The Washington PostDemocracy Dies in Darkness

Michael Steinhardt and the takeover of Jewish philanthropy by mega-donors

How a shift from communal charity to private foundations empowered individual wealthy funders.

Financier and philanthropist Michael Steinhardt attends the Champions of Jewish Values International Awards Gala at the Marriott Marquis on May 5, 2016, in New York. (Evan Agostini/Evan Agostini/Invision/AP)
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Over the past six months, major Jewish philanthropist Michael Steinhardt has been the subject of serious allegations from multiple women of sexual harassment. The arc of the story is all too familiar in our era of #MeToo: Women hoping to be taken seriously by the former hedge fund manager, whose fortune exceeds $1 billion and whose contributions to Jewish organizations, most importantly Birthright Israel, have been among the largest recorded, say they found themselves subject to lascivious commentary about their bodies and unwelcome requests for sex.

Far from furtive behavior, his alleged harassment was so well known that, reportedly, at least one Jewish organization did not allow its female staff members to meet with him alone. And in a New York Times account published on Thursday, recounting accusations by seven women of inappropriate conduct, Steinhardt’s close friends indicated little surprise upon hearing the allegations; many defended him as simply “passionate,” or possessing a “unique sense of humor.” Steinhardt admitted to “boorish, disrespectful, and just plain dumb” comments he’s made over the years, though he also denied, through a spokesman, many of the specific actions and remarks the women alleged, and his foundation accused reporters of “trying to dig up dirt.”

While the story line is familiar by now, the historical patterns it reveals should be reason for a Jewish communal reckoning. A clear line connects Steinhardt’s philanthropic power and a long-standing pattern of tolerance by the Jewish community of his alleged conduct toward women and their bodies. The power he wields, and the belief among many Jewish organizations and their leaders that he was too powerful to rebuke is the result of a historical shift that has seen many Jewish communal structures becoming beholden to megadonors.

Over the last 50 years, three connected transformations have changed the face of Jewish philanthropy: the growth of endowment practices; the rise of “identity” language; and the concentration of communal wealth. In the late 1800s and early 1900s, when American Jews created many of the communal institutions that still stand today, they approached charitable giving as an immediately redistributive process.

A commitment to quick redistribution was most clearly embodied by Jewish federations, umbrella charitable organizations that sprung up in hundreds of communities across the country starting in the late nineteenth century. They funded countless agencies on an annual basis. Each year, donors would give, and each year, the money they gave would be distributed to support hospitals, orphanages, summer camps and a whole slew of other services. This model of charitable distribution, embraced by most Jewish and non-Jewish charities at the time, allowed donors to account for their gifts and often convinced them to give again. Indeed, some federations even included in their bylaws prohibitions against holding more than a very modest reserve fund. Donations were meant to move.

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But as American Jews grew wealthier in the mid-20th century — thanks to their access to higher education, professional opportunities and overall U.S. economic growth — many of their communities no longer relied on charitable agencies. At the same time, the federal government started offering a growing number of social welfare entitlements to all U.S. citizens, including Jews. In the 1940s and 1950s, American Jews raised unprecedented amounts of money, channeling significant sums overseas, especially to the newly established State of Israel.

But the case for domestic Jewish philanthropy appeared shaky, and Jewish leaders themselves argued that the combination of Jewish socioeconomic privilege and state social welfare programs demanded a new strategy for Jewish philanthropy. Writing in 1949, the executive director of the Jewish Federation of Chicago, suggested that far from the “death knell of private philanthropy as a whole, and Jewish private philanthropy in particular,” expanding social welfare programs could usher in a new era of Jewish philanthropic vitality.

That new era became defined by identity and endowment. Starting in the 1950s, at first gradually and then with fervor, Jewish federations that had once been unable — whether because of their bylaws, a lack of resources or both — to build endowments jumped into the business. They worked with lawyers, accountants and stockbrokers to learn how to sell Jews on the idea of stepping outside of the annual campaign model, with its money in and money out logic, and, instead, embracing the idea of charitable giving as a long-term proposition. The financial logic may have been sound, but the change in culture from donations for immediate needs to gifts seen as investments in an unknown future was profound.

The newly emerging language of identity offered a compelling partner to the project of endowment building. Unlike the fulfillment of pressing basic needs, which required immediate expenditures, securing Jewish identity required a long view, with programs and research that could count on sustainable sources of funding. When Jewish federation leaders first embraced endowment, they anchored their case for it in the language of identity.

That language found its financial analogue in the practices of philanthropic perpetuity. By the 1960s and 1970s, Jewish leaders and observers began to use the word “survival,” an emotionally laden term in the wake of the Holocaust, to justify the necessity of warehousing Jewish capital for an unknowable future. Between the early 1960s and the mid-1970s, nationally, federation endowments grew from $62 million to $223 million. This trend would only sharpen in the coming decades, and discussions of Jewish survival would join new ones about “continuity” beginning in the 1980s.

By then, American Jewish philanthropy was transforming into a futures-based project, where capital held would serve as a guarantor for the perpetuity of Jewish life. Jewish federations were joined and, eventually, overshadowed, by private foundations like the one Steinhardt runs, structures unlike federations that were built from the start to hold one individual or family’s wealth and release it slowly, often more slowly than investment income on it accrued.

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In the 1980s and 1990s, when Steinhardt established his private family foundations (one in 1987 and a second in 1994), Jewish social researchers, such as Steven M. Cohen, reported that the masses of American Jews were not giving nearly as generously to Jewish causes as they once had. But these reports overlooked what was rising to take their place: the megadonor.

Federations had helped cultivate megadonors by courting their wealthiest supporters to put money into endowment funds and, in return, offering them a raft of new options for earmarking and designating those dollars outside of the typical channels of communal allocation. But for all of their work, federations soon lost many of these donors to the allure of private foundations.

Thanks to favorable tax laws and policies that were steadily deregulating finance, private family foundations expanded astronomically: Jewish private family foundations alone increased from roughly 3,000 in the mid-1990s to approximately 10,000 no more than a decade later. While many of these foundations were small, a few were so large and well-capitalized that, when taken together with the shifts in Jewish federations — which by 2013 held combined endowments of over $16 billion — the ideals of communal giving and accountability had truly become a thing of the past.

Birthright Israel, the nonprofit organization that Steinhardt started in 1999 with his billionaire friend Charles Bronfman to fund free trips to Israel for young Jews, epitomizes this shift. From its financing to its goals, Birthright manifests the interlacing power of identity and endowment in American Jewish life. The organization’s small handful of megadonors — including not only Steinhardt but also Bronfman, who has offered a defense of Steinhardt’s alleged misconduct, and Sheldon Adelson — have gained remarkable power from it, not to mention the tax benefits they secure from their foundations and donations. Birthright is a program meant for the masses, but controlled by the few, a fine illustration of Jewish philanthropy more generally.

A hedge fund manager, Steinhardt spent his career figuring out how to balance risk. Whatever possible dangers he faced from objectifying women and their bodies, as the reports about him claim, were low when measured against his power. His capital investments in the Jewish future, most tangibly through a massive organization committed to getting young Jews to love Israel and each other, could offset any blowback he faced for his alleged conduct.

And when we, the Jewish community, let this model of leadership take over our institutions, we helped him hedge his risk.

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