Harvard, Dartmouth, MIT Made Financial Crisis Worse: Report

According to a new report, Harvard, Dartmouth, MIT, Boston College, Boston University and Brandeis University all took on too much risk in the fiscal year ending last June and exacerbated the financial crisis.

BusinessWeek has more:

Investment losses at the endowments in the year ended June 2009 led to cutbacks and delayed construction projects, draining at least $1.35 billion from local economies for the next three years, said the study by Tellus Institute, a research and advocacy group in Boston.

"Harvard highlights how terribly wrong the endowment model can go when pushed to certain extremes in a climate of leadership crisis," said the 81-page report, which was released today. The endowment model, pioneered by Yale University's investment chief, David Swensen, relies on alternative assets including commodities, real estate and private-equity holdings to boost returns.

The report also states that "the endowment method of investing is broken":

"Whatever long-term gains it may have produced for colleges and universities in the past must now be weighed more fully against its costs -- to campuses, to communities and to the wider financial system that has come under such severe stress."

What do you think?

Comments

[Fabini]

08:31 AM on 05/21/2010

The impact on the Dartmouth College community has been horrible for those laid off in the cutbacks and psychologically damaging for everyone at the college who thought they were about to go. Financially, the community took a body blow. Everything softened. On the whole however, the community is doing fine. The college and medical school are continuing with construction projects. The business school is keeping a low profile, but doing very well. The medical center, always on a tight leash, is expanding in the IT and research areas.

Did the colleges mentioned contribute to the financial meltdown? No, not really. Are they important players in the intellectual development of this country. Yes, without exception. Let's keep focused on the true issue, banking and financial institution investments.

[wassilij]

07:38 AM on 05/21/2010

http://www.youtube.com/watch?v=yge311sFhC8

[palindrom]

06:59 AM on 05/21/2010

Actually, viewed over the last 10 years or so, Swensen's model did very well -- and that's even including the effects of the crash. You can rail against these schools all you want, but they were basically trying to do the best they could with the resources available; the target should be the financial system, not the universities which were just trying to grow their endowments.

[markdolph]

05:05 AM on 05/21/2010

"the endowment method of investing is broken" ...what does THAT mean?

if it means excessive risk taking, then what makes the endowment method any different from any other method used by institutions that put huge pools of other people's money at inappropriate risk?

[awakened]

08:37 PM on 05/20/2010

I think Harvard Business School should do a case study on itself illustrating the dangers of groupthink. Maybe they'll have a Nobel prof write about how risk has another meaning besides a mathematical measure of price variability. Who knew?
They'll probably blame Yale for tempting and corrupting them.
Anyway, LOL.

[realitytrumpsbull]

08:06 PM on 05/20/2010

The ivory tower model of doing business isn't long for this world. We have global telecommunications, the internet, and hence the ability to largely study outside of traditional classrooms. They can maybe turn the place into a museum or something, but online education is probably the future, here.

[MNmommy]

10:22 PM on 05/20/2010

At this juncture, most online education is a for-profit free-for-all.

For-Profit, as opposed to "private".

http://www.pbs.org/wgbh/pages/frontline/collegeinc/view/

[Fabini]

02:04 PM on 05/21/2010

Person to person contact and the exchange of ideas can never be understimated or undervalued.

[citizen1787]

08:04 PM on 05/20/2010

Best and the brightest(sarcasm off)

[IDIOTA]

07:14 PM on 05/20/2010

The UC system lost billions also and deserves investigation.

[realitytrumpsbull]

08:03 PM on 05/20/2010

Yeah, but in CA, educators apparently enjoy some kind of royalty status. Do you really expect the Governor's office to send the state AG to pick up their financial records and student rosters to find out what's really been going on, there? I mean, what happens if they actually ended up having to start arresting some professors or administrators or something, that would be heresy!

[geebee2222]

06:58 PM on 05/20/2010

Stupid is what stupid teaches!

[imajoebob]

06:44 PM on 05/20/2010

What do I think? That making believe you can make this question comprehensible in less than 250 words is a joke and a disservice to your readers, to the schools, to the contributors, and to your website.

You'll publish thousands of words on Lindsay Lohan snogging with another woman in the bathroom of a dance club, but you reduce this to 4 paragraphs? This is either a bad joke or very telling about the "journalism" practiced at Huffington Post.

[hdc77494]

06:42 PM on 05/20/2010

Leadership crisis? Everybody got greedy, and everybody was looking for higher returns, and assumed too much risk. The endowment model is broken? Give me a break.

[ramper]

06:28 PM on 05/20/2010

Using an endowment model designed by a Yale man and hammering Harvard with it. I can hear the cackles in New Haven now.

[Rich Zubaty the Rude Guy]

06:24 PM on 05/20/2010

What do I think? I think this is Larry Summers doing -- the self-appointed smartest guy in the room. He gave us the Wall Street meltdown by ending Glass-Steagall. Then he lost a billion for Harvard, then went right on to advise Obama to give $700 billion to corrupt bankers and 70 billion to a jobs program. And now he’s advising Obama to spend nothing more on jobs. The smartest guy in the room is a moron. And by continuing to listen to these creeps Obama is doomed to be a one-term president. I won’t vote for him again. And there are ten million more where I came from.

[Robin J]

07:09 PM on 05/20/2010

While I agree that we have not yet found a solution to the problems that developed in this country for many years, and accelerated under Cheney-Bush, who do you think would be doing better? McCain has shown that he sold his once admirable soul to extremists, and Palin is just not for discussion. Please consider that we must examine our choices carefully as they arrive...would you vote for Rand Paul or Palin? I know many of us are frustrated with the lack of effective choices being made---I too am frustrated- how anyone could think that rewarding bad behavior would reduce it is beyond me. But please keep your heart and mind open and take the next round of candidates as a whole, not just any body but this guy. This guy did not cause these problems. He has not fixed everything. He has tried some things and they did not work- some of these things you and I knew would not, but hey we could have been wrong. But he is still so amazing in his attempt to bring our country out of the dark and not the light, back to being a world leader that cares for it's own when it can. We were never going to get out of Iraq and Afghanistan in 30s. The mess is going to take time, and will require experimenting with different solutions. And next election, maybe someone better will be available. But if not, please chose carefully, not reactionary.

[GAnne]

06:22 PM on 05/20/2010

Once again, the 'best and the brightest' looking out only for themselves. Not a moral fiber to be found in the whole lot of them.

[hdc77494]

06:43 PM on 05/20/2010

Don't you look out for yourself, or do you expect the government to do it for you with other people's money?

[G8R4Obama]

09:34 AM on 05/21/2010

Yes, I look out for myself, while also keeping in mind the impact my actions have on others around me, as well as realizing that I am very fortunate and that many others are not as fortunate as I am and need more assistance than I do. These institutions could use a good dose of humility and a recognition that they have an impact on their communities, for good or ill. A little less greed would have made quite a difference, on the parts of all of the players in this mess.

[abrakadabra]

06:02 PM on 05/20/2010

I am looking for the complete report, who can help me?