that Jewish foundations have experienced similarly rapid growth. (Full disclosure: Tobin has been a client of mine.)

Most foundations, however, do not spend the bulk of their money, instead storing it away, granting only a small portion to charities each year. “Most foundations with larger assets give away about 5%, the minimum required by federal law, which most foundations see as a ceiling, not a floor,” Tobin and Weinberg write. Similarly, endowments — which also expanded with flush economic times — “rarely withdraw more than 5 percent or 6 percent of their assets per year,” as The Chronicle of Philanthropy reported.

True, endowments have their value. James Tisch, who has previously served as president of the UJA-Federation of New York, defends them strongly. “Endowments allow institutions to survive in bad years,” he told me. “Most organizations don’t have nearly enough after their annual campaigns to make it.” I don’t disagree. There are many institutions that would close if not for their endowments, which most thankfully diversified.

But having an endowment of large enough size to do what Tisch describes is a double-edged sword. It does let you out of the annual campaign rat race. But it also removes your sense of urgency.

If Jewish donors were truly ambitious, they would demand philanthropic extinction. They would give money to organizations only if endowment funds were also put to work. They would launch foundations with a built-in ticking clock: Perform, or else. In short, they would operate as if Bernie Madoff were managing their money, and that one day it would all be gone anyway.

That model would involve more risk, more spending, more activity and certainly less for future generations. It would be akin to taking away trust funds from the grandchildren so they actually have to work for a living.

Fine. Jewish donors know that you don’t gain reward without some measure of risk. That’s true in philanthropy just as it is in business. Yet many Jewish donors still give to the same old causes, the same old institutions, in the same old ways. No wonder so many got burned by Madoff. They followed the crowd on everything.

In Judaism, every 50th year is considered a Jubilee year, when we are commanded to return land to its original owner and to let our fields lie fallow. Why not transpose that commandment to our endowments and foundations? Let us resolve: Every 50 years, our community’s stored wealth must be spent, and its charitable assets depleted. After that, we can begin the work anew — yes, with fewer assets, but with a greater capacity for creativity and success.

Noam Neusner is the principal of Neusner Communications, LLC. He served as President Bush’s principal economic and domestic policy speech writer from 2002 to 2004.


The Jewish Daily Forward welcomes reader comments in order to promote thoughtful discussion on issues of importance to the Jewish community. In the interest of maintaining a civil forum, The Jewish Daily Forwardrequires that all commenters be appropriately respectful toward our writers, other commenters and the subjects of the articles. Vigorous debate and reasoned critique are welcome; name-calling and personal invective are not. While we generally do not seek to edit or actively moderate comments, our spam filter prevents most links and certain key words from being posted and The Jewish Daily Forward reserves the right to remove comments for any reason.





Find us on Facebook!
  • Mazel tov to Idina Menzel on making Variety "Power of Women" cover! http://jd.fo/f3Mms
  • "How much should I expect him and/or ask him to participate? Is it enough to have one parent reciting the prayers and observing the holidays?" What do you think?
  • New York and Montreal have been at odds for far too long. Stop the bagel wars, sign our bagel peace treaty!
  • Really, can you blame them?
  • “How I Stopped Hating Women of the Wall and Started Talking to My Mother.” Will you see it?
  • Taglit-Birthright Israel is redefining who they consider "Jewish" after a 17% drop in registration from 2011-2013. Is the "propaganda tag" keeping young people away?
  • Happy birthday William Shakespeare! Turns out, the Bard knew quite a bit about Jews.
  • Would you get to know racists on a first-name basis if you thought it might help you prevent them from going on rampages, like the recent shooting in Kansas City?
  • "You wouldn’t send someone for a math test without teaching them math." Why is sex ed still so taboo among religious Jews?
  • Russia's playing the "Jew card"...again.
  • "Israel should deal with this discrimination against Americans on its own merits... not simply as a bargaining chip for easy entry to the U.S." Do you agree?
  • For Moroccan Jews, the end of Passover means Mimouna. Terbhou ou Tse'dou! (good luck) How do you celebrate?
  • Calling all Marx Brothers fans!
  • What's it like to run the Palestine International Marathon as a Jew?
  • Does Israel have a racism problem?
  • from-cache

Would you like to receive updates about new stories?




















We will not share your e-mail address or other personal information.

Already subscribed? Manage your subscription.