Monday, January 12, 2009

Hoarding Money

I haven't written about the Madoff scandal because I don't have anything to add that had not been editorialized, and also the story leaves me with tremendous sadness that I can't express well in writing.

However, I do want to discuss an attitude I have seen in many Orthodox blogs regarding the principal (and all of its future proceeds) that is lost forever. At the outset, I will just say that the lack of rachmanut/compassion is tremendously disheartening. The lack of respect for someone else's losses is quite astounding.

This letter to the editor in the Jewish Press expresses many of the opinions I've seen in the past month: the opinion that no person or organization should "hoard" money. Many commentors seem to take offense that not every penny is immediately given away. The choice of the word "hoard" is quite interesting because of it's definitively negative connotation. Halacha defines how much a person should give and keep of their own funds, and at least my own study of halachot on tzedakah and ma'aser seems to indicate that a person *should* have savings, and that lack of funds exempts one from optimal fulfillment of the mitzvot surrounding ma'aser. The halacha also does not require the wealthy to give it all away, although they are likely subject to a higher tzedakah requirement.

I have seen halachic sources throughout the years that endorse having an "emergency fund," and define one without liquid assets as "poor." Personal finance experts recommend having an emergency fund of 3 to 12 months of expenses on hand, depending on the vulnerability of one's employment situation. A person with larger obligations and responsibilities (perhaps a business owner with employees), will need a much larger emergency fund if he/she doesn't want to put their business at risk during economic downturns or make severe cuts in staff through unexpected layoffs.

Let's all take a deep collective breath and meditate on the latest goings-on ("Madoff Scandal Rocks Jewish Philanthropic world," news story, Dec. 19). The lives of the billionaires who've lost a couple million won't change much. As for the rest of us poor slobs who have taken to lowering the thermostat's temperature indoors due to the high cost of heating and today's precarious economic times, or who are wondering for the umpteenth time this year how our next month's mortgage payment will be met, we could sure do with some of that pocket change.

The language expressed also is that of envy and class warfare, an "us vs. them" mentality. Those millionaires and billionaires were not born as such. In fact, given their ages, many of them lived through The Great Depression. They worked hard, they took risks, and, yes, they probably turned down their thermostats to get themselves started in business. And while they were in business, they probably continued to scrimp and save to ensure that their businesses have two legs to stand on because the larger their businesses became, the more they needed to "hoard" because their obligations and responsibilities became larger. Their risk taking in starting businesses, their investments, their charitable giving, their tax paying, and even their spending have 'created' thousands on jobs. Perhaps some of us can credit a current or past job or client, directly or indirectly, to someone with wealth.

Truth be told, some of us are finding it difficult to muster much sympathy for the synagogues, organizations and institutions that decry their tens and hundreds of millions that have been sucked up in a whirlpool of fraud. Perhaps it is because of the ordinary folks we are personally acquainted with - like the ones who are spending sleepless nights over their children's school tuition that's been in arrears for too long now; or who are weighed down by the expense of an upcoming child's wedding that is an onerous burden to bear, to say the least; or who were recently laid off due to the sluggish economy and are now left wondering how long they have before their meager savings are depleted.

Passive income is the secret to a healthy budget, and perhaps the secret to getting a good night's rest. A budget that does not completely depend on what might come in tomorrow to pay yesterday's bills is a healthy budget. I don't want to see any one's "meager savings depleted" because what comes next is the exercise that too many Orthodox institutions, businesses, and families do every month. That exercise: let's decide who gets paid and who doesn't. Those who "hoarded" some funds along the way, don't have to do this dance month after month and can weather a down economy, at least for the short term.

I wish more "ordinary folks" had a little something "hoarded" in the bank so that they could get a better night's sleep.

So while all the big losers cry foul and shout "ganif!" at Bernie Madoff, forgive me for asking, "Why did you hoard that stash? Couldn't you have at least invested it in any number of free loan institutions that help alleviate the monetary hardships of the many needy among us?"

The answer, of course, is greed - and, ironically, investors are now mad at Madoff for his greed.

The investors with Madoff are reported to be generous donors. Many of the investors carefully set up foundations funded with the "[hoarded] stash" so that the money could continue to provide dividends for many generations to come. Perhaps their causes were not her causes (or my causes), but making sure that your tzedakah funds will continue to give many times over, certainly isn't my definition of "greed."

I too find it hard to relate to a multi-millionaire who has lost a sliver of their wealth (although there were also reports of individuals and families who really did loose everything and must start from scratch). But, the budget struggles in the frum community are not the fault of these wealthy individuals either and it is a low blow to suggest such.

The letter writer would do far better learning about how "The Millionaire Next Door" lives his/her life rather than stewing in anger that the wealthy are not doing enough for "us." If you want to sleep like a millionaire (even a millionaire who took a hit, as has everyone with nearly any investment aside from Walmart stock has), chances are the answer isn't buying a better mattress, but hoarding saving a little money.

Note: the book I link to above is an excellent read and worthy of a book review sometime in the future.


Commenter Abbi said...

I fully agree with you. Blaming millionaires for "hoarding money" is just another way of deflecting responsibility. How sad that "savings" is now called "hoarding".

BTW, even Wal-Markt stock is down:

Ezzie said...

(Amazing book.)

I think that the more transparency we start to see within the frum community, the more we see money being properly used and not going to waste, the less we'd have of richer organizations holding onto money to let it grow and be saved for the future, anyway. It IS important for money to be saved, to be invested, to be put aside to meet future expenses. At the same time, if we knew how to alleviate problems now that might reduce those future needs, we'd probably take out some of those savings - but since we never seem to get that from most Jewish organizations, just a "we need your help!" cry, it's hard to justify spending money poorly now that can be spent wisely later with far greater impact.

rosie said...

I think of tzedukahs started with money from relatives wills. One aunt wanted some of her money to go to a scholar-in-residence program in her shul so that every year they could bring in a different scholar to lecture to the congregation. She was giving enough to pay for several years of bringing in scholars but was hoping that more would be donated to the fund to keep it going.
My in-laws started a cemetery beautification fund with money in their will. It was their desire that the fund would take care of the cemetery for several years and that others would continue to donate.
The point of these two examples was that neither donor wanted the money to be spent all at once. Both wanted the money to benefit the entire community at one time (the scholar could teach everyone and the cemetery would be beautiful for all who visited). Neither desired that the money should be spent on singular individuals such as paying for one person to study or have his grave beautified.
In the above examples of charitable giving, the caretakers of the money would have to make it last for several years until other donors replenished the funds.

Anonymous said...

I'm recalling the commenter on the Yeshiva World site who castigated YU for holding an endowment while "chareidi children are going to bed hungry" or words to that effect. What a lack of understanding on so many levels.

Dave said...

You know, this attitude explains an awful lot about the financial situation.

This is not rocket science. Want to get rich? Spend less than you make. Want to lose weight? Eat fewer calories than you burn.

In both cases, you have some degree of control over both the in and the out.

(Which reminds me, once the "New Year's Resolution" crowd fades, I need to start getting more exercise)

Anonymous said...

I wrote a guest post about madoff on dovbear when news first broke:

To me, the biggest tragedy is the loss of charities and funds that did so much good in the Jewish community and the world.

Many people and charities who were swindled had no idea they were involved in risky investments (for example, Merkin invested many charities' and yeshivas' money in Madoff's funds supposedly without their knowledge). These losses will hurt our community.

At the same time, I've had some conversations with my wife's grandfather who still works on wall street. He told me he was offered several times to invest with Madoff (which supposedly was a huge honor to be "brought in" to the fund). He turned it down each time since it seemed too good to be true and he suspected there was something fishy going on. Apparently the returns were just too good and too regular. He said people in the know had similar suspicions and stayed away. The fact that so many smart people lost their money in his opinion was because of greed. Because Madoff offered a slightly higher percentage than everyone else. In his opinion this is exemplified by the fact that smart people gave Madoff all their money instead of diversifying as anyone would tell you is investing 101.

Those complaining about hoarding and endowments, etc are of the same ilk who believe working and secular education are wrong, who speak out about the dangers of materialism and decry classism and yet seek out those same people for donations.

rosie said...

JS, many people who aren't Jewish are speaking out against excess materialism. On yesterday's there was an article about the fear that retailers have that people who get used to spending less as a result of the recession will continue their frugal ways when the recession ends. People who were studied felt that they were happier with less and did not want to go back to being in debt to have more.
People have the "right" to do what they please with the money that they work hard to earn but that money can evaporate in an instant. People who went from rich to poor are probably more miserable than those who went from poor to poorer.

Anonymous said...


I would consider myself frugal and not very materialistic. But, I think this goes with your circumstances.

I don't begrudge someone with a lot of money. Nor do I begrudge that person spending that money on certain things (however, I do believe certain things are unnecessary and frivolous regardless of how much money one has and that the money should instead be used to help others). Similarly, if someone doesn't want to work and would rather learn or wants to work but doesn't want to pursue a high flying career that's fine as well.

What bothers me is people living beyond their means and people who are hypocritical about money. If a rich person wants to drive a fancy car, fine. I think it's a little over the top, but it's not so frivolous in my opinion to warrant criticism. However, a person of more modest means shouldn't be buying or leasing such a car - they should make do with less. Also, if someone wants to live a more meager and ascetic lifestyle, I support that. If they want to decry materialism and those who earn the big bucks, fine too, I suppose. But those people shouldn't then come to the doors of the wealthy and ask for money.

Dave said...

Hopefully part of what will happen is that people will learn what things that they personally value, as opposed to the things they are "supposed" to value.

Dave said...

Also, if you tell me you value something, but aren't prepared to take the steps to make it possible, what you have really said is that you don't value it that much.

Originally From Brooklyn said...

You are correct. The Torah considers a person who have a lack of liquidity as if he is poor, and can take from charity funds. The Gamarah in Bava Kama says that if a person has lots of land, but he can not sell it for enough to bring him above the poverty threshold at a period of time, he can take money from the tzeddakah to bring him up to that poverty threshold line. We see from this that a person who doesn't "hoard" can be considered poor, and that in order not to be poor a person should keep a nest egg of funds available.

Anonymous said...

Yet there is, or should be, a difference between a person or a business and a charitable institution. The latter exists only to do good with the money. While it is true that an endowment can allow one to do good with the interest while preserving the principal, one sees charitable institutions (think major universities or not for profit hospitals) that simply accumulate the income from endowment and do not use even the real interest to further their mission. It is sometimes hard to see how they are run differently than profit maximizing businesses. This can be especially true for the hospitals whose behavior can often be directly compared to for profit hospitals; often the latter give as much free care as the former. Yet they are given favorable tax status as charities. One should expect a charity to be more focussed on its mission than growing its endowment.

Dave said...

Private foundations are required to use 5% of their endowments annually.

Anonymous said...

Dave: Foundations (organizations whose principal activity is funding others), yes. Schools, hospitals and the like, no.

And many universities' endowments were growing in excess of 20%/year during the boom, so even spending 5% was far less than the real interest.

Anonymous said...

I am a "Thousandaire" that suffered terribly from the Madoff scandal. It is beyond comprehension how sanctimonious some comments have been. Frankly, I have had more compassion and understanding from non-Jews and at the very least non-"Orthodox" Jews. Some Torah values....