Art in the Heart of the Country

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At around five-thirty on the morning of September 15, 2008, Lehman Brothers, the troubled American investment bank with over $600 billion in liabilities, announced that it did not have the funds to open for business. As the shock awoke Wall Street, an altogether different financial drama unfolded across the Atlantic. Sotheby’s was preparing its Mayfair auction room, a brightly lit chamber of commerce, for an evening sale of new artwork by Damien Hirst—a man who, if he did not invent the contemporary art market as we know it, certainly embodied the dark truth that surrounds it: that art has become an asset class, and assets are to be speculated upon. 

By the time the Dow Jones Industrial Average closed down five hundred points, Sotheby’s auctioneer Oliver Barker had hammered $127 million in sales. Frenzied bidders and staggered spectators soon emptied onto New Bond Street, just as Lehman’s last employees were exiting onto Seventh Avenue in Manhattan, carrying the contents of their desks in cardboard boxes. The Hirst auction had sold through 97% of its lots, but the venerable investment bank had failed to find a buyer. It closed that day for the final time. 

Just a few years later, there was no shortage of interest in catching the relics of its downfall. Auction catalogs for “Lehman Brothers: Artwork and Ephemera”—a farrago of company-owned wine, maritime paintings, logoed golf balls, clocks, bronzes, and chinoiserie—sold out ahead of the sale itself. The auction, which was moved to a larger room to accommodate the queue that formed outside, raised $2.9 million. Nearly every item sold, with the proceeds distributed to the creditors of the failed bank. 

Art has always been entangled with finance. Renaissance banking families underwrote the artistic flourishing of Florence, while Dutch financiers enabled speculative bubbles in genre paintings. But over the past forty years, the global art market has itself taken on the structural qualities of a niche financial market. There are now indexes of art prices, art-linked derivatives, and loans secured by art. Artwork has been fractionalized into individual shares and bundled up into art-backed bonds. Entry to the art market has never been easier, even as prices for the top lots have never been higher. 

And yet, this newly financialized industry often operates as if it was oblivious to the broader financial markets it resembles. The Mei-Moses Index, which tracks the prices of publicly sold art, fell during the global financial crisis triggered by Lehman’s failure. But it fell by less than the benchmark S&P 500 index, and it recovered faster. Ultrawealthy clientele give the market its own cycles, so that the index, and the art prices it tracks, is not constrained by the normal rules of supply and demand. In the auction season following Lehman’s failure, the number of objects offered at auction fell by 43%. But by late 2009, with the U.S. economy still clawing its way back from the abyss, Sotheby’s and Christie’s were hammering new world records for American post-war art. 

The most recent financial shock, the COVID-19 pandemic, barely fazed the art market. Instead, carnivalesque blue-chip auctions became home entertainment for online viewers, turning charismatic auctioneers, like Sotheby’s Barker, into viral stars. Today, however, as broader financial indexes continue to tick upward for the third year in a row, there is a curious reversion in the art market, which has been tepid for the last two years. Fewer works are coming to auction. Some artists who were once bankable can no longer find buyers. Major galleries are reporting sales 35% lower than last year, and these sales are made up of more artists, rather than a few big names, indicating a lack of interest at the top of the market. All these signs point to a deeper, structural weakness in the market, a slowly unfolding crisis only beginning to show on the surface. 

As the largest auction houses and mega-galleries have come to resemble unregulated financial institutions, they’ve sopped up the excess cash in the industry, leaving those institutions doing the ground work—of nurturing and preserving artists and their work—strapped for cash. Museums, residencies, collectives, and media outlets—the institutions, mostly not-for-profit, that for decades balanced out the excesses of art’s commercial side—are now at the mercy of the same economic forces they once mediated. Just as financiers, in the lead up to 2008, preyed on the very homeowners that kept their securitization machines humming, the art world, insular as it’s become, is eating itself alive. 

Among the power brokers of the art world, the recent weakness in the market hardly registers as a crisis. But the effects of this deeper, structural change will be felt outside of art’s capitals. It will be in the Midwest and the South, in the smaller cities that depend on philanthropy, civic funding, and fragile ecosystems of collectors and donors. And if recent history is any indication, broader financial markets will contract again. When they do, the art world’s center may hold, but the disruption will shake its core—those museums, galleries, and nonprofits in the heart of the country. 

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In the grand sweep of human civilization, art came first, then money. But once money appeared, it wasn’t long before someone thought to exchange it for art. Eventually, occasional buyers became manic collectors, and a market of dealers emerged to supply them with their fix. Around the same time, scholars took an interest in, and found patronage for, art history, which clarified and validated what the collector bought. This was a pattern so reliable that the historian Joseph W. Alsop found it repeating across five entirely different civilizations, from ancient Greece to imperial China and Japan, from the Islamic world to the West.

Given its natural foothold, it wasn’t long before art became commoditized. Over eight hundred years ago, a Sung dynasty critic was already lamenting that “art has become the fashion everywhere,” yet so often “regarded as merchandise and bribes.” But just because it was popular doesn’t mean it was valued. To understand whether you have a real market for art, Alsop proposed a simple test: when do forgeries start to appear? Forgeries imply not only that artwork was valued, but who created it—and who owned it—matters, too. It mattered a great deal, at least, in Renaissance Italy, where Alsop noted one of the earliest known forgeries, by a young Michelangelo, who supposedly carved a sleeping Cupid so convincing that Lorenzo de’ Medici had it rolled in dirt and sold to a Roman collector as a genuine antique for two hundred ducats.

Across these civilizations, and ever since, the impulse to collect wasn’t exclusive to the already wealthy and powerful. Art collecting had a certain mass appeal. As it grew, the art market sought to serve these masses as well. In the 1980s, when Japanese and American financiers were bidding Impressionist and Post-Impressionist paintings to astronomic prices, an insurance salesman named Larry DeYoung noticed his well-off but not-quite-rich clients reading about the splashy art sales in New York. DeYoung keyed into his clients’ budding taste for rare collectibles, first by selling them rare stamps. When that failed to satisfy their craving for cultural capital, he partnered with Jerome Eisenberg, who ran a gallery in midtown Manhattan called Royal Athena. 

To the doctors, lawyers, and car dealers in DeYoung’s orbit, Eisenberg may as well have been Indiana Jones. Neither one of them disabused their clients of the rumor that Eisenberg had discovered the Dead Sea Scrolls—one of many lurid fictions that justified overcharging them. In truth, the two dealt in middling antiquities: diminutive figures, vaguely classical and of uncertain provenance. But they sold their clients something more valuable: cultural capital. And DeYoung and Eisenberg weren’t the only ones marketing high culture to the masses, nor was theirs a scrappy trade limited to the frontiers of the art world. Increasingly, this was also the business of reputable firms on prestigious boulevards of major cities. Art had been commoditized. Was commercialization the next step in the art market’s evolution? 

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Colgate University professor Elizabeth Marlowe, who recently uncovered DeYoung and Eisbenberg’s scheme, years after it took place, says that Eisenberg was moving nearly a fifth of his inventory through DeYoung’s Michigan investor network, with some pieces selling for the equivalent of $40,000 in today’s money. Eisenberg didn’t just advise his clients as collectors, but as investors, too. He was, therefore, doing what he could to boost the value of his wares. He told clients to lend or donate their purchases to the museums at Ohio State, Miami of Ohio, Michigan State and other universities, where they could expect their pieces to appreciate in value—enjoying the so-called “exhibition bump,” the prestige that accrues to a “museum-quality” collection. 

Eisenberg arranged the museum placements himself, sparing collectors the expense of storage, insurance, and maintenance—costs that can consume half an artwork’s value in just a few years. Then, as a member of the American Appraisers Association, he would assess the book value of the very works he sold. In most cases, he did this without seeing the pieces in person, instead comparing them to similar sales and all the while neglecting to disclose his own financial interest. This was bad form, but it broke no laws. There are no universal standards or governing body to guide authentication or appraisal. Appraisers are, after all, known to say what you pay them to say. 

But the market eventually had its say, too. Professor Marlowe found that a third of the works Eisenberg listed between 2003 and 2019 sold for a 3–6% return on investment. An investor in the S&P 500 during the same period would have earned over 400%. But for Eisenberg’s clients, and many others like them, the return wasn’t the only reason to invest. 

Art was also the most beautiful way of taking advantage of a tax code that, for decades, was particularly friendly to art investors. Since 1954, American tax law has allowed collectors to write off donations of art to museums. If a collector sold the work instead, they could, until 2018, reinvest the proceeds in another work of art without paying capital gains taxes. Donald Trump’s first-term tax bill carved art out of this “1031 exchange,” which is also used for reinvesting in homes, precious metals, and other valuable assets. Nevertheless, a wealthy collector can still buy art, borrow against its value, and leave heirs with a tax-exempt estate—a strategy so common it’s playfully abbreviated “buy-borrow-die.” 

This last strategy has become particularly popular. Art lending began in the speculative frenzy of the 1980s that so excited DeYoung’s clients, and it’s now a $60 billion global industry. Auction houses pioneered it by offering consignors an advance against future sales. Today, even major banks and private lenders accept paintings as collateral—or at least those paintings their specialists deem worthy enough to serve as collateral. Melanie Gerlis, editor-at-large of The Art Newspaper, estimates only around twenty oeuvres are safe to lend against—household names with established markets and consistent resale histories, not middling antiquities hawked by insurance salesmen. 

As lenders have blessed these artists and their works, they have become more desirable—and more expensive. For American collectors, the price appreciation is perhaps justified, if for no other reason than the special privileges afforded to them by the country’s dominant legal code. In most countries, if you want to borrow against your art, it must be handed over to the lender as security. American collectors, however, get to enjoy their collection at home. The Uniform Commercial Code records liens against assets in a central registry, assuring creditors that certain collateral backs their loan and no one else’s. This legal transparency allows a hedge fund manager to borrow against the Warhol in the living room, reinvest the funds in the market, and generate returns simply by owning the painting, and without ever selling it. 

Art lending reached its full maturity last year, when Sotheby’s bundled its art-backed loans into a $500 million bond to finance the auction house’s operations. Like a mortgage-backed security, the sale offered investors the opportunity to participate in the returns that Sotheby’s generates from money it lends to its clients, except this bond was secured by artwork instead of houses. In the late 1990s, it was considered radical for Sotheby’s and Christie’s to auction contemporary art at all, but contemporary art made up 43% of the bond’s estimated value. 

Sotheby’s bond issuance shows how much auction houses are being molded in the images of the financiers that now own them. François Pinault may have been the first billionaire to realize that the pursuit of cultural capital is a lifestyle. The person buying a Bottega Veneta handbag in the afternoon likely drinks Veuve Clicquot at night to celebrate purchasing a Picasso at auction. Pinault bought Christie’s in 1998; since then, billionaires and private equity firms have scooped up five of the six largest auction houses, and each owner’s penchant for financial engineering has made clear how they intended to do business. 

That art became another luxury good is not in itself a bad thing. The first danger arises when what might have been called cultural institutions, once devoted to placing art in the hands of reliable stewards, become sophisticated financial institutions extracting value from cultural objects. These reinvented auction houses hedge their own risk, offer a share of that risk to others, amplify their returns, and create markets where none existed before. And they’ve completed this transformation while somehow maintaining their cultural authority. When an auction house declares a painting is worth fifty million dollars, it does so in spite of their financial interest in the work, or the liens against it, or the tax write-off its buyer may enjoy. But a greater danger looms: when art becomes beholden to finance, do artists become beholden to investors? 

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Alsop pointed us toward moments when art collecting catalyzed an art market, but plenty of advanced civilizations rose and fell without producing anything that resembled the transformation of art into merchandise over the last half-century. It’s a transformation that cannot be explained by globalization alone, and what makes this history more than mere intrigue is how it bears on the production, as well as the reception, of today’s art.

Purists may insist that creativity is compromised by capital. William Blake once wrote, “Where any view of money exists art cannot be carried on.” Yet art has carried on, despite money’s growing influence. The Australian art critic Robert Hughes wrote, in 1984, “The idea that money, patronage, and trade automatically corrupt the wells of imagination is a pious fiction”—one that was, to those who looked, “flatly contradicted by history itself.” Picasso, Hughes reminds us, was a millionaire by the age of forty, and for centuries artists, as beloved then as they are today, were patronized by the church, the crown, or the state. An artist’s wealth said little about the enduring value of their work. Vermeer’s Girl with a Pearl Earring sold for the equivalent of thirty dollars in the 1880s, while countless artists, now forgotten, sold for a million or more in their day. Van Gogh may have sold only one painting during his lifetime. 

Putting their fortunes aside, it doesn’t seem like a leap to say that those artists who find success are encouraged to sustain it by developing a signature style their collectors will recognize—a routine they drive into a rut by the promise of a high velocity of sales, recognition, and the attention of cultural authorities. It’s tempting to capitalize on that attention. Last March, the Guardian revealed that Damien Hirst had backdated artwork he had produced in 2017, claiming they were from the 1990s, the period most cherished by his collectors. “Contemporary artists are now part of an industrial, globalized process in which goods are sold everywhere,” said Jean-Michel Bouhours, curator of “Money in Art,” an exhibit in 2023 at La Monnaie de Paris, the city’s mint. “[I]n this ultra-commoditized world, art may end up getting a little bit lost.” 

Whether or not capital has a disorienting effect on creativity, the market certainly influences the public’s appetite for art. Mass appeal doesn’t always create a record price, but it can. In Victorian England, the most valued paintings were those that could be reproduced in handsome engravings. Once the tax on glass was repealed, in 1845, non-wealthy collectors could purchase and frame these engravings for the first time. The ubiquity of these images then drove demand for the originals, which sold for ever-higher prices. 

Some artists can sustain themselves purely off mass appeal. Reproductions of Thomas Kinkade, the self-proclaimed Painter of Light (also known, less generously, as “the king of twee”) reportedly hung in one out of every twenty American homes, an omnipresence enabled by a network of franchised galleries that operated until his death, in 2012, of an overdose of alcohol and valium. 

Kinkade once described his paintings of fairytale cottages, bathed in golden-hour light and couched in impossibly lush gardens, as “not the world we live in,” but “the world we wished we lived in. People wish they could find that stream, that cabin in the woods.” A similar aspiration powers the art-marking machines of “business artists,” such as Damien Hirst, Jeff Koons, and Takashi Murakami, who have exchanged critical acclaim for mass appeal as their work has become more commercialized and less intelligible. By purchasing their work, the collector can make some claim to its interpretation, perhaps capturing a bit of that world in which he wishes to live—that world in which he is culturally enriched, with time to read big, expensive art books and study the artist’s intentions that, at any rate, more often come from a dealer, one who mediates the transaction as well as the relationship between the collector and his imagined world. That, or it’s just another luxury good. 

Each of these three artists have flirted with bankruptcy—Murakami filed in 2020 and Hirst secured government-sponsored emergency business loans, while the fabricators producing Koons’ oversized balloon sculptures shuttered in the wake of the Global Financial Crisis. Insolvent artists and studios are nothing new: Vermeer died a poor man, and Rembrandt hosted a bankruptcy sale in 1656 (one that, incidentally, may have included Michelangelo’s faux-antique Cupid). What’s new—and what no doubt would have intrigued Alsop—is a market system that enables artists to grow and fail like businesses unto themselves. 

The conditions that brought these artists fame have also encouraged the globalization of gallery networks. More artists from varied backgrounds reaching new markets in previously untapped regions is one of the great virtues of today’s art market. But the result is also new collectors who can afford more than etchings and Kinkades. This burgeoning, global demand places a new value on exclusivity. Galleries, for example, control the placement of artwork by plucking buyers from waiting lists, selecting those who are less likely to flip the work for a profit and who will return to buy new works. Getting off the waitlist for prized pieces sometimes involves paying dearly for less-popular works (a form of patronage that, contrary to the gallerist’s intent, often lead to depressed prices for these works, when they are inevitably resold on the secondary market in exchange for a collector’s more coveted choice). 

But despite this protectionism, galleries must sell to survive—and it’s hard for artists to ignore the marketing of their art or others’. Lisa Yuskavage’s early paintings sold well. With the weight of so much early attention, she felt she began “painting for some mysterious fancy person who didn’t even exist.” But these patrons do exist, and they are, increasingly, the ones sustaining the market. Artists, too, must sell to survive. Therefore, it may be impossible to analyze the market for art without judging the art that’s sold. 

The artist and critic Walter Robinson bemoans a sameness he detects in a new crop of abstract artists. Some believe that honest criticism could correct what the calls “Zombie Formalism,” and other examples of the market’s pull toward imitation. But critics have become too anemic and promotional, ignoring the up-and-coming and serving already successful artists, rather than challenging them. Sometimes, in the case of Jeff Koons, this service comes at the artists’ direct request. 

With limited positions for art critics, many media outlets resort to merely describing and classifying artwork, rather than critiquing it. They take a journalistic interest in those works that are expensive, fake, or disreputable, such as those seized from oligarchs. But in a world with few and fewer critics, says Gerlis, of The Art Newspaper, “context gets replaced by content, value by price and criticism by Instagram likes.” Art’s last bastion—for preserving context, judging value, and shaping public opinion—may, then, be the museum. 

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Bronze is an alloy of copper and tin, which means it’s easily melted. It’s also beautiful, a combination of qualities that led Pliny the Elder to claim that it was “valued before silver and almost even before gold.” It was a material favored not only by artists, for casting their sculptures, but by statesmen, as a medium of exchange, and by generals, as a material for battle. When wealth and war took priority, bronze sculptures were melted down to make coins and weapons. As a result, fewer than two hundred major bronzes survive from antiquity, and only a handful of these are full-size sculptures that stand unassisted. These few are the ultimate prizes for scholars and treasure hunters alike. 

The most remarkable examples are the twin Riace Bronzes, from around 450 BCE, discovered off the coast of Calabria and now standing in the National Archaeological Museum of Reggio Calabria. Tall, imposing warriors, they look forward, determined, with eyes that retain their original paint. The museums of Athens and Naples have their own spectacular examples of gods and athletes. By and large, American museums have had to settle for fragments or figures so frail they need iron rods for support, though there are notable exceptions: the Getty Villa’s “Victorious Youth,” or the Metropolitan Museum’s partially clothed “Terme Boxer.” The quality and rarity of these pieces help explain the collective surprise that rippled through the art world when the Cleveland Museum of Art announced, in 2004, that it had acquired a lithe, free-standing Apollo and the delicately rendered snake he stands poised to kill. The surprise masked some unseemly suspicion that someone had duped the museum, perhaps too eager to boost its profile, into purchasing something that was less than it seemed—or, worse, a forgery. 

Museums are not typically accessories to these sorts of schemes. Professor Marlowe regards the museums who participated in the Royal Athena network to be “provenance launderers.” They accepted antiquities whose dirty origins were washed clean after a spin through the museum, and they got to diversify their holdings in the process. But with digital archives and more public attention, provenance research has advanced significantly in the last two decades. Museums themselves are at the forefront of this research. The Cleveland Museum of Art, for its part, stands behind its claims of authenticity, and the sculpture’s still-unsettled origin has faded behind its unquestionable beauty. But with so many museums facing financial strain, the motivations behind such a purchase are still worth examining. 

The Museum Age of the late 19th and early 20th centuries saw a proliferation of institutions established as repositories for objects recently exhumed, re-discovered, or re-valued. The Information age then illuminated art history so thoroughly that, in Hughes’s assessment, there would soon be, “no schools or artists left to rescue from oblivion.” The supply of old art, like the Cleveland Apollo, is finite and shrinking. Collectors and institutions have scoured the world to acquire the finest examples. This is what makes surprise discoveries so unusual and suspicious. 

There is, however, an ever-renewing supply of new art, which currently dominates the market, but not museum collections. The notion of a museum collecting contemporary art—let alone only collecting contemporary art, as many now do—was once considered oxymoronic. Today, it’s almost expected. Yet museums can’t afford market prices. Most come into possession of contemporary artwork by accepting gifts from benefactors, no matter the strings they attach. These collectors essentially finance the museums’ acquisitions—which can be a charitable service, even if it means that museums are receiving and displaying whatever the collector thought worth buying. 

Once that art’s inside, it’s hard to get it out. Deaccessioning, the polite term for when museums sell parts of their collections, is so unpopular—from protests outside the Baltimore Museum of Art to petitions at the Art Institute of Chicago—that museums must be truly desperate to do it. This means that each donation to a museum decreases, perhaps permanently, the supply of that artist’s work circulating in the market, while conferring prestige on the now-canonized artist. The result is higher prices for works selling in galleries or already hanging in private collections. 

Museums, then, have all the burdens of an individual collector—the shipping, storage, insurance, environmental regulation, and so on—but few of the benefits. Unable to sell their work or borrow against it, they must fund their operating expenses with earned revenue from admissions and memberships. That requires putting on shows that visitors want to see. Benefactors, although eager to place their collections in prestigious museums, can no longer be counted on for helping cover overhead costs, which doesn’t come with the same bragging rights as donated art. The older generation of donors, who stood ready to write checks, is not being replaced by younger donors, who seem more interested in collecting art than lending a hand to struggling institutions. 

“The rising generations are not interested in supporting these institutions the way their parents did,” Julia Halperin wrote in The Art Newspaper earlier this year, “and the prospect of dwindling donations is keeping arts leaders up at night.” Without private contributions, museums are desperately searching for revenue. The stakes are higher than they seem. As one insider put it, “The search for revenue is really related to the search for increased relevance.”

The two are undoubtedly related. Since their early proliferation, museums have focused on education and stewardship, but the curatorial community finds itself caught between the objects they love and the financial future of their institutions. Sometimes, this demands a choice between pleasing donors or satisfying visitors. Though many institutions may want to stick to original exhibitions of genuine historical or cultural importance, they may feel the need to mount a blockbuster show they can sell to the broadest possible audience.

Museums have long insisted on curatorial independence—even though a standard line of critique says that if an institution accepts public money, they should offer a public service. (This was true long before the current administration’s attempts to influence the Kennedy Center, the Smithsonian, and other nonprofit cultural institutions, demonstrating that public funding and institutional independence cannot be taken for granted.) But the Metropolitan Museum of Art, for example, receives only 8% of its funding from New York City. Another 25% comes from earned revenue, and much of the remainder from private donations. Who, then, should it answer to? 

The widening divide between the art market’s performance and the financial condition of museums became most evident during the pandemic. Just eight months in, Christie’s and Sotheby’s had hammered hundreds of millions of dollars in combined sales. Over that same period, one-third of American museums closed their doors. At many museums, attendance has still not recovered from the pandemic. This year, the San Francisco Museum of Modern Art and the Solomon R. Guggenheim Museum, among others, announced large layoffs. Nonprofit status requires that money-making activities relate to an institution’s mission, ruling out many creative schemes to patch-up holes in operating budgets. But in its own way, the market offers up opportunities for enrichment. 

Failing to sell a lot at auction is catastrophic for everyone involved, so Sotheby’s, Christie’s, and other major auction houses sell guarantees called irrevocable bids. They contract a minimum sale price before the auction opens; if bidding doesn’t reach that price, the work sells to whomever provided the guarantee. If it sells above the guaranteed price, the guarantor and auction house split the difference, say, sixty-forty. 

On high-value lots, that difference can be enormous. Larry Gagosian, whose power to personally guarantee blue-chip artwork allows him to command as much as 90% of the upside, reportedly makes tens of millions of dollars a year by agreeing to buy artwork that wouldn’t otherwise sell, but often does anyway. The fees for this service have grown in tandem with the rising prices for blue-chip lots. In 2017, Taiwanese billionaire Pierre Chen guaranteed the controversial Salvator Mundi for about $100 million. When it sold for $450 million, Christie’s reportedly paid him a 40% cut, or $135 million. Guarantees seem like easy money; by agreeing to buy a painting for $100 million, Chen earned $135 million. But it only works for dealers and collectors like Gagosian and Chen who can move artwork through their own networks. 

And yet, in 2024, it occurred to Adam M. Levine, director of the Toledo Museum of Art, that he had an interest in this, too. The business case was clear. His museum charges no general admission fee, leaving it reliant on grants, tuition income, parking fees, and the investment income generated by its endowment—$3.3 million in 2024—half of which is earmarked for acquisitions. Then, last year, the museum made $500,000 providing its own auction guarantees. 

Levine claimed this was part of a “clear collecting strategy.” It was a pittance compared to the $50 million the museum earned a year earlier through the controversial sale of three famous works from Toledo’s collection: Cézanne’s “Clairière” (1895), Renoir’s “Nu s’essuyant” (1912), and Matisse’s “Fleurs” (1923) (The last of these had been in the museum’s collection for 87 years. Each sale was guaranteed by other parties.) But guarantees didn’t require such controversial deaccessioning. The museum didn’t have to mount a blockbuster show, or court benefactors. The market had shown Toledo’s museum a potential solution to its problem. 

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But the market seems to proffer solutions to problems of its own making. Today’s art market, however tepid, is siphoning wealth from art’s traditional stewards, such as museums and artist residencies. It does so while operating with little transparency—and its participants intend to keep it that way. 

They got their wish in April 2022, when, apparently without lobbying for it, New York City Council repealed most auction-house regulations. Auctioneers no longer need to disclose whether lots are reserved or when third parties hold financial interests in them. Estimates are now at the discretion of the auctioneer, and reserves can exceed low estimates, attracting bidders with unrealistic expectations of a bargain. By lifting restrictions on “chandelier bidding”—when auctioneers point toward the light fixtures and pretend to see bids that aren’t there—the new rules have created a considerably more asymmetric auction market. 

The Council’s deregulation was preceded by an unusual Treasury Department report that acknowledged the risks of money laundering in the art world while attributing them to failures in the broader financial system. The report’s authors recommended that art lenders conform to anti-money laundering rules but stopped short of requiring further scrutiny. Neither buyers nor sellers want imitators to enter the art market, the authors argued, so market participants are incentivized to police themselves. And at $65 billion, insiders told the Treasury, theirs is a market too small to regulate—and its merchandise, too unique. 

The forces that brought down Lehman—excessive leverage, moral hazard, regulatory capture—seem to have migrated from finance to the art market. Lehman didn’t survive the Global Financial Crisis, but Sotheby’s has thrived since. The contrast was striking then, but it looks different now. What seemed like the art world’s immunity to financial contagion was actually something more concerning: its transformation into an unregulated financial system that operates by its own rules, increasingly for its own benefit. 

As a result, nonprofits’ search for revenue—and relevance—seems existential. When Lehman failed, its business was taken up by other banks. But the cultural institutions now at risk can’t be replaced. Once they’re gone, they’re gone. And we may discover, far too late, that in a financialized art world, it was money that mattered. Everything else was just merchandise.