Summers lost Harvard billions
By Kevin Connor • Nov 29, 2009 at 12:27 EST
The Boston Globe has an excellent piece on Larry Summers’ mismanagement of Harvard’s finances today. As president from 2001 to 2006, Summers overstepped his presidential duties and pushed most of the university‘s cash into the market, against the frantic warnings of his investment chiefs. These moves lost Harvard close to $2 billion.
The article opens with a debate, Summers’ preferred mode of personal interaction:
It happened at least once a year, every year. In a roomful of a dozen Harvard University financial officials, Jack Meyer, the hugely successful head of Harvard’s endowment, and Lawrence Summers, then the school’s president, would face off in a heated debate. The topic: cash and how the university was managing – or mismanaging – its basic operating funds.
Through the first half of this decade, Meyer repeatedly warned Summers and other Harvard officials that the school was being too aggressive with billions of dollars in cash, according to people present for the discussions, investing almost all of it with the endowment’s risky mix of stocks, bonds, hedge funds, and private equity. Meyer’s successor, Mohamed El-Erian, would later sound the same warnings to Summers, and to Harvard financial staff and board members.
Summers essentially makes Wall Street look both smart and humble. An incredible feat!
The entire article is well worth a read.
Summers works two floors above the Oval Office right now. You have to wonder: what kinds of debates is he (brilliantly) winning right now?
Two noteworthy stories chronicling the hegemonic position of the Goldman Sachs Group appeared last week. The first was a scoop by The Guardian about an internal announcement regarding the record bonuses that Goldman will pay at the end of 2009, assuming that the company’s year-end profit projections are borne out. The second piece was a 10-page Rolling Stone spread by Matt Taibbi elucidating Goldman’s central role in every major economic bubble since the dawn of bubble economics.
On Sunday, The New York Times ran “Bill Gross of Pimco is on Treasury’s Speed-Dial,” a lengthy article on the cozy relations between PIMCO executives Bill Gross and Mohamed El-Erian and the Treasury Department. The piece had the confessional tone that is commonplace these days on the Times business page. To seek absolution for rapaciously self-interested actions, executives seem eager to tell all to Times reporters. Once the conflicts of interest and manipulation are out in the open, they lose their shock factor and can continue unabated.
The article traced the origin of PPIP to El-Erian, a much-hyped bond manager and emerging markets specialist. Although El-Erian’s plan for shedding toxic assets wasn’t adopted immediately, Treasury Secretary Timothy Geithner eventually warmed to it, and El-Erian and Gross helped shape it at every step. Now PIMCO appears first in line to benefit from the sweet terms they drew up for the government, should any bank ever decide to participate in the program.