State of Israel Bonds Organization - excerpt from Lee O'Brien, American Jewish Organizations and Israel, 1986

This page is an extract, reproduced with permission, from Lee O'Brien, American Jewish Organizations and Israel, Washington DC: Institute for Palestine Studies, 1986.

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• Year established: 1951
• President: Brig. Gen. Yehudah Halevy
• General Chairman: Sam Rothberg
• Executive Vice-President: Morris Sipser
• U.S. National Campaign Chairman: David Hermelin
• Address: 730 Broadway, New York, NY 10003

General Background

Following the establishment of the Jewish state, and against the background of the ongoing debate over Israel's share of UJA campaign funds, a group of 59 American Jewish leaders visited Israel in September 1950 and met with Prime Minister Ben-Gurion ‘to consider the economic situation of Israel.’ Two-thirds of the participants were from the New York-New Jersey area, and the moving force behind the visit was Henry Montor of New York City, who was already very active in UJA fundraising activities and who was arguing for a bigger Israeli share of the annual receipts.

Realizing that Israel's financial needs at the time were staggering, the group attempted to find another funding channel controlled exclusively by pro-Israel elements. To this end they called for private investment in Israel and for the continuation of the UJA, as well as ‘a new approach to the scope of the cooperation between the Jews of the United States and the people of Israel,’ in the belief that ‘the State of Israel has reached a crucial point of development in which contributions are not adequate to meet long-range economic needs.’ At the conclusion of their meeting, they pledged themselves

‘That should the Government of Israel decide to float a public loan in the United States as a means of obtaining funds for the financing of constructive programs, American Jewry will extend its fullest support.’

What grew out of that resolution was the American Financial and Development Corporation for Israel, better known as the Israel Bonds Organization (IBO). Besides Montor, the other moving force behind the idea was Henry Morgenthau Jr. then chairman of the UJA, and formerly secretary of the treasury under Franklin D. Roosevelt. After Morgenthau secured U.S. governmental approval of the idea, Ben-Gurion visited the United States to launch the IBO in May 1951, and Henry Montor left the UJA to nurture the new organization during its first few years.

Structure and Role

The IBO is not a tax-exempt corporation, but an investment corporation. It ‘seeks to provide large-scale investment funds for the economic development of the State of Israel through the sale of State of Israel Bonds in the United States, Canada, Western Europe, and other parts of the free world.’ The sale of Israel Bonds makes development capital available to Israel at a rate below that of another available money market. The Israeli securities carry from four to seven percent interest and mature. in fifteen years. The funds raised from the sale of these securities go directly to the Israeli Ministry of Finance, where they become part of Israel's development budget. The IBO works closely with the Israeli government, especially during what they define as emergency situations, when Israeli needs for cash are transmitted directly and swiftly to IBO officials in the United States.

The impact of bond money is felt in almost every economic project in Israel. Together with German reparations and loans, bond money financed ‘the growth of Israel's southern industrial towns and factories, the Jordan Valley Water Carrier, the ports of Eilat and Ashdod, the oil pipelines from the Gulf of Aqaba to the Mediterranean, as well as a host of other development projects, including the enlarged Dead Sea Works and the Arad petrochemical complex.’

Run simultaneously as a highly structured business and a community organization, the IBO targets the entire American market and not only American Jews. With headquarters in New York City, the IBO has a system of city offices, each responsible for a given area. In addition to the geographical organization, there are sectoral units, such as the Women's Division, the Rabbinate Division, and so forth. All of these regional and sectoral units are controlled by directors and chairpersons responsible to the national executive staff in New York. In Florida, a new position of condominium coordinator was recently introduced.

Flow of Funding

For potential Jewish investors, the purchase of State of Israel Bonds is presented as the ‘strongest and most direct link with Israel, its people and their future.’ For non-Jewish American entrepreneurs, the purchase of Israel Bonds is cast as helping ‘to expand Israel purchases of U.S. produced machinery, equipment, raw materials and other products, thus providing jobs and business opportunities for Americans,’ while assisting the economic growth of Israel, "the only democracy in the Middle East.’ Many of the techniques the IBO uses to sell its securities are similar to those used by other major fundraising organizations: gala social events, missions to Israel, regional meetings, specialized seminars, and fashion shows. To create a network of bond purchasers, ‘Prime Minister Clubs’ restricted to big investors were created in a number of large U.S. cities.

Major purchasers of Israel Bonds are honored with awards such as the Israel Bonds Cultural Award, the Golda Meir Leadership Award, and the Eleanor Roosevelt Humanities Award. In order to promote its new series of Variable Rate Issue Bonds (VRI) in Detroit, the IBO held small cocktail meetings in doctors' medical suites. ‘In each case, the invitation, printed on the doctor's stationery, was mailed to colleagues in the doctor's building. The meeting was conveniently held immediately following office hours and a guest speaker, knowledgeable about VRI and pension and profit-sharing plans, was featured.’ The success of the plan in 1982 led to its continuation the following year. Immediately after launching the invasion of Lebanon in 1982, the Israeli government initiated intensive contacts with IBO officials in the United States and urgently requested cash. In conjunction with other major fundraising organizations, the IBO put in motion ‘Operation Welcome,’ a U.S. fundraising tour for Prime Minister Begin. At an IBO luncheon held at the Waldorf Astoria in New York on 18 June 1982 American and Canadian Jewish Bonds leaders presented Begin with a check for $35 million, a first installment on the $100 million that they committed themselves to raise by September 1982. At that time, a high-level IBO delegation was in Israel to hand over the balance of their commitment.

In late June 1982, a delegation of thirty Bonds leaders was invited by the Israeli government for consultations. During a 42-hour visit, the delegation met with the prime minister and minister of finance and visited the Beaufort Castle and Israeli troops in Lebanon. A week later Israeli officials invited a second Bonds delegation of 32 members to visit for consultations and progress reports on the emergency drive.

A four-day Interriational Leadership Conference of the IBO was held in Washington, D.C. in late August 1982. The conference was addressed by Israeli defense minister Ariel Sharon and Walter Mondale. Chairman Sam Rothberg set the 1982 goal at $550 million in Bond receipts (the 1981 sales were $432 million) and proceeded to list what he considered the four ‘major challenges’ facing the Bonds program:

• (1) To begin a new era of agricultural and industrial development of the Galilee ...
• (2) To help restore and replenish the economy ...
• (3) To continue the expansion of the economic structure of the Negev in order to complete the resettlement of the families from Sinai ...
• (4) To provide seed money for the Mediterranean-Dead Sea Canal.

IBO's interaction with the Israeli government has always followed a fixed pattern: Israeli officials express the volume of their need to IBO officials, and the latter commit themselves to raising it. What happened in the wake of the invasion of Lebanon duplicated the response to earlier ‘emergencies.’ These emergencies, however, are not restricted to wars, as the following example illustrates. During the first week of April 1982, as Israel was preparing to pull out from the Sinai, Begin sent an urgent cable to IBO's Rothberg in which he expressed his hope that ‘the Bond Organization will demonstrate its solidarity by making a special effort in the coming weeks to enable us to back up our endeavor for peace with a strong economy.’ In response, the IBO declared 25 April 1982 to be ‘Unity with Israel Day,’ which would be the culmination of a special campaign of major sales and cash collection.

To target the corporate world, the IBO set up the Israel Bonds Corporate Program in the early 1970s. In 1982, some $160 million in securities offered by the IBO were purchased by corporations, banks, and insurance companies in the United States. Bond securities have also been purchased by 9,500 pension funds, 3,500 banks, 1,500 labor unions, and 500 insurance companies. Among the major purchasers of Bond securities are: the Coca-Cola Company, Melville Corporation, the Borden Corporation, Allied Stores Corporation, U.S. Shoe Corporation, Walter Kidde and Company, the Catalog/Showroom Industry, MGIC Investment Corporation, ARA Services, Inc., the Great Atlantic and Pacific Tea Company, Warner Communications, Inc., Bally Manufacturing Corporation, Supermarkets General Corporation of New Jersey, Associated Wholesale Grocers, Inc., Colonial Stores, the Manufacturers National Bank of Detroit, and the National City Bank of Cleveland, In April 1982, at a gala dinner-dance at the New York Hilton, under the auspices of the IBO, Lord & Taylor was designated to receive the ‘State of Israel Peace Medal’ for its valued service to the state. The purchase of substantial sums in Israel Bonds is probably the most important form of financial assistance that U.S. labor has rendered to Israel. Union pension funds and health and welfare funds buy these securities despite the low rate of interest. About forty unions hold approximately a quarter billion dollars in Israel Bonds in their portfolios.

The unions holding the bonds include the following (unions with few Jewish members, as indicated by the Israel Bonds Organization, are denoted by an asterisk):

• Amalgamated Clothing Workers of America (AFL-CIO)
• Amalgamated Lithographers of America (Independent)
• Amalgamated Meat Cutters and Butcher Workmen of North America (AFL-CIO)
• American Federation of Musicians (AFL-CIO)
• Baker and Confectionery Workers International Union of America (AFL-CIO)
• Bricklayers, Masons and Plasterers International Union of America (AFL-CIO)
• Distillery, Rectifying, Wine and Allied Workers International Union of America (AFL-CIO)
• Graphic Arts International Union (AFL-CIO)
• Hotel and Restaurant Employees' and Bartenders' International Union (AFL-CIO)
• International Association of Bridge and Structural Iron Workers (AFL-CIO)
• International Association of Machinists and Aerospace Workers (AFL-CIO)
• International Brotherhood of Electrical Workers (AFL-CIO)
• International Brotherhood of Painters and Allied Trades of the United States and Canada (AFL-CIO)
• International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America (Independent)
• International Jewelry Workers Union (AFL-CIO)
• International Ladies Garment Workers Union (AFL-CIO)

Since IBO's inception in 1951, more than $6.1 billion in bonds and other Israel securities have been sold, and over $3 billion worth have been redeemed. Although individual German companies and institutions purchased large quantities of State of Israel Bonds in the early 1960s, the majority of sales continue to take place in the United States.

• International Leather Goods, Plastics and Novelty Workers Union (AFL-CIO)
• International Longshoresmen's Association (AFL-CIO)
• International Typographical Union (AFL-CIO)
• International Union of Dolls, Toys, Playthings, Novelties and Allied Products of the United States and Canada (AFL-CIO)
• International Union of Operating Engineers (AFL-CIO)
• International Union of Wood, Wire and Metal Lathers (AFL-CIO)
• Laborers International Union of North America (AFL-CIO)
• Laundry, Cleaning and Dye Houseworkers International Union (Independent)
• Longshoremen's and Warehousemen's International (Independent)
• Retail Clerks International Association (AFL-CIO)
• Retail, Wholesale and Department Store Union (AFL-CIO)
• Seafarers International Union of North America (AFL-CIO)
• Service Employees International Union (AFL-CIO)
• Sheet Metal Workers International Association (AFL-CIO)
• Textile Workers Union of America (AFL-CIO)
• United Association of Journeymen and Apprentices of the Plumbing and Pipe Fitting Industry of the United States and Canada (AFL-CIO)
• United Automobile, Aerospace and Agricultural Implement Workers of America (Independent)
• United Brotherhood of Carpenters and Joiners of America (AFL-CIO)
• United Furniture Workers of America (AFL-CIO)
• United Hatters, Cap and Millinery Workers International Union (AFL-CIO)
• United Paperworkers International Union (AFL-CIO)
• United Steelworkers of America (AFL-CIO)