From Medici to Deutsche Bank

Why do banks buy so much art?  To earn prestige apparently. Yet that prestige may come at a cost as banks do not want to be seen spending extravagantly in the wake of the mortgage crisis and bailouts.

Few banks collect art to make money. A liquidation auction of art from collapsed investment bank Lehman Brothers in London on Sept. 29, for example, raised $2.6 million. Not bad, but it won’t make a dent in the $613 billion in liabilities the bank had run up when it folded.

Art confers respectability and respect, according to Joan Jeffri, director of the arts-administration program at Columbia University’s Teachers College, and banks need those more than ever. From the mighty Medici banking dynasty in Renaissance Florence to the giants of the 19th century, like John Pierpont Morgan, art has been used to project status and power.

You could argue that the banks have done a better job of acquiring art than they have of acquiring financial assets. What’s more valuable: a Richard Diebenkorn painting or a toxic collateralized debt obligation? “The people responsible for managing these corporate collections have professionalized,” Jeffri says. “Whereas it was once the wife of the CEO or some personal friend managing the CEO’s interest in art, now banks have art departments and on-staff curators.”

  1. Eben Harrell & Frances Perraudin, Cultural Assets: Banks Stock Up on Art, TIME,  http://www.time.com/time/magazine/article/0,9171,2024218,00.html?artId=2024218?contType=article?chn=bizTech (last visited Oct 25, 2010).
Questions or Comments? Email me at derek.fincham@gmail.com

"[S]ome in the art world desire a market that is neither open nor honest."

So notes federal district court Judge William H. Pauley III in an opinion denying the request by Craig Robins to prevent the sale of three works which he was not allowed to buy.  Robins alleged that art dealer David Zwirner had effectively blacklisted him from buying other works by Marlene Dumas.  From Randy Kennedy’s summary:

The collector, Craig Robins, asserts in a lawsuit that he sold a painting by Ms. Dumas through the David Zwirner Gallery in Chelsea in 2004 with an agreement that the sale remain confidential. But the gallery, which took over representation of Ms. Dumas in 2008, told her about it, Mr. Robins asserts, causing her to add his name to the blacklist, even though he has an extensive collection of her works, 29 in all, according to the suit. In court testimony, Ms. Dumas’s former dealer confirmed that the artist maintains a blacklist of collectors and dealers whom she believes to be speculating in her works or simply selling them too quickly after buying them. Mr. Robins says that the Zwirner gallery promised to help get him off the blacklist and to sell him new paintings but that the gallery failed to do so. The gallery has denied the claims.

Ed Winkleman argues this might have all been avoided with the introduction of droit de suite in New York:

In situations such as the one that led to the Robins-Zwirner lawsuit, droit de suite would work well for galleries too. If the law required collectors to share the profits from any resale, the gallery would not get caught between the furtive goals of the collector and the wishes of their artist. Indeed, in most resale arrangements all three parties (collector, gallery and artist) could be motivated to work together to ensure each makes the most money possible. 

  1. Randy Kennedy, Collector’s Motion for Court Order Against Gallery Is Denied – ArtsBeat Blog – NYTimes.com, http://artsbeat.blogs.nytimes.com/2010/05/21/art-collector-fails-to-get-court-order-against-gallery/?ref=design (last visited May 24, 2010).
  2. Helen Stoilas & Marisa Mazria Katz, Judge denies collector’s injunction against dealer The Art Newspaper, http://www.theartnewspaper.com/articles/Judge-denies-collector-s-injunction-against-dealer/20893 (last visited May 24, 2010).
  3. Edward Winkelman, The case for droit de suite in New York | The Art Newspaper, http://www.theartnewspaper.com/articles/The-case-for-droit-de-suite-in-New-York/20673 (last visited May 24, 2010).
Questions or Comments? Email me at derek.fincham@gmail.com

Update on the Drouot Arrests

The AP reported yesterday that charges have been filed against nine employees of the Drouot auction house. French authorities last week found a stolen work by Gustave Courbet.

An auctioneer and eight commission agents were given preliminary charges, including ”organized theft,” the prosecutor’s office said.
Three others detained last week in the police raids on Drouot, its warehouses and homes of employees were released with no charges filed against them.
When the bust was announced last week, there was initial confusion about which Courbet work had been recovered. The painting — stolen several years ago from a collection whose owner had recently died — was not clearly identified, and the heir had confused it with another work, an official close to the inquiry said. He spoke on condition of anonymity because the case is ongoing.
Police initially identified the recovered Courbet work as ”La Vague” (The Wave), worth euro900,000 ($1.3 million), but officials said Monday it was actually ”Paysage marin sous un ciel d’orage” (Marine Landscape Under a Stormy Sky), worth about euro100,000.
The stolen Courbet — one of several paintings by the convention-smashing realist master with a stormy ocean theme — was found at the home of one of the commission agents being investigated. Other pieces recovered in the sweep included artworks, frames and furniture.
Under French law, preliminary charges give the judge more time to investigate and determine whether to send the case to trial. Three commission agents were jailed in the case, with the prosecutor’s office accusing them of deep involvement in thefts dating back to 2001.
The auctioneer was released pending the investigation with the stipulation that he stop hosting sales.

  1. The Associated Press, Preliminary Charges vs 9 in Paris Auction Sweep, The New York Times, December 7, 2009.
Questions or Comments? Email me at derek.fincham@gmail.com

A Profile of the Art Market

The Economist discusses the current state of the art market:

The current downturn in the art market is the worst since the Japanese stopped buying Impressionists at the end of 1989, a move that started the most serious contraction in the market since the second world war. This time experts reckon that prices are about 40% down on their peak on average, though some have been far more volatile. But Edward Dolman, Christie’s chief executive, says: “I’m pretty confident we’re at the bottom.”
What makes this slump different from the last, he says, is that there are still buyers in the market, whereas in the early 1990s, when interest rates were high, there was no demand even though many collectors wanted to sell. Christie’s revenues in the first half of 2009 were still higher than in the first half of 2006. Almost everyone who was interviewed for this special report said that the biggest problem at the moment is not a lack of demand but a lack of good work to sell. The three Ds—death, debt and divorce—still deliver works of art to the market. But anyone who does not have to sell is keeping away, waiting for confidence to return.

Good thing then that other buyers have appeared in Russia, the Middle East, and China.  In fact China has increasingly used the art market to seek repatriation:

The sensitivity of the subject was shown up in February this year when the collection built up by the late Yves St Laurent, a French fashion designer, and his partner Pierre Berge was put up for sale. The auction included bronze heads of a rat and a rabbit, two pieces that had been looted from the imperial palace of Yuanmingyuan by French and British soldiers in the opium wars in 1860. The heads, part of a series of 12 figures which dominated a zodiac fountain in the palace garden, had not even been designed by a Chinese artist but by a Jesuit priest from Venice who lived in the imperial capital. All the same, their provenance and history made their sale controversial.
The government let it be known that it did not approve of a public sale of the precious bronze heads in the West and did not want its citizens to take part. Even so, both the winning bidder and several underbidders turned out to be Chinese. One, a London-based businessman, had been planning to present the bronzes to the Chinese government as a gift. The buyer, Cai Mingchao, who secured the two pieces for EURO 31m ($46m), turned out to be an adviser to a Chinese foundation which seeks to retrieve plundered treasures. He announced very publicly soon afterwards that he would not pay up. The heads were quietly returned to Mr Berge. The government has since announced that it wants to catalogue all the pieces looted from Yuanmingyuan, which some believe is the first step in a campaign to reclaim them.

Questions or Comments? Email me at derek.fincham@gmail.com

Banks as Art Museums?

Interesting piece from the New York Times on banks and their art collections:

Deutsche Bank is believed to own the largest corporate collection in the world, with some 60,000 pieces of contemporary art. UBS owns 40,000 pieces, and JPMorgan Chase 30,000. Combined, that approaches the Museum of Modern Art’s trove. Banks have various explanations for their hoarding instincts: lots of walls to cover, clients to impress, corporate identities to build. Or perhaps just some past director was a devoted patron.
If banks were temples of culture rather than lucre, the collections would be easy to justify. As a financial asset, however, much of the art is of dubious value. Some 400 works owned by Lehman Brothers, including ones by Roy Lichtenstein, are expected to fetch only about $1 million at a coming auction. And it’s hard to believe Andy Warhol or Damien Hirst ever helped get an initial public offering off the ground.
At least some banks take care of their treasures. JPMorgan, whose collection was started a half-century ago by David Rockefeller at Chase Manhattan, has a well-regarded curator. But many banks don’t even know what’s boxed up in the basement, having inherited artwork in takeovers.
Some do make an effort to share their artistic wealth. Monte dei Paschi di Siena of Italy invites the public to see some of its impressive collection, which stretches back to the Renaissance. The Swiss bank UBS lets the Tate Museum of Britain select from its collection. But these efforts don’t often come to much. The Tate currently has only three of UBS’s pieces on display.

The authors tie these large collections to the financial bailout.  I’m more interested in comparing these banks to art museums.   It make When banks purchase massive amounts of art, it becomes harder for museums to compete with the economic clout of banks.  Though the piece is critical of this ownership of works of art, I suspect one main reason these works of art are held is to wait until their value escalates and banks can trade them for tax exemptions.

  1. Jeffrey Goldfarb & Lauren Silva Laughlin, Banks Hoard Troves of Art, The New York Times, October 26, 2009.
Questions or Comments? Email me at derek.fincham@gmail.com