The Yalie Who Could Save Us Billions

Photo: Chris Arnold, NPR

As if the Wall Street bailout couldn't get more obscene, Wall Street executives are now lobbying for huge fees from the government to manage some of the assets they're selling to the government; in other words, the taxpayer will take the risk, but Wall Street will get the fees. From The New York Times:

Even as policy makers worked on details of a $700 billion bailout of the financial industry, Wall Street began looking for ways to profit from it... Other firms hope to be hired to manage the assets that Treasury acquires, a job that could earn them $1 billion a year, even if they charged fees that were modest by industry standards. Among them are the asset management companies Pimco and BlackRock. Morgan Stanley, the investment bank, is also vying for the work.

Paying Wall Street exorbitant (if volume discounted) fees is something only a true crony-capitalist could come up with. Paulson, Bernanke, and probably even Bush know that there is another model that works extremely well: the relatively modestly paid money managers employed by major educational institutions and pension funds.

The leader of this bunch is Yale's David Swensen, who has delivered an average 16.3 return on the university's endowment since he started running it 20 years ago -- outstripping every other university endowment and almost all private investment funds, growing it during that time from $1.3 billion to $22 billion.

Here's the kicker: Swensen works for $1.3 million a year (a very modest amount when you consider that someone of his talent could be making tens or even hundreds of millions working in the private sector). Swensen has said that he wants to stay at Yale for the remainder of his career, but I suspect he could be persuaded to change his mind if we was reminded of Yale's famous slogan: For God, for Country, and for Yale.

As much as we Yalies love our alma mater, we know what comes first. Swensen might even be willing to serve as a "dollar-a-year" man, working pro-bono for the greater good (though paying him a few million to save us billion in fees might not be such a bad idea either). So, Mr. Paulson, if you're really interested in doing something other than purely making your Wall Street buddies even richer, it might be time to pick up the phone and call New Haven.

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Comments

[schatsie]

Excellent suggestion... I really do like it and would consider applying for a position, the others all seem to ideological (sure we will take care of you, after we take care of ourselves).. or naive..

This is going to be very complicated and Wall Street has done it's best to dump this without any recourse or responsibility... We need for Paulson and Cox to resign NOW, they were both watching this smolder and then Voila, credit froze up and now in the last few months, Wall Street needs a massive BAILOUT..

WATCH THIS VERY CLOSELY,,,OVERSIGHT DID NOT WORK AT THE SEC, and what makes them think that another Republican lead Oversight committee would work...

[bkessar]

This recommendation sounds (almost) too good to be true, I've been disturbed by the idea, that Wall St would be paid to manage the same assets that need buying by the Treasury; so that they make money twice on financial venture they caused to fail. Out of greed. The lobbyists are tripping over each other, to be chosen by Paulson to price and manage these failed mortgage securities.
What was really appalling, was hearing Paulson tell the Congress, that so many businesses, who want to sell mortgagae securites that no one else but the Gov't will buy, would 'reject' having their compensation cut: that would be too 'punitive'. And he didn't want to discourage them from participating in the 'bailout'. SO Let Them Go Bankrupt, if they won't have their bonuses cut. How dare they demand bonues, and golden parachute contracts being fulfilled, after driving their companies to the brink of bankruptcy, anyway?

[SamThornton]

If this institutionalized rape of the Treasury goes through, no amount of safeguards or fine tuning will be sufficient to stop the clever thievery at which the Wall Street gang excels. This is the ultimate ploy to destroy non-defense spending by the Federal government, and our so-called representatives are jostling to be first to go over the edge. It's the death of the idea of representative Democracy in this country. With representatives as venal and ignorant as this bunch, we have a system that clearly no longer works.