With every passing day it becomes abundantly clear that the Madoff scandal is having seismic financial reverberations for the Jewish community at large. The Jerusalem Report recently reported that at least $600 million in Jewish charitable funds has been lost by the collapse of Madoff’s investment firm. However, this doesn’t include billions of dollars in losses to individual and family investors who have been the primary donors to Jewish institutions.
For the Jewish community the scale of this financial crisis is staggering and almost incomprehensible to contemplate. Though it is much to early to predict what the long term implications will be, it is clear the impact will be significant. The JPost article included an interesting analysis by American Jewish historian Jonathan Sarna, from Brandeis, who suggests that the era of the “big macher” may now be officially over:
Sarna predicted that the wholesale destruction of fortunes and endowments would prove to be a turning point in American Jewish institutional life, which over the past 20 years has moved from a model of community funding – collecting small donations from a broad swath of donors – to focusing on a handful of “cowboy” mega-donors who launched hugely successful programs like birthright Israel outside of the traditional federation system.
“The reduction of billions – not millions but billions – in the Jewish economy means that there is just not going to be enough money to sustain all the institutions and initiatives that have been created,” Sarna told the Post.
“We will be a poorer community for that. What’s been wiped out is an infrastructure that was particularly important in sustaining these institutions. The people who were invested with Madoff were the generation that not only supported institutions like Yeshiva University or the Holocaust museums, but that created them,” Sarna said.
Older donors from Florida’s Palm Beach community, where Madoff found many of his investors, might be replaced by a younger generation of Jews whose wealth was invested elsewhere, Sarna speculated.
“It’s a different group of people who will be called on to step in. It’s almost impossible to imagine that the group that has lost so much money will regain it,” he said.
The challenge facing American Jewry will be saving programs and institutions that provide “the most bang for the buck,” a task complicated by the absence of a unifying organization to take the lead.
“Are these decisions going to be made by the market… or are we going to ask for a communal bailout?” Sarna asked. “We don’t have anybody who can act with the speed and the authority of the federal government, and it’s going to take time to sort this out and figure out how to make these decisions professionally.”
Whatever else happens, it looks like the new Jewish economy will be leaner and meaner. That’s not all bad, but the prognosis for the foreseeable future looks grim indeed…