Gallery chronicle (September 2009)

 
Jack Tworkov, Thursday (1960), courtesy Hirshhorn Museum and Sculpture Garden,
Smithsonian Institution, Washington, DC / Joseph H. Hirshhorn Purchase Fund

THE NEW CRITERION
September 2009

Gallery chronicle
by James Panero

We think of painting as a window, but for Jack Tworkov painting was a home. “My striving is not for the far-off or far-out landscape,” he once wrote, “but for the identification and naturalization of a home ground.” So he became the master contractor of Abstract Expressionism. In color and gesture he rarely dazzled. In the construction of work, however, he could be flawless. Rather than seek affection, he commanded admiration. His paintings do not seduce, they secure. They dig a foundation, erect four square walls, and put a roof over your head that is built to last.

In 1960 Tworkov complained that “I’ve been second-rated by every critic, large or small.” Two first-rate productions now allow us to reconsider this estimation. At no other moment, including 1964’s Whitney survey and 1987’s Pennsylvania retrospective, could this artist be so fully examined. At the UBS Art Gallery in midtown Manhattan, the curator Jason Andrew has assembled a must-see show called “Jack Tworkov: Against Extremes, Five Decades of Paintings.”[1] The exhibition presents numerous Tworkov drawings and twenty-nine major paintings, from Untitled (Still Life with Peaches and Magazine) (1929) to the large Compression and Expansion of the Square, completed just before the artist’s death in 1982. At the same time, Yale University Press has published the definitive collection of Tworkov’s writing in a book called The Extreme of the Middle, edited by Mira Schor.[2] This 480-page volume brings together Tworkov’s artist statements, published reviews, and correspondence, but most notably it unearths extensive selections from Tworkov’s diaries. In their philosophical and artistic introspection, these rigorous notations may just be the New York School’s answer to the journals of Delacroix.

Born in Biala, Poland, in 1900, Yakov Tworkovsky emigrated to the United States in 1913 with his mother and younger sister Janice, joining his father on the Lower East Side. The sister took the name of her Old World hometown to become a famous painter herself, a jet-setting Parisian ex-pat, and the common-law wife of Ford Madox Ford. Jack proved to be much less facile in putting down roots. He wrestled with the despair of alienation. “I have the perverse desire to be completely known as a Jew to non Jews but deny that fact to Jews,” he wrote of his religion in 1954. “My predicament is that I’m essentially a religious man—a religious man without a religion and so abstract art is perhaps the nirvana towards which I reach,” he reflected in the 1970s.

The order one can impose on painting became Tworkov’s support. “Geometrics or any systemic order gives me a space for meditation, adumbrates my alienation,” he wrote in a revealing letter to the painter Andrew Forge in 1981.

Tworkov studied at New York’s Stuyvesant High School and entered Columbia University to major in English Literature. He thought of becoming a poet. Then exposure to Cézanne and Matisse lured him to painting. Upon graduation in 1923, he enrolled in the National Academy of Design to study with Ivan Olinsky and Charles Hawthorne. He followed Janice to Provincetown and met Karl Knaths. At the Art Students League he trained with Guy Pène du Bois and Boardman Robinson.

Like many of the older members of the New York School, Tworkov took up painting with the Public Works Project. His genre work from this period, such as Afternoon Bridge (The Card Players) (c. 1935), is eminently forgettable, a fact he was quick to acknowledge. He became disillusioned with loaded political subject matter and stripped his work down to the bone. Tworkov may be known as the Abstract Expressionist who turned increasingly minimal in the 1960s, but the importance of structure is apparent from his early work. “I turned to still life as a release from subject and spectacular composition,” he wrote in 1947. His Untitled (Still Life with Blue Pitcher and Grapes) (1946) demonstrates an engineering hand, as line twists through space to connect elements into a unified whole. In 1948 he rented a studio next door to his friend Willem de Kooning. As a founding member of the Eighth Street Club, Tworkov then emerged alongside de Kooning during Abstract Expressionism’s rapid ascendency in the 1950s.

Some of Tworkov’s paintings from this period endure as masterpieces of post-war American art. House of the Sun (1952) ranks with de Kooning’s 1948 Painting in the MOMA collection as a supreme demonstration of gesture tied to form, here in primary colors. Watergame from 1955 is another example. Yet while Tworkov’s structure was always strong, often his color choice and brushwork lacked assurance. His painting could be stiff and overbuilt. Nausica (1952) is one instance where pastels produce a cartoonish riff on a de Kooning Woman.

The Dionysian expression that came to define Abstract Expressionism held little interest for Tworkov, and he gradually moved towards a more Apollonian center. “I would not be comfortable with a painting that was too aggressively stated or too sleek or too self-consciously simple, or too beautiful or too interesting,” he noted in 1973. “I am uncomfortable with extreme portrayals. I let reason examine disorder.” He recognized the uplifting quality in mid-century art: “The abstract-expressionist movement, although negative in its rejection of all tradition and especially of the French art of the first half of the century, did reflect this positive element, the postwar euphoria, the sudden feeling of strength both physically and spiritually.” Yet he turned against the violence of de Kooning: “We all dissent from de Kooning’s example of defacing, of painting out the painting, of throwing the defiled scrapings back on to the surface, in a gesture of contempt and hatred… . My attitude was to abandon the angry gesture, to wear in this respect a neutral face.”

Tworkov’s home life reflected his desire for order. He rejected the licentiousness of bohemia. He identified with middle-class America and lived accordingly. “Jack took care of everything—his car, his house, his lawn, his tools, his studio, his brushes, his family, himself,” noted the poet Stanley Kunitz. “Nobody could have led a more admirably moderate, regulated, or disciplined life.”

His diaries reveal a rigorous self-questioning that emerged from a revulsion with both Nazism and Communism. “The left has become the biggest cesspool,” he wrote in 1958. This sentiment matured into his identification with a patriotism that led not towards ideology but to freedom from ideology. “Only bourgeois society as we know it in America today gives me the freedom to join nothing, no organization and protects me from its vengeance,” he wrote in 1959. “We had and still have in this country the chance to take a new turn towards humanity and human society,” he continued, “Not Russia, not India, but America is the hope of the world.” He then proclaimed in 1960: “My Americanism amounts to a total conversion. I know myself to be Jewish, but my desire is for identification with those people and those forces that move towards making this country a reality of the Bill of Rights.” Tworkov saw the direction of his philosophy for what it was: “Rereading some of these notes I am struck by the conservatism of some of my views, how uncongenial they are to the prevailing intellectual point of view. However these notes are a response to the most serious self-questioning… . They represent not what I ought to believe, but what I know I believe.”

As Tworkov found his home in middle-class America, it meant an exit from artistic bohemia and the sacrifice of his own reputation. He despised Dada and its new formulations. (“A Jew is out of his head if he is for Dada,” he wrote in 1959, “like a hare running with the hounds.”) Yet rather than despair at his falling out, Tworkov found an additional spur. Many of his signature works emerged during this period. “I think the time has now arrived for me to do the best work of my life,” he wrote in his journal in 1960. He was right: Thursday (1960) is a standout of the UBS show. A red armature binds together the painting’s green and white forms, which come alive through an ambiguity of figure and ground. Although Tworkov says his dealer Leo Castelli once worried over them, one of Tworkov’s heraldic flag–type paintings, RWB #3, is also a triumph. “They are all in red, white and blue, and perhaps unconsciously an ironic comment on my growing patriotism.”

Tworkov moved to academia. In 1963 he became the chairman of the art department of Yale. He discovered a greater interest in mathematics and geometry. Unfortunately for an artist who once remarked that “all programs represent future sorrows,” much of the work from this period comes off as programmatic. Idling II (1970) might as well be the prototype for stain-concealing wallpaper. Even his writing seems increasingly formulaic. “The painting activity stands in ironic contrast to the measuring activity,” he noted at the time. “The brushing represents a purely random activity.”

The diagnosis of bone cancer around 1980 reawakened his human touch. Conventional wisdom dismisses all of Tworkov’s post-1960s work as bloodless noodling. Yet Compression and Expansion of the Square (1982) may just be the most assured painting in the show. In this three-panel work, structure becomes gesture. Tworkov built the animation of the piece into its form, not its brushstroke.

Tworkov could be a captive of his own intellect. “I had a revulsion against the intellectual in my own nature and in art,” he wrote in 1947. “I am a man condemned—behind bars—a prisoner,” he lamented in 1954. “I need desperately to be alone again—to stop the endless verbalizing of all my thinking, and to paint.” Yet he could also harness his intellectual pressures to build great structures in paint. “Reason chooses the ground where the play of feeling is set free. … It does not so much limit as it contains,” he remarked. While his paintings became marked by a greater sense of order, in fact he always exercised a high level of control, even in his more gestural work. “His paintings have a quality that other American-type non-objective paintings do not have,” Fairfield Porter rightly observed. “Though superficially just as broad and dashing, they are entirely conscious… . Tworkov’s power, which gives his paintings their lasting effectiveness, comes from his never letting go of awareness.” Tworkov believed in an “aesthetic morality,” and it began with the trueness of his line. “Art can become the true square and level of all things,” he wrote. Rather than a mere concern for structure and gesture, for Tworkov “trueness and pleasure add up to the most fundamental quality in a painting.”

Notes
Go to the top of the document.

• “Jack Tworkov: Against Extremes, Five Decades of Paintings” opened at UBS Art Gallery, New York, on August 13 and remains on view through October 27, 2009. Go back to the text.
• The Extreme of the Middle: Writings of Jack Tworkov, edited by Mira Schor; Yale University Press, 480 pages, $45. Go back to the text.

Special Report: The Pawnbroker

ART & ANTIQUES
September 2009

SPECIAL REPORT: The Pawnbroker
by James Panero

With the art lending business facing challenges, a startup tries an unconventional approach.

If the art of business has revolutionized the business of art in the past decade, Tony Barreiro and Ray Parker Gaylord are firmly in the vanguard. The San Francisco-based company ArtLoan, which they founded in 2004, lends money against the value of art collections owned by individuals and galleries. In this venture they join more established art financiers in New York. But unlike these large players, who lend only against big-ticket items, Barreiro and Gaylord say they want to change the way the world views even its smallest collectibles. Essentially, they aim to turn art and antiques at every level into ATMs.

Barreiro and Gaylord say they formed ArtLoan after a fateful visit to the local bank. They wanted a loan backed by a Picasso painting that Gaylord had inherited from his father, Charles, a dealer who specialized in antique mantelpieces. “We went to a major bank in San Francisco because they had extended credit to us based on real estate,” explains Barreiro, “but the idea of lending on a Picasso made no sense to them. They said that it had no value to them. We said, ‘There’s something wrong with this.’” The artwork, after all, could be appraised through auction results, just as real estate could be evaluated based on similar sales.

Eventually, they came to see the history of real estate as signaling an opportunity for the art market. “I remember the days where if you wanted to access money from your house, you had to sell your house,” Gaylord says. Home equity loans then made it possible to unlock the liquidity in real estate while still retaining ownership. The availability of money for equity fueled an unprecedented rise in home prices. This history, say Barreiro and Gaylord, shows that widespread access to an asset’s liquidity increases its value.

Asked whether the recently-imploded real estate market is the best model for lenders, Barreiro draws a distinction: “The real estate meltdown occured largely as a result of properties being overvalued and over-leveraged,” he says. “People were lending on 110, 120 percent of value. They were lending against future value, which is not how underwriting should work. We are not going to lend against what a Warhol is going to be worth five years from now.”

The ability to borrow against art is not altogether new. “Prior to the advent of modern banking and commerce,” Barreiro points out, “people borrowed against and bartered their personal property. Table silver, jewelry, furniture, porcelains and even rugs were used like cash. The business of art financing and lending can play an important role in making these objects readily liquid once again.” Even modern banking and finance gradually got back into the act. In 1979 Citibank formed an art advisory service, with two employees, out of its private banking division. The auction houses were not far behind, offering their own financial services in the form of bridge loans to sellers against consigned property and occasional financing to big-ticket buyers. Sotheby’s formed its Financial Services division in 1988. The year before, the auction house lent $27 million to Alan Bond, the Australian industrialist, to purchase Vincent van Gogh’s Irises. The purchase price of $53.9 million made it, at the time, the most expensive painting in the world, and the picture itself served as collateral for the loan.

Art prices, like real estate prices, have experienced their own recent rise and fall. Lending against equity has played a supporting role in this process by helping to drive auction returns. Even in 1987 some observers thought the Van Gogh purchase had been inflated by Sotheby’s loan.

During the past decade private equity firms, operating outside of banking regulations, have entered the business of art finance with headline-making deals that are turning expensive artworks into an ever more liquid commodity. For the first time art financing has come about not as an adjunct to other businesses but rather as an independent money-making venture.

“We are a private finance company, and not a bank” explains Ian Peck, who founded the New York-based Art Capital Group in 1999. “We are like a hedge fund.” In 2005 Andrew Rose, a former ACG director, started another private lending firm called Art Finance Partners, along with ACG’s comptroller Christopher Krecke. Since these firms operate outside of the FDIC regulations restricting bank-based lending, they could offer, for example, “non-recourse” loans—those backed only by art collateral for which the borrower is not personally liable (meaning that defaults have no effect on credit scores). The availability of such financing meant that art could be more than a luxury item. It could be a nontraditional asset in a diversified portfolio, with a suite of financial instruments at its service. In the fall of 2008 for example, the photographer Annie Leibovitz reportedly borrowed $24 million from ACG and a subsidiary against personal real estate and the reproduction rights for all her photographs.

Yet as art financing evolved over the past several years, only a small fraction of the collecting public could take advantage of it. “Our minimum loan amount is half a million dollars. Rarely do we do anything below that,” Peck explains. Since loans at ACG are made on 50 percent of the art’s value, he says, “to get to the half-million minimum you need to have artwork worth over a million,” or a combination of art and real estate with that value. Bank-based financing likewise serves only high-value art and high-net-worth individuals. Emigrant Bank Fine Art Finance, founded as Fine Art Capital by Andy Augenblick in 2004, advertises loan amounts between $1 million and $100 million on art and antiques.

“The competitors that are out there are primarily focused on very high-dollar artwork,” says Gaylord. “We realized that the market out there is not generally comprised of multimillion-dollar works of art. Most sales are $100,000 and under. And that means that dealers are not all buying multimillion-dollar Picassos and Warhols. They are buying stamp and coin collections, and their most valuable coin might be $25,000. Yet the ability to access cash from those collectibles is almost nonexistent because firms like Art Capital don’t want to deal with a $25,000 transaction.”

ArtLoan is still a startup. Barreiro and Gaylord will not discuss the volume of their business. They operate ArtLoan out of the same address as Charles Gaylord & Co., the company started by Ray’s father, where the two serve as dealer-partners. Yet they see their loan model as having the potential to change the art world. “There are people in New York who have been doing it longer than we’ve been doing it,” says Barreiro, “but they do it differently. We wanted to be the first to have a Web-based procedure, for it to be easy-no mystery, no 25-page contracts.” The two have taken out patents on several online business models. When financing becomes available, they plan to institute an auction financing system “as simple as Netflix,” says Barreiro. They also have a proposal to preapprove works sold at auction for loans, which could be activated by the buyer at any time after a sale.

Unlike other art lenders, ArtLoan is able to make small loans thanks to the particular regulatory structure Barreiro selected for their company—a structure that might surprise some in the art world. ArtLoan is a licensed pawnbroker. “Sadly, a lot of people have dim views of pawnbrokers,” says Barreiro. “They think they are going to take you to the cleaners or fence goods. But that’s not what we do here. I went to a pawnbroker’s convention in Sacramento and made the decision that this license makes so much more sense than any kind of banking license.”

Barreiro says the pawn license allows him to use simple contracts with low fees and no interest triggers. Once a work of art comes in for evaluation, ArtLoan bases its lending offers on the liquidation estimate of the collateral, minus the cost of storage, processing and depreciation. There is no court process on defaults. “There is a 10-day default grace period, and on the 11th day we vest in the property.” The pawn license also means that ArtLoan only makes non-recourse loans, in which the asset serves as the sole backing and approval requires only title and lien searches on the property and an in-house appraisal, not a credit search. “We don’t care whether the borrower is employed or whether they have paid their mortgage,” Barreiro says. Likewise, because these are nonrecourse loans, defaults do not adversely affect credit scores: “If you default on a loan from us, you are not a bad guy.” Finally, the license requires that all security must be sent to ArtLoan for safekeeping during the dura- tion of a loan.

According to Barreiro, the flexibility and simplicity of ArtLoan’s procedures make the firm attractive to his credit facilities (the companies that supply the cash) as well as to his borrowers. “When you borrow from a commercial bank,” he says, “you have to go through all the financial disclosures and credit-worthy tests, but many people cannot jump through those hoops.”

Barreiro believes that many lenders aim to encourage default through interest-rate hikes and fees hidden in their long contracts. “My bankers rub their hands like Shylock, hoping for default” in order to take possession of the art, he says, “but I don’t want our customers to default.”

Some high-end borrowers have run into trouble with their loans. In late July, The New York Times reported that ACG sued Leibovitz for allegedly refusing to cooperate with attempts to sell her houses and photographs to pay back her loan. Also accord- ing to the Times, the artist Julian Schnabel took out a loan from ACG in 2006 to help fund a real-estate venture and later sued the company over what saw as its “exorbitant fees.” ACG made a counterclaim against Schnabel for additional interest and fees because the artist did not disclose that there was an existing mortgage on his property.

Barreiro and Gaylord say they steer clear of such litigation. The real challenge for ArtLoan, as for all players in the art finance industry, is the current lack of availability of cash to make loans. “Cash is king, more than ever, and it seems to wear a big crown,” says Barreiro. “I would be lying if I said we are not challenged. Banks tell us they can get 15, 18 percent on their money all day long.” The retail rates for ArtLoan’s cash vendors mean that the company charges credit-card-like interest to its borrowers, with rates that can go as high as 24 percent.

Peck says ACG faces a similar cash crunch. “We have a lot of private equity, but our commercial lines are limited. As a result of the current market, where we used to have seven commercial banks, we now have one or two.” The cash crisis, says Peck, has recently forced many of his large competitors to shut their doors. “At the moment ACG is one of the few if not the only active lender in this space.” Christie’s officials say the auction house will still consider making loans against consigned artworks. Interview requests made to Emigrant Bank for this story were declined.

In the economic downturn, there could be an upside to ArtLoan’s small size. The multimillion-dollar loans made by the larger lenders were supported by the securitization markets and the ability to sell those loans into bond packages. That market is now largely closed. In addition, the pawnbroker license gives ArtLoan a great deal of latitude in its practices. “We are structured differently,” says Peck. “We are much more institutional.”

The art financing industry largely disappeared in the economic downturns of the 1980s and ’90s, only to rebound and grow. In the current climate the demand for art finance is offset only by the availability of cash to lend. The revolution that Barreiro and Gaylord anticipate in art-equity lending might come to pass in the next recov- ery. “There is a lot of house cleaning in the art and antiques world,” says Barreiro, “and this century is going to change the way that the antiques and fine arts business has always operated.”

Peck agrees, but advises caution about the road ahead: “Thirty years ago, only 5 percent of the buying public financed their cars; now that number is inverted. I am envisioning over time the same thing becoming true for the art market. People are going to use their collection as a margin account. Americans love to leverage their assets. Yet there has to be a balance with what the market says things are worth and the ampli- fier of financing. Real estate got out of control. There was such easy credit—you could borrow 100 percent of the purchase price for a home. There has to be a balance.”

The Culture Crash

CITY JOURNAL / SPECIAL ISSUE: NEW YORK'S TOMORROW
July 2009

The Culture Crash
by James Panero

Risky investments have endangered New York’s leading arts institutions.

To understand the current condition of arts organizations in New York City, visit the Metropolitan Museum of Art. There, you will find one of Winslow Homer’s most famous works, The Gulf Stream. Painted in 1899, the canvas depicts a solitary sailor lashed to his boat on a storm-tossed sea. The mast and bowsprit have snapped, the tiller and rudder are gone, and a school of sharks circles the boat in blood-red water. On the horizon are two images. On the left, through the fog, is the silhouette of a ship under full sail: a possible rescue. On the right, a looming waterspout presents a far more ominous outcome.

Homer was no allegorist, but his work serves, unfortunately, as an all-too-appropriate metaphor. Just as the storm has knocked out the boat’s propulsion and steering, an initial wave—the downturn in the financial markets—has smashed the endowments of arts organizations. Now a second threat, the indirect effects of the downturn, is appearing on the horizon like the waterspout. Its full force will be felt by arts organizations in the months and years ahead.

The reductions in arts endowments reported over the past year have been significant, raising the question of how they have been managed. If the investment goal of arts endowments is the preservation of capital, how can they now face decreases of 35 percent, aside from the criminal actions of investors like Bernard Madoff?

For the answer, look to nonprofit money managers and “managers of managers,” such as the Commonfund, which was started with seed money from the Ford Foundation in 1969 and now manages managers for hundreds of nonprofit institutions, with $40 billion in assets under management as of 2007. These managers, now used throughout the nonprofit world, have encouraged arts organizations to seek “total returns,” including capital appreciation, from their endowments, rather than merely preserving capital and accruing dividend income. “In the post–World War II decades,” explained Commonfund in its 2005 report Principles of Nonprofit Investment Management, “the concept of prudence changed from one of avoiding risky investments altogether to one of balancing the risks of various kinds of investments against one another. . . . If you aim to get the most out of your investments long term, you have to own some that have a higher degree of risk.”

Endowment asset allocations thus moved away from the safety of fixed-income instruments, such as high-grade bond funds, to the volatility of domestic and foreign equities and even to “alternative investments,” such as distressed debt and venture-capital equity. This investment strategy paid luxuriantly during the good times, resulting in bloated budgets and massive expansions. Yet with only quarterly meetings, arts boards proved too slow to navigate away from the hazardous investments once the bad times began. In short, arts organizations adopted bad habits.

“All of the charities, all of the institutions lost money, but they didn’t have to lose 25 to 40 percent,” says Frank Martucci, a financier who has sat on several arts boards and opposed their aggressive strategy. “Why weren’t there some down only 10 percent? If you are all sharing the same strategy, it’s not really a diversified approach. Advisors are all pretty much the same. They tell you 10 to 30 percent in bonds and the rest in private equity, stocks, foreign securities, distressed securities. There are times you take your chances, but with charities I don’t think you ever do, and putting 85 percent of your money in equity and illiquid instruments is gambling. I hope this has taught people to be more conservative in their approach towards charity.”

Martucci advocates an eventual shift in endowment allocation to 40 percent to 50 percent in conservative fixed-income investments and the rest in equities—and only 5 percent to 15 percent of that in alternative investments. He also suggests that arts endowments move away from relying on active management and use volunteer board members with financial expertise to oversee investments, which can largely be maintained through bond index funds. “Managers of managers are like funds of funds,” says Martucci. “You can end up paying fees three times over.”

In the early months of 2009, arts organizations began announcing their endowment losses and the measures they were taking to balance their budgets. The news reports became week-by-week blows to the city’s cultural health. James R. Houghton, chairman of the Metropolitan Museum’s board of trustees, announced in February that the museum’s endowment had lost a staggering $700 million since the previous June—a decrease of 25 percent, leaving the endowment worth about $2.1 billion. Since investment income makes up 30 percent of the heavily endowed Met’s annual operating revenue, the loss shook the museum at all levels. Adding to the Metropolitan’s woes, the city announced that its operating support for the museum would be reduced by $1.7 million, with another cutback of $2.4 million announced for the next fiscal year.

Houghton identified a set of new cost-cutting measures, including a museum-wide hiring freeze, the elimination of temporary staff, and travel curtailment. He also flagged the museum’s retail arm for immediate cutbacks. In March, as the Metropolitan’s loss estimates rose by $100 million, its director, Thomas Campbell, announced further layoffs. Campbell added that the museum anticipated the need to reduce the rest of its workforce by 10 percent by July, which could mean a reduction of as many as 250 additional full- and part-time jobs. These cuts will represent the first museum-wide layoffs since the fiscal crisis of the early 1970s. And in June, the museum raised the estimate of its losses again, to a third of the endowment’s former value.

“We’re looking at a period of austerity this fiscal year, and the situation will be even more difficult in the fiscal year that follows,” says Metropolitan spokesman Harold Holzer. Even without an additional downturn in its portfolio, the Met’s bottom line will worsen because of the way the museum averages its endowment income over a multiyear period. “We base [endowment income] on a rolling average of 20 quarters, so it’s just beginning to be averaged in,” says Holzer. “We’ve had three quarters. Eventually the bad periods become the majority of the average. That’s when the income will go precipitously down. We’re looking at a much more pressing problem in fiscal year 2011 than in 2010.”

Bad news for the Met, but smaller arts organizations might envy a mere 33 percent endowment loss at a still-munificent museum. On April 21, Arnold Lehman, director of the Brooklyn Museum, released far grimmer news. The museum’s endowment had fallen 35 percent from the top of the market, from approximately $100 million to $65 million. In addition, since the end of the museum’s 2008 fiscal year, New York City had reduced its operating support for the institution by 32 percent, amounting to a loss of $2.31 million over three years, according to the museum. Income from museum membership fell 20 percent in the first months of 2009. Enrollment for new members dropped “precipitously” compared with the past several years, Lehman continued. Income from two major annual fund-raising events was down 35 percent in early 2009. Revenue from the museum shops and the parking lot also fell off.

To help confront these shortfalls, Lehman announced, the museum’s trustees had agreed to maintain or increase their level of financial support. Meanwhile, the museum froze hiring and put a moratorium on staff travel. Suggested admission fees for adults were raised from $8 to $10. Staff members would get a one-week unpaid vacation in the summer. Nonunion employees were asked to take salary reductions, beginning in July, and all employees were offered voluntary severance packages. Through these actions, Lehman said, the museum hoped to “reduce personnel costs sufficiently to avoid or minimize any subsequent layoffs.” Meanwhile, a major exhibition scheduled to open in the fall was canceled, and in September, the museum will shutter one of its three special-exhibition galleries “for the foreseeable future.”

Lehman’s perspective on the challenges facing New York arts organizations extends beyond Brooklyn. In addition to his job at the Brooklyn Museum, he heads the Cultural Institutions Group, a committee representing 34 city museums and cultural outlets, including the Metropolitan Museum of Art, the Brooklyn Academy of Music, and the American Museum of Natural History. The group’s members are located on city-owned property and receive funding from the city in exchange for providing cultural services. “The Cultural Institutions Group really is in the midst of a perfect storm,” Lehman said in late April. “Significant reductions in municipal support as well as huge downturns in contributed incomes at all levels have left many of our members in a much more fragile state than is understood by the general public.”

While many once-stable arts organizations are now in a “fragile state,” those that were already shaky when the financial crisis began may now be past hope. No organization represents this sad chapter of the economic crisis more than New York City Opera. At one time, City Opera—the “people’s opera,” as Mayor Fiorello La Guardia called it—was a model counterweight to the Metropolitan Opera, its tonier neighbor now located across the plaza at Lincoln Center. The opera star Beverly Sills became City Opera’s general director in 1979 and headed it for a decade, raising its profile with popular bel canto fare and increasing donations. The more than decade-long tenure of Paul Kellogg, who took over from Sills’s successor, Christopher Keene, in 1996, was likewise “stable and successful—a model balancing act,” writes New Yorker music critic Alex Ross. Yet when Kellogg announced his retirement in 2005, City Opera languished for years without finding a replacement.

Another long-running problem was City Opera’s location. For years, it fretted over finding a new venue independent from the New York State Theater at Lincoln Center, which it shared with the New York City Ballet and which was constructed with acoustics suited to ballet footfalls rather than opera arias. With each failed search, City Opera piled uncertainties on its supporters. It sought headline space at a rebuilt World Trade Center cultural venue and then at a location nearby, which it lost out to Goldman Sachs. It proposed building a new theater in Damrosch Park, the current location of the Lincoln Center band shell, and was shot down by the Metropolitan Opera. It looked at reconfiguring City Center in midtown, where Morton Baum had founded City Opera in 1944, but concluded that the fly space there couldn’t accommodate contemporary sets. It made plans to move into a new development near Lincoln Center, on Amsterdam Avenue, but that also fell through.

Now the opera company may not need a home at all, partly thanks to its 2007 selection of Belgian-born Gérard Mortier as its future director. An avant-garde impresario accustomed to government largesse (see “The Abduction of Opera,” Summer 2007), the director proved a far greater diva than Beverly Sills without singing a note. While the New York State Theater went under the knife for a $100 million renovation, becoming in the process the David H. Koch Theater, Mortier encouraged City Opera’s board to shut down the 2008–09 season almost entirely, rather than contend with the construction. (New York City Ballet had no such qualms and ran its season around the interruptions.)

While the opera was able to shed its administrative staff for the yearlong furlough, it still had to pay its chorus and orchestra. Ticket revenue declined from the $13 million that it averaged for its 2005–08 seasons to only $320,000 this past year. The ill-timed closing, combined with the economic crisis, pushed City Opera into an abyss. In 2001, City Opera’s endowment was worth $51 million; in 2008, it had shrunk to $27 million; now, after two large withdrawals for operating expenses in late 2008 and early 2009, it has dwindled to $10 million.

And what became of City Opera’s captain during this emergency? In November 2008, Mortier jumped ship without ever taking the full-time helm, accepting a job at the Teatro Real in Madrid. He says he opted out of his New York post because City Opera’s evaporating finances wouldn’t let him enact his artistic vision. “I saw myself as drowning,” Mortier told the New York Times. “I wanted to be rescued.” As he floats away on a golden lifeboat, his replacement, the young George Steel, has confronted a strike from his union performers over further emergency cuts. City Opera’s future will play out in one of two ways: either a donor steps in soon to rescue it, or Steel will oversee the end of a once-proud New York cultural institution.

The experiences of these three institutions—the Metropolitan Museum, the Brooklyn Museum, and City Opera—mirror the overall troubles of arts organizations in New York City. The Metropolitan Opera, which saw its $300 million endowment shrink by a third, has cut senior staff salaries by 10 percent and put up its colossal Marc Chagall tapestries as collateral for a loan. The Museum of Modern Art has implemented a hiring freeze and ordered a general budget cut of 10 percent. The New York Botanical Garden, facing a $2 million reduction in city support and a 12 percent budget shortfall, will cut 49 jobs; it has also canceled its 2009 summer art exhibit, despite the popularity of last year’s showing of Henry Moore sculptures, which led to an 8 percent increase in attendance. The Asia Society has seen a 30 percent decline in its endowment and has had to cut 18 positions, reducing its $26 million operating budget by 10 percent. Even animals are facing the ax, metaphorically, as the Bronx Zoo must close several exhibits. A survey in late 2008 of nearly 100 New York City cultural institutions, conducted by the Alliance for the Arts, found that 79 percent had reduced or were planning to reduce their budgets, 68 percent were deferring new hires, 42 percent were planning layoffs, and 45 percent were canceling or postponing programs.

With irrecoverable losses in endowment income, at least for the foreseeable future, the survival of arts organizations will depend not just on cutting their budgets without negatively affecting their core services, but also on finding new sources of revenue. Unfortunately, in perilous economic times, attracting new donors may be harder for arts organizations than for other nonprofits. The Princeton philosopher Peter Singer exemplifies the attitude against arts funding in his new book, The Life You Can Save: “Philanthropy for the arts or for cultural activities is, in a world like this one, morally dubious.” Singer points to the $45 million that the Metropolitan Museum spent on a Duccio painting in 2004 as an amount that would pay for cataract operations for nearly 1 million blind people in the developing world. “If the museum were on fire, would anyone think it right to save the Duccio from the flames, rather than a child?” Singer asks.

Such ideas, of course, ignore the fact that arts organizations, unlike “feed the world” campaigns, have a proven track record of serving and elevating the poor and dispossessed. They also employ many workers. Still, studies by the Conference Board and by the Center on Philanthropy at Indiana University find Singer’s anti-art attitude reflected in the habits of many donors during troubled economic times. “When you’re providing human services or feeding the hungry, people understand that maybe this is a time to dig a little deeper,” Patrick Rooney, interim executive director of the Center on Philanthropy, told Bloomberg News. “Helping an arts organization? That’s a tougher sell.” Randall Bourscheidt, president of the Alliance for the Arts, concurs. But the “deeper values of society that are in education and the arts are important,” Bourscheidt maintains. “These activities are not competing with basic needs but complementing them.”

Some arts donors have already followed Bourscheidt’s advice. In April 2009, the Juilliard School announced that it would cut 50 slots for poor minority schoolchildren in its Music Advancement Program. When the billionaire Los Angeles philanthropist Eli Broad read about the cut, he pledged $425,000 over four years to sustain the program. But such stories are the exceptions. A Foundation Center survey at the start of 2009 reported that two-thirds of foundations expected to reduce their giving amounts by about 10 percent. Half of all foundations predicted reductions in the number and size of their grants. Most grant-making organizations anticipated maintaining their previous priorities—meaning that arts foundations will continue to make donations but that competition for their support will become more aggressive.

Many arts organizations will close before the next financial rebound. Some will undoubtedly fold because they lack public support, and as unworthy organizations no longer compete for funding, such winnowing could eventually contribute to the cumulative health of the arts. One hope for arts organizations that do survive the storm is that they emerge stronger, leaner, and more responsive to their constituency.

The National Academy Museum and School of Fine Arts is an organization that is trying to turn that corner. Like City Opera, the artist-run Academy suffered from years of bad management. In the economic downturn, its already-small operating endowment fell 40 percent. So in late 2008, it sold two major Hudson River School landscapes from its permanent collection to pay its bills.

It was a low point in the Academy’s 184-year history. According to peer-reviewed organizations like the Association of Art Museum Directors, museums are permitted to use the proceeds from the sale of artworks—or “deaccessions,” as the museum world calls such sales—only to fund the purchase of other artworks, not to pay general operating expenses. The National Academy deaccessions brought a censure from the arts establishment, making the museum unable to secure loans from other museums. (Legislation now under consideration in New York State would have made the deaccessions illegal.) But if not for the sales, “we would not have been able to pay loans and certain creditors,” says David Kapp, an artist and treasurer of the National Academy. “We would have had to file for Chapter 11.” The sale of the works brought the National Academy’s operating endowment to $10.5 million.

If the National Academy survives—and the painting sales bought some time—the economic crisis will have presented the museum and school with a mandate for reform, says Kapp. In April, the Academy’s artist members voted to modernize its governing structure and administration. “How do you guarantee that it never gets to that edge again?” asks Carmine Branagan, the new director of the Academy. The answer, she says, is to confront the bad decisions and bad habits that created the crisis—in the Academy’s case, an antiquated board structure that hindered fund-raising and outreach. “The sale of the paintings would have been a wasted endeavor,” says Kapp, “if we hadn’t changed our governing practices.”

The Academy’s restructuring points to a lesson for the city’s other arts organizations. They must try to survive the storm through budget cuts and aggressive outreach, yes. But they must also confront the governing and investment decisions that exposed their endowments, big and small, to excessive levels of risk and brought many of their organizations to the brink. As Kapp says: “This is too good a crisis to waste.”