Israel Bonds Wants You

Sparked by fund-raising events nationwide, the State of Israel Bonds drive to attract individual buyers rather than institutional investors is paying dividends. Last year, 95,000 Jews purchased a total of $600 million in bonds, compared with about 55,000 in 1997. Banks, meanwhile, bought only $31 million last year — 3.4 percent of the $920 million sold — after purchasing $300 million two years earlier. Pension funds and city and state governments bought the rest last year.
Israel Bonds pays 60 to 70 base points more than U.S. Treasury bonds, noted its president and CEO, Gideon Patt, and “every bank wanted in its portfolio some highly regarded international bonds.” But he also wanted to use the bonds as a way Jews could “bond” with the State of Israel.
“Bonds connect purchasers,” explained Patt, who said that when he took over three years ago, more than one-third of sales was to banks.
Patt reduced the amount banks could buy while making a major push for individual investors. The organization now bars any bank from purchasing more than $1 million, and then only in connection with a Bonds fund-raiser.
The 35 U.S. offices sponsored many such events last year to raise the requisite $920 million. Patt figured that on average, 26 fund-raisers were held nightly on 260 nights last year, with an average event attracting about 200 people.
“These events are giving us a strong position in the country,” said Patt. “Purchases by individual Jews are now the backbone of this organization.”
Even more fund-raisers are planned for this year, he said, so the number of individual Jews who buy bonds in 2000 should surpass 100,000.
Because the average longevity of an Israel Bonds is seven years, Patt calculated that more than 1 million investors — almost all Jewish — own an average of $5,000 to $7,000 worth of bonds. He said about 500 institutions own the rest.
Another project Patt initiated was reducing the stack of bonds that had matured but were never redeemed and therefore were no longer appreciating. When he arrived, there were $140 million in unclaimed bonds held by about 30,000 investors.
At his request, Chase Manhattan Bank ran advertisements asking these buyers to search for unredeemed bonds. As a result, the value of unredeemed bonds has been whittled to $60 million, he said.
Since it was founded 50 years ago, State of Israel Bonds has sold more than $21 billion in bonds, of which $16.5 billion were redeemed on time. The other $5 billion is still outstanding.
Israel Bonds are sold directly by the organization rather than through institutions to ensure an uninterrupted sale, Patt said, pointing out that sales by institutions might be subject to the vagaries of political developments.
“A bank would say, ‘Let’s see what happens with the peace process,’ ” he explained.
He noted that several years ago, some Orthodox Jews upset with the Labor government then in power called on their members to refrain from buying Israel Bonds. And Patt said the same thing happened a few years later, but this time Reform Jews proposed a boycott to express displeasure with the Likud government of Benjamin Netanyahu.
“Israel Bonds have no strings attached,” Patt insisted. “Jews when they buy them don’t ask what happens if Israel defaults or will not exist. A bank would take that into consideration, but a Jew doesn’t because he wants to help Israel. And now that Israel is doing very well economically, he is proud of it and wants to contribute to its economic strength.”