Elizabeth Sebesky has varied experience in both the arts and the law, including book publishing, film production, and legal administra-tion. She recently received her B.A. in English from Yale University where she was the principal bassoonist of the Yale Symphony Orchestra, a paid Intern for the editorial director at Yale University Press, and a Legal Assistant at Yale Law School. During that time, Ms. Sebesky shaped storylines into polished works as a Film Production Intern at Red Wagon Productions at Sony Pictures Entertainment in Los Angeles, CA and as an Editorial Intern for the then Editor-in-Chief at Random House in New York, NY. Upon graduation, she further explored her love of the judicial branch as a paid Legal Intern at the U.S. Bankruptcy Court, District of NJ. She currently resides in Washington, DC where she is a Paralegal Specialist for the Department of Justice.
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From the article, The Art Market: How Lending Fuels Art Crime:
For more information and to order a copy of the Journal of Advanced Appraisal Studies - 2010, click HERE.For the study of art crime, it is important for art historians and art economists to go beyond a traditional neoclassical analysis of the art market. Instead of analyzing common topics such as the distinction between public and private art supply, scholars and professionals in the field must pay attention to both “the extrinsic and intrinsic motivation” of players in the art market and the “dynamics of interaction” between these two motivations. The intrinsic motivation can be defined as psychological attachment to the art itself or what the art represents for the buyer. External motivation connotes the practice of distilling aesthetic value into a pure monetary figure or financial asset. The first step to serious investigation is to describe these motivations in financial terms: “psychic return” and “consumption benefit” respectively. Those who care primarily about “psychic return” are “pure collectors,” who generally purchase or hold onto artwork due to their personal regard for it and tend to ignore price fluctuations in the market. In contrast, “pure speculators” are more willing to sell their art due to “unpre-dictable financial risk (price variations) and uncertain attribution” and are most concerned with the art object’s “consumption benefits.” By under-standing the psychology behind these “consumption benefits,” art historians and art criminologists can focus on individual players—such as lenders, dealers, and investors—who have their personal psychological justifications for committing crimes against art.
In 2009, The New York Times reported in an article by Allen Salkin, “That Old Master? It’s at the Pawnshop,” that art lending companies across America have seen a recent upsurge in business from art owners, collectors, and dealers, who have decided to leverage their art objects. One such company, Art Capital Group, predicted that it would make about $120 million in art-related loans in 2009, up $40 million from 2008. Similarly, owner Ray Parker Gaylord of ArtLoan says that he has “seen ‘exponential’ growth in the last year even though it charges interest rates of 18-24%, and the art lending company Art Finance Partners reports a 40% rise in business over the last six months. In addition to Art Capital Group, Art Finance Partners, and ArtLoan, some of the most prominent companies include Sotheby’s Financial Services, Emigrant Bank’s Fine Art Finance, and the lending services at the “art advisory wings” of large banks such as CitiGroup, Bank of America, USB, and Deutsche Bank. Independent companies not attached to big banks are desirable to clients who wish to keep their financial affairs especially private or separate from other parts of their personal finances as well as for those unable to receive a loan from larger companies. The owner of Art Capital, Ian Peck, admits that clients come to them in times of financial trouble—“burned by Ponzi schemes.” Generally, these art lending companies charge 40% of what they appraise the artworks to be worth. Often, they gain full possession of the art objects if their clients default. These statistics indicate the success of this corner of the art market and that it fulfills a real function for art owners in economic trouble.
There are several options that art lending companies may offer to those seeking capital in the form of “asset-based” loans: loans created from the temporary exchange of property (in this case art objects) instead of through credit. Across the finance industry, pieces of art are considered “unconventional assets.” Art owners looking for cash have a few options: they can “borrow against” their artwork (fine and decorate arts, antiques, and collectables), receiving what is called a “term loan”; here, the owner can temporarily lend his/her art pieces without selling them outright in order to get money or “liquidity.” Another option that most private firms offer is if an owner knows he or she wants to sell an art object outright, he or she can borrow a certain amount of money based on a “low-end auction estimate” of the price in advance of the sale; this practice allows clients to continue investing while waiting for consignment to occur. Sometimes the art object is not the only object that is used as an asset and is combined with other forms of leverage in a collateral package. Additionally, some of these private companies offer “consignment financing” for art dealers, based on the value of their business, so that they have enough financial support to effectively sell their art objects.
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