Art's Bull Market Pinches Museums

National Gallery director sees dire dip in museums' buying power and in donor largesse

THE black BMW in front of me in traffic had ``PICASSO'' on its license plate, a reminder that, for the affluent, the art market is on a fast ride straight up the money mountain. Forget silver straddles and pork belly futures. The smart money, according to National Gallery director J. Carter Brown, is in Van Gogh, Gauguin, and Picasso.

A survey sponsored by the auction houses of all the investment categories puts paintings as No. 1, Mr. Brown told a National Press Club audience last month. ``They have outperformed every other [investment], with a one-year increase last year of 51 percent. Chinese ceramics [were] second at 40 percent, stocks at 25 percent, diamonds at 15 percent, US farmland at 6 percent, and oil at 3 percent.''

Brown cited the auction sales of Van Gogh's ``Irises'' in the last year for $53.9 million, a Picasso self-portrait for $47.9 million, and a painting titled ``The Halberdier'' by the Florentine Old Master Pontormo for $35.2 million. The Getty Museum purchased the last painting. The Getty has also bought Renoir's early Impressionist painting ``La Promenade'' for $17.6 million.

The situation is skewed somewhat, Brown pointed out, ``by the fact that people don't put out at auction categories of works of art they don't think will do well; so it tends to beat the flames. And there is a basic nonaccountability on various works of art. [It's] not like shares of stock, where one share is exactly the same as another. Works of art are looked at for quality, for eye appeal, for condition - things like that. It is a very good question as to how good it is as an investment vehicle.''

He warned that booms traditionally are followed by busts, too. Today's multi-million-dollar Warhol could be tomorrow's tea-towel art.

Which brings us to the subject of what Brown calls the rage for contemporary art, which has been so spectacular. He mentioned the contemporary collection of the late New York taxi magnate Robert Scull and his wife, Ethel. The sale of their collection in 1973 marked the first time contemporary art had gotten into the auction headlines, Brown pointed out. ``The Sculls had invested some $200,000 in their collection, and it sold for $2.2 million,'' he explained. ``In 1984, the total of contemporary art sales in New York was $12 million. Last year, it was $104 million. So we do have a boom psychology here. Many people ask why.

``Basically, I suppose it's easy to say it's supply and demand. The supply, except for the contemporary field, where artists are producing more, is limited by finite groups of objects, and more and more of them are ending up in permanent collections in museums, or being restricted by export restrictions. And therefore, it isn't easy, even if you're as rich as the Getty Trust, to find them to spend your $50 million a year pocket money on.''

Brown smiled gamely as he said that, but for any major gallery director, there's a wince involved in thinking about how little their acquisition funds will buy in today's golden bull market. The National Gallery, for instance, has an acquisition budget of between $2 million and $3 million yearly to buy art for its permanent collection. In today's market, that's salted peanuts.

New York's Frick Collection is a case in point. The Old Master painting ``The Halberdier'' had been on extended loan there and was expected to become a bequest. The portrait, reputedly of the Duke Cosimo de Medici, is viewed as Pontormo's greatest. It was removed from the walls of the Frick with one day's notice and sold at auction in May for $35.2 million, triple the previous record for an Old Master. As Brown put it, ``This is the first Old Master painting to reach the stratosphere.'' And a priceless loss to the public, as well as the museum.

Another factor in the big green art market is internationalization, as Brown pointed out. ``I was interested in the contemporary field last year. Fifty percent of the buyers were either Japanese or European. That is all new in the American art market. The auction houses have learned to be aggressive; they have invented new forms of financing ..., and they have been able to promote a sense of art as an investment vehicle, and as high status.'' Brown believes that the rise in art prices ``indicates that people are really excited about art.

``But for museums it really is a pain,'' he said. ``First of all, acquisitions [are] our life blood; that's how we exist ... to try to keep our collections alive, to fill in, to make great. And this insidious art market is difficult in several ways at once. First of all, direct purchases now have to be greatly curtailed.'' Great masterpieces - even the ones like those by Pontormo, who is not a household word - are so astronomically high that ``at that kind of price there's no art museum other than Getty that can possibly compete.''

The problem for museums is aggravated by the 1986 changes in the federal tax code, which has had a chilling - or even freezing - effect on potential donors. Formerly donors could deduct the fair market value of a work of art as a gift to an American art museum. Now they can deduct only the cost, Brown pointed out.

He gave an example: ``A Jasper Johns [``False Start''] went for $17.5 million last November [at auction]. If that picture had been donated to an art museum, the total deduction the owner could have claimed would have been $3,811,'' the price paid for the work.

``Obviously it's more lucrative to sell,'' Brown continued, ``and so Van Gogh's `Irises,' which had been on the walls of a museum, is going off. The Pontormo, which had been on the walls of the Frick and had been expected to stay [is gone]. They were summarily whisked away to auction, and what we all realize even more is not only are they not going into public collections; they don't stay in America. The drain of art from our shores as a result of this is very serious. The impact on American museums is very serious. It is hard to quantify.''

The American Association of Museums sampled its 274 members, Brown said, and found the value of objects donated in 1987 was $12.7 million below 1986, a decline of 32.8 percent. In all, 38,000 fewer objects were donated in 1987 than the year before.

``The Museum of Modern Art in New York reported a decline in this two-year period since they passed the tax law of 58 percent,'' said Brown, ``and the Metropolitan Museum, 66 percent. They said people simply aren't giving art any more, and we'd rather have art than the money, 'cause what are you going to do with the money in this market? And the art is not fungible; it's not like stocks. Art is the life blood, and, if the tax law is going to choke off the stream of art into the public domain, I would argue that whatever small, tiny percentage of [tax] revenue is lost by this is greatly outweighed by the extraordinary loss to the public in perpetuity for public access to great works of art.''

In spite of all the bad news Brown cited on the soaring art market, he also had some good news. The National Galleryhas just been given, in advance notice of a bequest, a Van Gogh ``Roses'' painting it could never buy, even if it hoarded its acquisitions funds for decades. Art experts estimate the value of the painting, bought by American diplomat Averell Harriman in Paris in 1930, as high as $60 million today.

The painting, ``the outright gift of a partial interest,'' in the gallery's words, will assure full title passing to the gallery on or before the death of its donor, Mrs. Averell Harriman. In addition, three other works of art have been donated to the gallery by the late Rita Schrieber, widow of Taft B. Schreiber of Los Angeles: Picasso's ``Harlequin Musician,'' Matisse's ``Woman Seated in an Armchair,'' and Brancusi's ``Bird in Space.'' A gallery spokesman noted that the Picasso and Matisse paintings and the Brancusi sculpture would have been too costly for the gallery to buy at auction.