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The End of the Art World’s Arb Era

Why is the art market down so much in volume when other markets haven’t seen the same drop? One explanation might be the billions of dollars in art loans that are now being reversed in our high-interest rate environment.

jerome powell
Before Jay Powell started jacking up interest rates, private bankers—especially those managing collectors’ non-art assets—were lending against up to 50 percent of the value of the investors’ art holdings. Photo: Al Drago/Bloomberg via Getty Images
Marion Maneker
July 21, 2024

One of the great ironies of finance, a banker friend likes to remind me, is that no institution wants to lend money to someone who really needs it. Between 2010 and 2022, as excess liquidity sloshed through the system, ultra-high-net-worth individuals borrowed billions and billions of dollars against their assets. For many art collectors, that meant leveraging their art—sometimes to make money in other asset classes, sometimes to buy more art. Starting two years ago, those conditions have reversed, draining the art market of billions.