Harvard Totally "Fucked" As Goldman Sachs Alum Flees

While people are focused on the AIG story and the Sarah Palin story in the August issue of Vanity Fair, there's actually something even more amazing in it—a Nina Munk piece on Harvard's endowment. It is only online in "preview" form, but we have something called a "subscription."

What's going on up at the old school? "Radical change is coming to Harvard. Fewer professors, for one thing. Fewer teaching assistants, janitors and support staff. Shuttered libraries." The list goes on. At Harvard! Which is, to quote a hedge fund manager who "counts Harvard among his investors," totally "fucked."

What went wrong, according to Munk? Ridiculous, ill-advised expansion in this decade, of 6.2 million square feet, at an outrageous, unbelievable cost of $4.3 billion. Also, their annual budget, which was $2.1 billion in 1998, was, ten years later, $3.5 billion. Spendy! Oh and also any student whose parents earn less than $180,000 a year pays no more than 10% of tuition.

Harvard's endowment was an astounding $36.9 billion one year ago. Its debt now is $6 billion, which, Munk calculates, means that Harvard must pay $517 million a year until 2038 to pay it off.

There is a barely-mentioned component of the piece, and it has to do with Edward Forst. Forst was, let's say, "graduated" from Goldman Sachs (which is to say, he went through a process of sudden promotion, with, most likely, a one-time extra-massive bonus, and then "left" the company). This is how Goldman Sachs moves on the people who need to be paid off for having done their heavy lifting—or how it gets rid of people it just doesn't want any more. Forst was elevated to co-head of the Investment Management Division at Goldman just back in November of 2007, and then left in 2008, "for" Harvard. He is in his late 40s.

Forst's title at Harvard was executive vice president. His job was to "help supervise the $34.9 billion endowment," wrote Bloomberg News at the time—and he was also to sit on the board of the Harvard Management Company. Now, with the endowment in ruins, he will leave Harvard in a few weeks. Everyone left behind is looking for someone to blame; Forst is slinking out quietly after something like a year on the job. Huh!

http://www.theawl.com/2009/07/harvard-totally-fucked-as-goldman-sachs-alum-flees

Harvard was apparently known for their high risk portfolio, and now they have risked it right into the dumper.

Of course, we have nothing to worry about, because the trash at Goldman Sachs et al like to buy respectability from places like Harvard bby making donations, except it now appears that "donation" might have a different meaning when we're talking about people conspiring to massive transfers of wealth from the US tax payer to thieves in high places.

like John Maynard Keynes:

remember this story from earlier in the year.

Harvard Derivatives Whiz Fired For Emailing Larry Summers About "Frightening" Trades?

http://tpmmuckraker.talkingpointsmemo.com/2009/04/larry_summers_ignored_frightening_trading_practice.php


"A former quantitative analyst at Harvard Management Company, the university's once-vaunted endowment manager, tells the Harvard Crimson she was fired for voicing concern to then-university president Larry Summers' chief of staff about the money manager's risky use of derivatives the traders didn't understand.

The episode dates back to 2002, when analyst Iris Mack, whose website identifies her as the second African American woman to earn a Harvard PhD. in applied math (and someone who likes primary colors) joined the much-venerated Harvard Management Company, which invests the university's then $18 billion endowment, to find what she termed a "frightening" state of affairs...


If Mack's allegations are true Harvard certainly paid the price for its recklessness: Summers' swaps sowed the seeds for a financial disaster at HMC:

....Mack's boss at HMC, Jack Meyer, parted ways with the university in 2005. His bets were still paying off but his relationship with Summers had reportedly cooled -- among other things, over alumni outcry led by the university's Class of 1969 over the hedge fund-sized bonuses being awarded to employees of a supposed nonprofit. But if there's anything we've learned from the past year, gratuitous compensation and gratuitous risk go hand-in-hand..."

Edward C. Forst named Harvard executive vice president
Edward C. Forst, global head of the Investment Management Division for Goldman, Sachs & Co. and a member of the firm's Management Committee, will become Harvard University's first executive vice president, effective September 1, Harvard President Drew Faust announced today (June 18).

As executive vice president, Forst will be the principal ranking operating officer at the University. In this newly created position, Forst will serve as a senior adviser to the president and will lead the development of administrative capacity in new areas that cross School boundaries or traditional administrative units. He will oversee the financial, administrative, and human resources functions, and administrative components of information technology for the central administration. He also will serve as a member of the board of the Harvard Management Company, which manages the University's endowment.
http://www.news.harvard.edu/gazette/2008/07.24/99-forst.html

The guy who made the "Harvard is fucked" comment is Munk...

What went wrong, according to Munk? Ridiculous, ill-advised expansion in this decade, of 6.2 million square feet, at an outrageous, unbelievable cost of $4.3 billion. Also, their annual budget, which was $2.1 billion in 1998, was, ten years later, $3.5 billion. Spendy! Oh and also any student whose parents earn less than $180,000 a year pays no more than 10% of tuition.

This country has been run into the ground by Harvard and Yale graduates. Which means that they're teaching the wrong things, or they have no quality control over their graduates, or (my preferred choice) both.

Bring them down to the level of, say, the University of Missouri - Rolla. A tiny school in a Podunk town. Unless and until they start producing graduates of some quality, let 'em run car washes for funds.

They're union busters anyway. I'm more concerned about state universities than that Circus of Privilege.

brought the house down?

http://www.laineygossip.com/JK_Rowling_out_for_dinner_before_premiere_night_for_Harry_Potter_and_the_Half_Blood_Prince.aspx

I've never been quite sure if Catherine Austin Fitts' stories about corruption at HUD can be taken seriously or are just tinfoil, but she brings Harvard into them. http://www.dunwalke.com/gideon/fhalist.htm

And then there was that strange business about Harvard's investment in Harken Oil, back when Bush was involved with the company.

http://unansweredquestions.org/index.php/2002/07/19/uq-wire-harvards-millions-poured-into-harken/

Harvard fund poured millions into Bush-connected oil firm
Family connection raised as factor
By Michael Kranish, Globe Staff, 7/18/2002
The Boston Globe

WASHINGTON - As a congressional candidate in the Texas oil patch in the late 1970s, the last thing George W. Bush wanted to mention to the rural electorate was his postgraduate degree from Harvard. But when Bush later was involved in struggling Harken Energy Corp., Harvard Management Co. poured a total of $30 million into Harken, keeping it afloat and helping sustain Bush’s career.

The investment in Harken by Harvard Management, an independent fund that manages the university’s endowment, has received far less notice than the controversy about whether Bush used inside knowledge in 1990 to sell stock in the firm at a profit. But the money from Harvard, beginning in 1986, was crucial, at one point giving the fund one-third control of Harken. That was such a large stake that a key member of Harvard Management’s investment team acquired stock in the firm on his own and was invited to join Bush on Harken’s board of directors.

All these years later, the question remains: What did the investment arm of the nation’s most prestigious university see in a troubled little oil company from Texas that justified such attention and a $30 million investment? . . .

Michael Eisenson, the former Harvard official who dealt directly with the Harken investment, declined requests for an interview. Eisenson, now the chief executive of Charlesbank Capital Partners in Boston, said through a spokeswoman that he could not talk about the specifics of the Harken deal because of restrictions placed on him by Harvard Management.


http://www.prorev.com/bush3.htm

HARKEN

GLENN R. SIMPSON, WALL STREET JOURNAL - When the small company that helped make George W. Bush a multimillionaire verged on bankruptcy in 1990, newly unearthed documents show an unlikely financial archangel came to the rescue: Harvard University. It long has been known that the school's endowment arm, Harvard Management Co., was a major investor in Harken Energy Corp. But the documents reveal two heretofore little-noticed deals, both endorsed by Mr. Bush, to allow the Texas firm to stave off creditors. One, critical to the company's survival, involved a partnership used to move troubled assets and large debts off the company's balance sheet -- much like the controversial investments that Enron Corp. set up before it filed for bankruptcy-court protection. At the time, one of the Harvard endowment's most influential board members was a political supporter of then-President George H.W. Bush, the current president's father. One result of the deal: The current president avoided damaging his credibility as a businessman. Unlike many of Enron's deals, Harken disclosed its transactions to investors and the Securities and Exchange Commission and complied with accounting rules. Mr. Bush didn't profit personally from the subsequent boost in Harken's stock because he already had sold most of his shares to fund a lucrative investment in the Texas Rangers baseball team.

The partnership deal is notable in the context of President Bush's drive to reform corporate standards in response to a string of accounting scandals. The Harken deal was designed to raise money without incurring new debt or selling stock. It did so by exploiting "a fundamental weakness in accounting rules" by moving the deal off its balance sheet, said Rice University accounting expert Dala Bharan, who reviewed the transactions for The Wall Street Journal.

TIMOTHY J. BURGER, NEW YORK DAILY NEWS - Harken Energy Corp. set up an offshore subsidiary in the Cayman Islands tax haven while President Bush sat on Harken's board of directors in 1989, the Daily News has learned. The revelation comes as Republican lawmakers are roundly criticizing the practice of U.S. companies setting up offshore subsidiaries, usually to skirt American disclosure laws or corporate income taxes on foreign income. Even White House spokesman Ari Fleischer condemned the tactic yesterday, saying, "The President is concerned about corporations in America who take advantage, set up operations outside of America, in an effort to lower their taxes." A spokesman for Bush said the offshore company did not save any taxes because it failed to find oil or make a profit. Harken registered Harken Bahrain Oil Co. on Sept. 1, 1989, according to Cayman Islands government documents.

Who knew, other than the residents of Allston who kept protesting it?