Some Harm for Jewish Agencies Foreseen Due to Stock Decline

Jewish agency professionals generally were of two bents Tuesday when asked to evaluate the effect of the rapid decline of the stock market this week on their agencies, which depend on financial gifts.

Most told the JTA that fund raising would likely be impaired, but they noted that the suddenness of the drop in stock prices and the market’s subsequent volatility made accurate predictions impossible. But one pointed specifically to likely short-term cash-flow problems.

And they all hastened to add that operations would not be diminished and that there was no panic among their major givers.

At issue were two major considerations: gifts by individuals; and philanthropic and endowment funds that have been invested in stocks.

“The collapse of the stock market is a matter of concern, but it is too early to make any prediction,” said Dr. Steven Nasatir, executive vice president of the Jewish Federation of Metropolitan Chicago.

He acknowledged that the federation’s stock investments probably lost value, “but I cannot tell you to what extent. We will know better in a few days.” A New York stockbroker and Jewish lay leader who asked to remain anonymous noted that the stock fluctuations would have “significant implications on giving. There were people wiped out. I met people who lost a third of their life’s savings.” He added that “if people lose money, they give less.”

Ernest Michel, executive vice president of the UJA-Federation of New York, seemed to be less alarmed. He said he anticipated that many major givers would be temporarily forced to pay their contributions late, but he didn’t observe panic.

“I foresee over the next several weeks a cash-flow problem that will affect our agencies,” he said. That means the beneficiary agencies domestically and abroad of the agency’s $150 million allocations budget all may receive less funding than expected in the short term, he explained.

But, he added, “I’m sure we’re not alone in that, and I’m sure not only Jewish philanthropy, but philanthropy in general — hospitals, museums, everybody — will be affected by it.”

Michel is more concerned about philanthropic funds. He declined to describe the size of those of the UJA-Federation, but conceded that a portion of its funds, which provide “a large amount of income to the organization,” were invested in stocks.

“Those portfolios have been reduced on paper,” he said. “It is worth much less than it was last week.” However, because some of the income derives from dividends per share of stock, Michel seemed certain that “the income will continue … Hopefully companies will maintain their dividends.”

He said that the lay leaders who invest these funds “eventually will deal” with the stock ramifications.

“We have no plans to do anything other than going on with our activity,” he said. He expressed relief that the UJA-Federation held major fundraising campaign functions last week and two weeks ago, and scheduled others for mid-November and December.

Beyond next month, he looked for the economy to recover.

ENDOWMENT DAMAGE POSSIBLE

It’s too early — and probably impossible–to assess the damage to the $2 billion held in philanthropic and endowment funds of North American Jewish federations, according to George Kessler, director of the endowment department of the Council of Jewish Federations, the umbrella organization of North American Jewish communal federations.

“There’s no way to quantify it, no way to prove it,” he explained.

If the market doesn’t recover, endowment giving may be harmed, he noted, with “the same impact on endowment gifts as on annual campaigns.”

“There are a lot of other factors here,” he explained. Citing Jewish communities in oil-producing areas, he said “there are an awful lot of people who are individually very well-to-do whose companies aren’t doing well,” meaning that their giving continues at high levels despite business arrears.

As for the philanthropic and endowment funds, the degree of harm will depend upon how heavily they are invested in stocks, he explained.

“The smaller the federation, the less likely they are to have been involved in any of this area. Conversely, the larger federations are more likely to be involved in such equities, but as a rule they have balanced portfolios. They are also very conservative,” Kessler said. Federation philanthropic fund investment in stocks can range from nil to 50 percent of the total, according to Norman Sokoloff, a former CJF staffer who now serves as executive vice president of the Jewish Communal Fund of New York, an independent endowment organization allied with the UJA-Federation of New York.

Thus, he saw the stock market decline as potentially harmful for some federations. Of course, he said, “it’s all according to what they’re invested. in.” His fund has about 13 percent of its $218 million invested in stocks, he said.

Sokoloff said despite the stock market debacle, he is confident of economic recovery, because of the relative strength of other leading economic indicators — the inflation and unemployment rates and corporate growth. If the economy does recover, the fund will likely grow and any new Jewish philanthropic problems in general will decline.

UJA EFFUSES OPTIMISM

The United Jewish Appeal, which channels federation contributions to Israel, released an optimistic statement Tuesday: “We follow, as do others, developments concerning the stock market, but we have no immediate indications that we would be affected. Our campaigns have continued to increase each year for many, many years, regardless of the fluctuation of the stock market. Historically we have continued to show increases, and we are optimistic that this will continue to be the case.”

A spokesman noted that the 1987 campaign, which will end in December, has amassed an estimated $725 million. He added that most gifts reaching UJA were in cash, not in stocks.

Regarding American investments in Israel, the stock market decline will have no “direct and immediate” effect, according to Karen Chaikin, public relations director of AMPAL-American Israel Corporation, which finances and invests in Israeli economic enterprises.

Israeli stocks on U.S. exchanges fared in a variety of ways Monday, from no change for Elscint to a loss of 35 percent for Etz Lavud.

Initial reports from continental Europe, meanwhile, indicated that Jewish communities and individual Jews there were likely to escape relatively unscathed from the stock exchange turmoil.

Contrary to Wall Street, Jews play only a minor role as stock brokers and investors in the financial markets of France, West Germany and Switzerland.

(JTA correspondents Yitzhak Rabi in New York and Edwin Eytan in Paris also contributed to this story.)