Larry Summers Can Fix This

Publish date:

There's a lengthy article in Boston Magazine about how Harvard has been hemmoraging money (the endowment has lost $11 billion, bringing it down to 2005's mere $25 bill, due in no small part to Harvard Management Company, which one alum privy to the details of the school's balance sheet told the author, "took the university right to the edge of the abyss...Meaning, you're out of cash. the definition of insolvency.") Very few insiders would speak on or off the record, as Harvard is attempting to downplay the perception that its people are soiling themselves in fear, but one brave fool soul did offer this absolutely harrowing take:

While the failed presidency of Lawrence Summers generated more headlines, this quiet crisis is actually a greater threat to Harvard. The university has been so rich for so long that most of its denizens can't remember a time when money was a concern. While Harvard officials are doing their public-face best to downplay the problem, the numbers don't lie, and this economic crunch will leave the school a profoundly changed place. Harvard will have to become smaller and academically more modest, and as it does it will chafe at having grand plans without the resources to fund them. For the first time in decades, it will worry about merely paying its bills. The university will have to decide: If it is no longer so rich that it doesn't have to make choices, what does it really value? What are its priorities? It won't be a comfortable debate.
"We are in trouble," says one Crimson professor. In the aftermath of deep and damaging cuts, "there is a real chance that Harvard will no longer be considered the best there is."

This is also good:

Further squeezing Harvard was a transaction Summers had pushed it into in 2004, when he successfully argued that the university should engage in a multibillion-dollar interest rate swap with Goldman Sachs and other large banks. Under the terms of the deal, Harvard would pay Goldman a long-term fixed rate while Goldman paid Harvard the Federal Reserve rate. The main goal was to lock in a low rate for future debt, and if the Fed had raised rates, Harvard would have made hundreds of millions. But when the Fed slashed rates to historic lows to try to goose stalled credit markets, the deal turned equally sour for Harvard: By last November, the value of the swaps had fallen to negative $570 million.

Drew Gilpin Faust and the Incredible Shrinking Harvard
[Boston Magazine via The Atlantic]


Goldman Sachs Can Fix This

A week ago today, a man named Greg Smith resigned from Goldman Sachs. As a sort of exit interview, Smith explained his reasons for departing the firm in a New York Times Op-Ed entitled "Why I Am Leaving Goldman Sachs." The equity derivatives VP wrote that Goldman had "veered so far from the place I joined right out of college that I can no longer in good conscience say I identify with what it stands for." Smith went on to note that whereas the Goldman of today is "just about making money," the Goldman he knew as a young pup "revolved around teamwork, integrity, a spirit of humility, and always doing right by our clients." It was a culture that made him "love working for the firm" and its absence had stripped him of "pride and belief" he once held in the place. While claiming that Goldman Sachs has become virtually unrecognizable from the institution founded by Marcus (Goldman) and Samuel (Sachs), which put clients ahead of its own interests, is hardly a new argument, there was something about Smith's words that gave readers a moment's pause. He was so deeply distraught over the differences between the Goldman of 2012 and the Goldman of 2000 (when he was hired) that suggested...more. That he'd seen things. Things that had made an imprint on his soul. Things that he couldn't forget. Things that he held up in his heart for how Goldman should be and things that made it all the more difficult to ignore when it failed to live up to that ideal. Things like this: