Times: Recession Slams Harvard

The president and VP of Harvard have issued a warning to their deans. Expect tough times and major cuts.

Here is my peeve. I thought university endowments were meekly ambitious pools of money, meant to be recession proof. After all, schools depend on the returns for their daily expenses.

It turns out that university endowments were plundered and now squandered by fund managers looking to make enormous returns to justify their equally out of proportion salaries and bonuses.

This of course is irresponsible behavior, no two ways about it.

Now the academic community - students to professors - must suffer - and indeed the near term future looks particularly bleak for the campus elite.

From the end of the article in the Times:

In their letter, President Faust and Mr. Forst said that to have the cash necessary to meet demands and minimize risk, the school would issue “a substantial amount of new taxable fixed-rate debt.” Harvard also plans to convert a significant amount of short-term tax-exempt debt into bonds with longer maturities, so it can reduce its exposure to volatility and continue to finance operations and other priorities.

The school also indicated concern that just as Harvard was suffering the worst endowment returns in its history, it stood to be hit by declines in other revenue streams — presumably contributions and tuition, as families find themselves increasingly in need of financial aid.