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Israel Bonds, Explained

How a little-known investment vehicle became a major source of financing for Israel—and flashpoint in New York City politics.

The Unlikely History of Israel Bonds

How a little-known investment vehicle became a major source of financing for Israel—and flashpoint in New York City politics.

Protesters demonstrate against Israel Bonds in Dublin on June 11, 2025.

For decades, Israel Bonds served as a critical source of capital and foreign currency for a country unable to court traditional investors. In its early days, Israel Bonds were purchased almost exclusively by Jews in the diaspora, but today the money comes not just from private citizens but from taxpayer dollars, directed there by comptrollers and other financial officials charged with investing public worker pension funds. 

After October 7, sales in Israel Bonds spiked, and as the genocide deepened, pro-Palestine human rights advocates launched campaigns to cease taxpayer support for the war. Unlike bonds sold by the Israeli Finance Ministry, Israel Bonds are sold on a retail basis by a third party in the United States, and are not traded on the public market. For that reason, it is difficult for financial officials to divest portfolios from Israel Bonds, but they can opt not to reinvest the money once a bond matures. After sustained pressure campaigns from pro-Palestine activists, several jurisdictions across the United States have opted to do just that, including Louisiana and more than a dozen counties in Ohio, according to Jewish Voice for Peace. (Campaigners have also secured important divestment wins from Israel sovereign bonds).

It’s now become an election issue. In New York, the state’s comptroller, Thomas DiNapoli, who’s already been elected four times, is now facing the only primary race of his career. One of the flashpoints of this election has been Israel Bonds. DiNapoli has invested hundreds of millions of taxpayer dollars in Israel Bonds during his time in office and nurtured a close relationship with the US company that sells the bonds. Both of DiNapoli’s challengers, Raj Goyle and Drew Warshaw, have criticized DiNapoli for pursuing unethical investments and promised to cease reinvestment in Israel Bonds if they are elected.

As voters in New York go to the polls, The Nation is publishing this primer on Israel Bonds, tracing how and why they were created, their relationship to the mob, and how the financial instrument became a means for right-wing comptrollers to furnish their pro-Israel credentials.

Who created Israel Bonds and why?

The story of Israel Bonds begins after the creation of the state of Israel, when the newly formed government was desperate for cash. Prior to 1948, the Zionist leadership in Palestine had largely relied on donations from Jewish American communities. As University of Southern California professor Dan Lainer-Vos charts in his book, Sinews of a Nation, after the founding of Israel, these donations started to dwindle, partly because the Jewish American nonprofits that collected the funds began to take a larger cut for themselves. Meanwhile, the economic situation in Israel—including an overvalued currency and state control of key sectors—made it nearly impossible for the country’s leadership to attract conventional foreign investors.

In 1948, UJA chair and former secretary of the Treasury Henry Morgenthau, who had raised almost $200 billion to finance World War II by selling US “war bonds,” approached Prime Minister David Ben-Gurion and proposed creating a similar program. Instead of just soliciting donations, his idea was to sell bonds to the Jewish diaspora, enabling Israel to access new pools of capital and foreign currency while reducing their dependence on philanthropy.

Ben-Gurion was initially skeptical of the plan, but by 1950, the economic situation in Israel was dire enough that the prime minister decided to try it. He advocated for the creation of a new organization to issue the bonds, the American Financial Development Corporation for Israel (the AFDCI, later reconstituted as the DCI). Wary of initial fluctuations in bond value might impact the Israeli economy and long-term survival of the bond program, AFDCI’s US leadership decided to make the bonds non-transferrable; in other words, they could not be traded on a public bond market but were instead (with a few exceptions) paid out by the AFDCI when they reached maturity. The bonds sold by the AFDCI/DCI have always been distinct from sovereign bonds, which are sold by the Israeli Finance Ministry and can be resold after purchase, subject to shifting valuation on the public market.

Bonds are a form of debt; the seller of the bond agrees to pay back the principal to the investor, along with regular interest payments. The bond terms set by Israel Bonds—such as the bonds being non-transferrable—meant that traditional investors wouldn’t consider them. Yet the investors that the AFDCI were targeting were driven in large part by their emotional ties to Israel and were therefore willing to accept lesser terms and a lower rate of return. Mitu Gulati, a professor of law at the University of Virginia who studies sovereign debt, calls this aspect of diaspora bonds the “patriotic discount.” “If there is a subset of people who are willing to lend to you at lower rates in bad times,” he said, “then that’s a way that you could have a form of insurance. Israel has it, and other countries would desperately like it.”

In 1951, the first set of bonds were issued. Since its founding, Israel Bonds has brought in $57 billion to Israel, constituting about 25 percent of its foreign debt.

What role did Israel Bonds play in shaping US diasporic identity and diasporic understandings of Israeli history?

In 1951, Meyer Steinglass, a playwright and writer living in New York, was hired to serve as Israel Bonds’ national publicity director. He was charged with........

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