(JTA) — Joseph Abruzzo can’t seem to get enough Israeli bonds.
Government officials representing Palm Beach County, Florida, have invested $700 million of local taxpayers since October 7 in bonds to help finance the Israeli government’s war against Hamas.
15% of Abruzzo’s investment portfolio is at the maximum limit legally allowed to be purchased according to county policy. This total represents about a quarter of all Israeli bonds sold since the start of the war, making Palm Beach County, with its large Jewish population, the single largest holder of Israeli bonds in the world.
Abruzzo, who is not Jewish but has Jewish relatives, says his motivations are not ideological but follow state law and county policy, which calls for him to focus on protecting public funds. But he also said this investment strategy happens to coincide with support for Israel.
“I am proud to support Israel, our greatest ally in the entire world,” Abruzzo said in an interview. “That being said, these are incredibly safe investments. They have an incredible return for county taxpayers, and from a fiduciary perspective, it makes perfect sense to us. It suits me.”
While Palm Beach County is unique in how much of its financial portfolio is invested in Israeli bonds, Abruzzo said it has joined the growing number of state and local governments across the country investing in bonds in recent months. It reflects the logic of being there.
The Israel Bond Organization, an arm of the Israeli government, said earlier this month that it had sold more than $3 billion in bonds since Oct. 7, almost triple its normal annual total, as the country weathers the economic turmoil caused by the war. Announced. Buyers include individuals and financial institutions, but the bulk of the $1.7 billion was purchased on behalf of taxpayers by investment officials from governments such as Abruzzo, creating an investment opportunity for individual Jews in the diaspora. This marks a departure from the traditional marketing of Israeli bonds. In the development of Israel.
Justin Marlow said, “While we have been seeing state and local governments across the country investing in Israeli bonds for some time now, many jurisdictions are investing in Israeli bonds for the first time, especially on October 7th. “I have seen them increase their holdings of Israeli government bonds since then.” He is a research professor at the University of Chicago Harris School of Public Policy and director of the school’s Center on Local Finance. “In some cases, governments openly state that they are increasing investment as a show of solidarity with Israel.”
The bond leaves a huge portion of its investments in Israel under wide public scrutiny as anti-Israel protesters on college campuses demand that schools divest from Israel and increase transparency in their investment portfolios. corresponds to It’s unclear how much scrutiny they are conducting. No members of the public commented on the Palm Beach County hoardings at the March meeting, according to video of the meeting.
Experts say the trend in public spending on Israeli bonds is notable because state and local governments cannot take on the same risks as retail investors.
Experts say the trend in public spending on Israeli bonds is notable because state and local governments cannot take on the same risks as retail investors. Daniel Bergstresser, a professor at Brandeis University who specializes in municipal finance, said the money the government invests comes from taxpayers and ultimately needs to be spent on public needs. , explained that we need to be more careful.
“Therefore, investing these funds in safe assets is a very high priority,” Bergstresser said. “Bills must be paid.”
For most people managing public sector funds, this situation has traditionally meant avoiding any investment in sovereign institutions, Marlowe said.
“There are very few government entities that have triple-A ratings that can be considered truly risk-free like U.S. Treasuries,” he said.
In the case of Israel, political instability and the impact of the war on the Israeli economy have led to global credit agencies downgrading or placing warnings on the country’s ratings, which could theoretically impact the government’s ability to borrow. .
Additionally, not all states allow local cities or counties to invest overseas. Florida passed a law in 2008 allowing investment in Israeli municipal bonds.
“Whether the state allows it or not reflects the state’s priorities, and whether local officials use it or not reflects their priorities,” Marlowe said. “This is clearly a policy statement on the part of the government.”
A total of 35 state and local governments have invested in the bond since October 7th. Although not all have disclosed their investments, the list includes Florida, New York, Alabama, Arizona, Ohio, Illinois, Texas, Oklahoma, Georgia, Nevada, Louisiana, and, according to the bond buying letter, South Carolina, Pennsylvania, In addition to Indiana, Broward County, Palm Beach County, Miami-Dade County, the cities of Miami Beach and Boca Raton in Florida, and Franklin County, Ohio, are also affected.
This trend extends across party lines.
“This is a bipartisan effort. According to Bond Buyer, I’m a Republican, but Franklin County has a great Treasurer in Sheryl Brooks Sullivan, and she’s a Democrat,” said Ohio Treasurer Robert. Sprague said this at a recent virtual meeting of government investors convened by Israel Bonds. .
Abruzzo holds the elected positions of circuit court clerk and comptroller in Palm Beach County, an area with a large and growing Jewish population. According to a 2018 Brandeis University demographic study published by the county’s two Jewish federations, about 15 to 20 percent of the county’s population lives in Jewish households.
Prior to serving at the county level, Abruzzo, a Democrat, served in the Florida House and Senate. He sponsored legislation to support Holocaust survivors and commemorate Israel’s 70th anniversary in 2018.
Abruzzo told JTA that he is quarter-Jewish, before clarifying that he was referring to the results of a genetic ancestry test. Additionally, he added, his stepmother is Jewish, grew up in a mixed Italian-Jewish household, and his stepbrother had a bar mitzvah.
“I like to say that one of my grandmothers made the best tomato soup in the world, and my stepmother made the best matzo ball soup in the world,” Abruzzo said. “I know a lot about Israel and Jewish tradition.”
He began investing in Israeli bonds long before the current war. In his first year in Palm Beach, he convinced the county commission to double the amount allowed to invest in Israeli bonds from 5% to 10% of the county’s portfolio. However, at that time, the number of bonds on the market was limited, and the upper limit was not affordable.
As Israel went to war and the economy shrank, the government decided to issue more bonds.
“If you go back to October 7th, a day or two after that horrific event, I was able to speak with (local Israeli bond manager) Mark Ruben and we purchased $25 million in bonds,” Abruzzo said. said. “We got a very good rate and we were very excited. Then we made his $135 million purchase, which was our largest purchase of the day.”
But even that wasn’t enough.
He asked the county commission in March to raise the cap again. In his argument, he pointed to the county slated to earn $83 million in bond interest, part of what official data shows since he took office in 2021. , indicating a dramatic improvement in the performance of the county’s fiscal portfolio.
The board voted unanimously to raise his cap to 15%, which equates to about $700 million of the $4.7 billion in county coffers.
Experts say the situation in Palm Beach County is highly unusual.
“I don’t know of any other jurisdiction that has 15% of its holdings in one type of investment,” said Marlowe of the University of Chicago. “That’s not necessarily good or bad. It’s a decision. It’s a policy choice that they’re making. But this is a far greater concentration of risk in a public entity’s portfolio than I’ve ever seen before.” It means something big.”
Brandeis University’s Bergstresser said he believes this investment strategy is unusual in that it is probably not wise.
“Such a large allocation to a single foreign issuer is standard portfolio diversification advice, especially when avoiding severe losses is a priority, as in this situation,” Bergstresser said. There is no doubt that it is contradictory.” “Sovereign issuers can default on the bonds they issue. If the State of Israel defaults on these bonds, Palm Beach County will have no way to pay its bills without the funds it expected to have available. will have to find it.”
Mr. Abruzzo is up for re-election in November, but with less than two months left until the filing deadline and no one else has announced their candidacy, he is currently running without a vote.
Abruzzo said there was no political agenda behind investing in Israeli bonds.
“Every decision was based on dollars and cents and financial security,” he said. “This has nothing to do with elections or personal motives. It was not done for political gain.”
But he spoke out about the political controversy over the war between Israel and Hamas in the Gaza Strip that has roiled the United States and deepened rifts within the party. Abruzzo’s stance reflects the staunch pro-Israel sentiment that still prevails within both parties, as the White House grows increasingly frustrated with the actions of the Israeli military and the left wing of the Democratic Party denounces Israeli genocide. He rejected calls for greater restraint from Israel.
“A lot has been said about Israel, especially in far-left circles in my party, but if what happened in Israel on October 7th happened here in America, this country that was harboring terrorists would be on the surface of the moon. “It would look like that,” Abruzzo said.
Israel’s total borrowings, including Israeli bonds and other financial instruments, doubled to $43 billion in 2023. Meanwhile, billions of dollars in charitable donations are also pouring in to support Israeli civilians and soldiers.
The success of the Israeli bond fundraising campaign began in March last year, when the group invited Israel’s far-right Finance Minister Bezalel Smotrich to speak at a conference amid mass protests by Israelis against the Israeli government. This was after alienating some American Jews.
Despite Israel’s credit rating downgrade, Dani Nabe, president and CEO of Israel Bonds, said prospective bond buyers had not expressed such concerns to him. . He said Israel should be reassured that despite past military crises and regardless of who was in power, Israel has never defaulted on its debts.
“The state has always met its obligations and paid off its debts on time,” Neve said in an interview. “It is also important to note that when we look back at past security crises, the resilience of the Israeli economy has been very strong, and I am optimistic that this will be the case again.”
