Stopping by the loan window to finance a Fragonard

When Wendell Cherry put in his final bid of $5.3 million for a Picasso self-portrait on May 21, few at Sotheby Parke Bernet, the world's largest art and antique auctioneers, worried whether he was good for it.

Mr. Cherry, president of a hospital chain based in Louisville, Ky., is a known quantity to the dealers and auctioneers of art, as is his personal wealth and vast collection of modern art. The $5.3 million is the most ever paid for a work by a 20th-century artist.But at a certain stratum of wealth no one is concerned if you can come up with the "scratch."

"Them that has, gets," the saying goes, but of course a lot more people want. Art, for instance. The art market hasn't been booming for the past few years simply through the millions poured into it by a few tycoons of Mr. Cherry's kind. Most art sold at auction goes for $1,000 or less, and most of the people buying it are not so secure that they don't have to ask the price.

A lot of people buying art simply have excess money and can transfer assets from stocks or other investments into purchases of art. Others, and an increasing number, have had to finance their acquisitions the same way they pay for any other purchases -- through loans from commercial banks for savings-and-loan institutions.

These institutions had formerly wanted little to do with lending money for buying art -- either for reasons of personal enjoyment or as an investment -- as it seemed to them pure speculation, with assurance of a higher resale. That thinking has gone by the wayside more and more as traditional investments such as stocks and bonds have proved risky and "hard money" or tangible commodity investment analysis has gained currency. Works by established artists have been shown to gain an average 15 percent annual increase in value. Few other purchases can consistently do that.

"I don't mean to sound smug, but the last generation of bankers has had a broader, more liberal education than their predecessors and recognize that in times of inflation works of art go way up in value," Toby Sherry, senior vice-president of the First Wisconsin National Bank of Madison, pointed out.

"There has been a complete rethinking by banks and lending institutions of the reasons for buying major works of art."

Mr. Sherry added that over the past five years his bank has increased by several times the numbers of loans it makes to people wishing to buy works of art.

Citibank, in New York, found it was making so many loans to art collectors that it hired the appraisal services of Sotheby Parke, Bernet and brought onto its staff Patrick Cooney, the assistant curator of the Frick Museum in New York.

Linda Nalevanko, assistant vice-president of Citibank, says there has been a sizable increase in the number of loans the bank has made to people buying art, with the amounts ranging from $250,000 to $4 million and even $6 million.

"For us, art is a mainstream area in our lending picture -- it's no longer speculation and venture capital," she said, adding that half of the time these loans are structured by using other works in the investor's collection as collateral.

Besides a greater willingness to make loans, many bankers have developed a personal interest in art and have established a bank collection. They, too, have come to see the investment value of art. The First National Bank of Chicago, for example, hired Katharine Kuh, a former curator of modern art at the Art Institute of Chicago, to build a collection of 4,000 objects ranging from the 6th century BC to the present. Having spent $1 million on acquisitions, the bank now estimates its collection to be worth three or four times that. Another art enthusiast, David Rockefeller, the recently retired chairman of the Chase Manhattan Bank, was able to put together a collection of more than 5,000 pieces worth, conservatively appraised, $5.5 million, twice what the bank paid for it.

"Banks have seen that art is a pretty good area to invest in. I mean, you don't see that many works going down in value," noted Frances Teel of the American Bankers Association. She added that the association urges banks around the country to consider works of art as a normal area of investment. They know whence they speak: The association has its own collection of prints and original works of art, including those of such masters as Josef Albers, Georges Braques, Pablo Picasso, and Georges Rouault.

Savings-and-loans institutions have been Johnny-come-latelies in this area, but it was only late last year that the federal government relaxed its restrictions on where and how S&Ls could help finance purchases.

Angelo Vigna, senior vice-president and supervisory agent of the Federal Home Loan Bank Board, the regulatory agency for S&Ls, pointed out that it is too early to tell whether any institutions have moved in any large way to provide loans for buying art, though the door is now open for them to do so.

"Like everything else, it's simply a matter of how they will be collateralized," he said. "I imagine that we will be seeing more and more loans to buy art. Hmm. I guess there's nothing wrong with that."