U.S. investments in Israel Bonds fuels genocide

Demonstrators demand no state investments in Israel Bonds, Harrisburg, Pennsylvania, Feb. 6, 2024.

Student encampments demanding divestment of college and university endowments from Israel or companies providing military support for Israel, starting in April, quickly spread from coast to coast in the U.S. and around the globe. Collectively, college and university endowments hold nearly $1 trillion of investments in their portfolios. Outrage over Israel’s genocide in Gaza, which has claimed over 37,000 lives since October 2023, fueled this movement.

However, a much larger source of potential funding for Israel lies with states and local governments whose investment portfolios collectively hold over $4 trillion dollars. This amount does not include state and local government pensions that are generally held in separate funds under different decision-making structures.

By early May, eight months after the start of the genocide, Israel’s war bill reached $16 billion. Since April 2023, Israel’s budget deficit rose to $35.7 billion dollars — 7% of its GDP. (Bloomberg, May 9)

Increasingly, Israel has had to rely on foreign bond sales to finance its growing budget deficit resulting from the military spending. According to the Financial Times, Israel Bonds, the official underwriter for Israel’s debt, has sold over $3 billion of bonds since Oct. 8, when Israel launched its genocide in Gaza. This is three times the previous annual average. 

Over $1.7 billion of these bond sales came from 35 U.S. states and local municipalities including governments in Alabama, Arizona, Florida, Illinois, Indiana, Louisiana, New York, Ohio, Oklahoma, Nevada, South Carolina, and Texas. (Times of Israel, April 24) Huge investments from state and local governments in the U.S. are fueling Israel’s ethnic cleansing in Gaza.  

The single largest investor has been Florida’s Palm Beach County which holds $700 million in Israel bonds — 22 times more than any other U.S. municipality. A county board-imposed cap was recently increased from 10% to 15% of their $4.6 billion portfolio, allowing the overseer of Palm Beach County’s investments to increase their purchase of Israel Bonds, violating two state statutes, according to people opposing the purchase. The state treasurer of Ohio also added $30 million to holdings of over $260 million of Israel’s debt. (The Cradle, May 28)

In the first legal action of its kind, a group of Palm Beach County residents sued the county over its Israel Bonds investments. Residents are challenging the county for sinking money into support for a genocidal war while local communities suffer from a housing crisis, and a serious lack of funds for critical public transportation and infrastructure.  

By December 2023, Palm Beach County was running a $732 million budget deficit. Any failure of repayment of the Israel Bonds would spell disaster for Palm Beach County residents. (Mondoweiss, May 24)

There is also a rank-and-file movement within the United Auto Workers pushing the union to divest from Israel bonds.

Israel Bonds = risky investments

Most government treasury bonds are considered relatively safe investments. Bond purchases lend money to corporations, governments or other entities. In return, investors receive interest payments at regular intervals. At the end of the repayment period, the original investment amount comes back to the purchaser.  

However, due to the unstable nature of the Israeli economy, with investments in Israel Bonds there is a clear default or credit risk that they won’t be able to pay the interest or principal on the bond.

According to Reuters, Israel Bonds have “underperformed the most widely followed global emerging market bond index by just over 10 percentage points over the last six months and Moody’s cut the country’s credit rating last month.”  (March 6)

With Israel bonds being difficult to sell or hold to maturity, special laws have been passed in recent years to allow local and state governments to add Israel bonds to their portfolios alongside U.S. treasuries and other U.S. government-issued debt, viewed as safer and easier to sell if needed. There is no other country whose bonds can be sold in the U.S. (The Cradle, May 24)

In 2023, Democracy for the Arab World Now (DAWN), a human rights group, asked the U.S. Justice Department to investigate the Development Corporation for Israel, underwriter of Israel bonds, for being an unregistered foreign agent. (Mondoweiss)

On Feb. 5, 2024, hundreds of protesters gathered inside and outside the state capital in Harrisburg, Pennsylvania, and risked arrest to protest plans by the commonwealth to invest an additional $20 million in Israel bonds for a total of $56 million. 

Pennsylvania State Treasurer Stacy Garrity’s website, which was adorned with a large “Stand with Israel” graphic, noted that Israel bonds have generated $49 billion in support for Israel over 72 years. (www.workers.org/2024/02/76776/)

In addition to the legal actions by Palm Beach County residents, pro-Palestine activists, including Jewish Voice for Peace, have held street protests against Israel Bonds. Veterans for Peace held a protest outside the Israel Bonds (Development Corporation for Israel) office in Philadelphia’s Center City as part of their itinerary on June 15.

Just as the campus encampment movement spread across the globe, look for more and more demonstrations challenging investing public money for Israel’s genocidal onslaught as awareness grows that big investors in state and local governments are increasing purchases of Israel Bonds..

 

Betsey Piette

Betsey.Piette@workers.org

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Betsey Piette

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