High art subprime: borrowing on private art collections surges into billions

Originally published at: https://boingboing.net/2019/07/08/picasso-for-grifters.html

Using art for a loan is kind of like getting loans on your home furnishings. Most people, even those who have an eye to its value, don’t buy art unless they really like it and it’s an emotional thing for them. Even if it’s worth a lot, most people won’t buy something they can’t stand to look at. There’s always some chance that the borrower may not be able to pay off. Putting art up as collateral and thereby taking a chance on losing it at less than its known value is kind of like getting a loan on a pet - probably an act of desperation.

“Growing at a stunning rate” - that tells me one or both are going on:

  1. Lots and lots and lots of fraud: people borrowing money against “art” they know is actually fake so they can capitalize it before anyone discovers it’s really worthless

  2. Lots of “rich” people who need cash RIGHT NOW. And that could be scary. They can’t all be clueless wastrels who spent themselves into a corner. There may be some frightening economic changes that common people don’t hear about ahead. Those who have the money to have the right friends can get advance warnings we peons don’t, and now lots of them are risking things they love in order to secure quick cash they can hide. Not a really good sign.


I couldn’t see details because paywall. Do the leveraged owners retain possession, like collateral, or are artworks warehoused by lenders a.k.a. pawnshops? Should banks host galleries of their pawned art holdings?

If borrowers retain possession, who pays for security – them or the bank? Your Picasso better be guarded.

What besides big-name physical art can we expect to see pawned? Maybe song catalogs, private libraries, patents, media networks. The NYT was essentially pawned to Sr. Carlos Slim awhile back. What’s next?

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The part of the article you can see says “In America collectors can even keep encumbered art on their wall.” There’s a partial answer for you.


I still don’t understand the draw of “fine” art. I’d plunk down a few hundred for a Kandinsky because I think they look great, but anything more than $1k just seems silly given the gifted and talented artists in our midsts right now. $100,000,000 for a painting is just absurd. If people want to stash their cash without being traced, just have their accountant google blockchain or some other foolish mechanism.

Lots of rich people are idiots, and I would certainly place idiocy into your matrix somewhere.


There’s a good heist movie in all of this.


It’s straight-up money laundering. The pricier the art, the more money one can “clean” in one go, even if it takes months for the wash cycle to complete.


Amen. If it’s truly fine art…



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For Semi-liquid assets, look into Collateralised Dali Obligations.*

Please note, the market can remain surreal longer than you can remain solvent or a giraffe.


Because these stones are too large to move, buying an item with one simply involves agreeing that the ownership has changed. As long as the transaction is recorded in the oral history, it will now be owned by the person to whom it is passed and no physical movement of the stone is required.


On the nose! What’s a half a billion dollars for a “Leonardo” between friends; you know, “friends” like oligarchs and autocrats. Wink.wink.nudge.nudge…


“I may not know art, but I know how to squirrel away my nut.”

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I missed that but I’ll blame my bad eyes – too many retinal and corneal surgeries.

If I needed cash, sure, I’d put my R.Crumb and C.Schultz originals up as collateral. Maybe my F.Kahlo stuff too. If I faced a paranoid banker who thought my security inadequate, she might keep my pieces and give me nice replicas to display. Who would know but she and I?

After a few defaults, this might become industry practice. Hide your giclée Warhol Elvis replica behind safety glass.

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I think one has to consider historical value as well. Who was utilizing groundbreaking techniques at any given historical period? The refinement of perspective, the use of portable tubed paint by the Impressionists, Cubism, etc.

In all, I think there is a separation between “classic” and “modern” art camps, too.

A 1952 prediction that failed:

“7. The cult of the phony in art will disappear. So-called “modern art” will be discussed only by psychiatrists.”

I think you overestimate the artistic sensibilities of the very rich. To them, I think art is something that they invest in because of its value and portability, and because of bragging rights. I don’t think many of them buy art for its beauty.


A lot of the most expensive pieces being sold at auction at places like Sotheby’s these days are being kept on yachts, which makes them immediately transportable away from any jurisdiction that might start to give an oligarch any legal issues.

It also means that a significant amount of the most highly valued (monetarily and culturally) art is at risk of being ruined by seawater. It’s an incredibly unstable place to keep art…but a mobile palace has unique advantages for those trying to stay one step ahead of the law.