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Larry Summers Put Harvard Near Bankruptcy. Guess Where He is Now?

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July 25, 2009 – Comments (12)

He is the top economic advisor to Barack Obama.

From Vanity Fair

A $1 billion mistake

Harvard sold those bonds because it needed cash, fast, to cover what sources say was an almost unthinkable $1 billion unrealized loss from interest-rate swaps. The swaps were put in place under former Harvard president Larry Summers in the early 2000s to protect the university against rising interest rates on all the money it had borrowed. Instead, interest rates plunged. Yet for reasons no one can seem to explain, the university simply forgot to (or chose not to) cancel its swaps. The result was a $1 billion loss.

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It's actually a very good and funny article.

Oh man this Presidency is starting to make George Bush look shrewd.  So far Obama has brought in tax evaders, banking insiders, and now a Harvard buddy ran the most prestigious university in America into the ground.  LOVE IT!!!

From Wikipedia

Summers resigned as Harvard's president in the wake of a no-confidence vote by Harvard faculty that resulted in part from Summers' conflict with Cornel West as well as a 2005 speech in which he suggested that women's under-representation in the top levels of academia is due to a "different availability of aptitude at the high end." Summers has also been criticized by some liberals for the centrist economic policies he advocated as Treasury Secretary and in later writings.[2] Since returning to government in the Obama administration, he has come under fire for his numerous financial ties to Wall Street.

I never thought in a million years that the Left would give us a President worse than GWB, but congratulations, you've almost done it.  If he invades Iran or Pakistan, we may have a new champion.

But to put this all in perspective, a dose of Rockwell:

The nature of the state — and the core of its rationale for existence — is the conviction that it stands apart from and above society, to correct the failings of the market and individuals. A presumption of superiority is at the very heart of the state, whether it is minimal or totalitarian. Who is to say when and where it should intervene? Well, think about it. If the state is inherently wiser than and superior to society, standing in judgment over what is working and what is not working, the state alone is also in a position to decide when it should intervene.

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David in Qatar

12 Comments – Post Your Own

#1) On July 25, 2009 at 12:57 PM, RonChapmanJr (92.76) wrote:

"ran the most prestigious university in America into the ground". 

Hey, hold on a second there.  :)  We aren't finished quite yet.  It will be interesting to see how much of the endowment was lost and how long it takes to recover. 

Obama gave us all the signs before the election that he was going to be a crappy president, people just chose to ignore those warning signs.  I would not be shocked to see him with a lower approval rating than Bush when it is time for him to leave office. 

ron

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#2) On July 25, 2009 at 1:35 PM, eddietheinvestor (< 20) wrote:

Obama promised us the end of "politics as usual," but all he has given us is more of the same.  Obama's political appointments have serious conflicts of interests and ties to lobbyists and some have failed to pay their taxes.  It's amazing that when Obama picked Geithner and Daschle, they decided that was the time to pay the taxes that they had owed for years.  Ambassadors are chosen based on how much they contributed to Obama's campaign.  Obama following Bush is one lousy president following another.

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#3) On July 25, 2009 at 2:02 PM, ikkyu2 (99.34) wrote:

Summers had no authority over the Harvard endowment at all, any more than Drew Gilpin Faust does.  The swaps were put in place under Jack Meyer, who was forced out in the kind of politically charged backstabbing that is just business as usual at Harvard.  Why Mohammed El-Erian didn't undo them is anyone's guess but he barely lasted a year - probably got tired of all the backbiting and backstabbing as well.  He sure ran back to PIMCO in a hurry.

They say Jack Meyer ran an ad in the WSJ, tongue-in-cheek, seeking his replacement:  "Seeking fund manager with experience running $30 billion fund.  Must be willing to take 95% pay cut; in return, all movements and actions will be publically announced and subject to oversight and control by Board of Overseers (who have no fund management experience.)"

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#4) On July 25, 2009 at 3:37 PM, AdirondackFund (< 20) wrote:

*whistling past  the graveyard*  Glad to see there are no foos here!

Larry Summers was also one of the guys who championed the repeal of Glass-Steigel.  Clearly, the fix is in.  You just have to love these guys who claim they are smarter than dead people who in their own time sought to preserve the union and not to turn it into preserves.    

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#5) On July 25, 2009 at 4:35 PM, UltraContrarian (31.23) wrote:

"Larry Summers Put Harvard Near Bankruptcy"

It's hard to understand why anyone would make a statement so obviously false.  Words have meanings, you know.

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#6) On July 25, 2009 at 6:58 PM, PrestonCheek (31.65) wrote:

What ronchapmanjr said.

How do you like him now, and it's going to get worse.

 

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#7) On July 25, 2009 at 7:03 PM, prose976 (< 20) wrote:

Regardless of how true or untrue the statement is - Obama is an abomination on this country, right along with the majority of elected officials.  They are a plague on us and should all be run out of town with pitchforks and torches.

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#8) On July 25, 2009 at 7:18 PM, dibble905 (37.21) wrote:

What in the world...

First of all, if the swaps were setup to reduce or eliminate exposure to increasing interest rates, all the swaps should have done is lock in the interest rates they had borrowed at.

Basically, if interest rates rose, the swaps would have offset the rising interest costs of their loans. The reverse is also true. If interest rates declined, the swaps would have offset the reduced interest cost of their loans.

Therefore, a derivative loss in this manner should not be categorized as if there was a net loss - surely, their loan interest costs went down as a result of the declining interest rates.

Whether Larry Summers put Harvard near bankruptcy or not, the conclusion derived from the swap losses is ridiculous - assuming the hedge did work properly (the loss was almost entirely offset by reduced interest expenses).

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#9) On July 25, 2009 at 11:20 PM, whereaminow (< 20) wrote:

RonChapmanJr,

Agreed, though the Chicken Hawk Party will probably nominate a complete a-hole like Lindsey "I was in the rear with the gear" Graham, so Obama will breeze to another four years.

esterlin,

I don't know if you've seen these, but a while back there used to be bumper stickers with Clinton's picture on them.  The caption read "No longer the worst President in history." (Obviously referring to GWB).  I think we can almost update that sticker with Bush's image.

ikkyu2,

To say the University President had no say over what happens at his university is naive. He's not an all powerful ruler, but a carte blanche pass won't be coming from me.  The guys is obviously a dipsh*t,

AdirondackFund,

I wasn't aware of that.  Thanks for adding that info.

UltraContrarian,

I realize that Summers wasn't the second shooter behind the grassy knoll, but to say he is guilt free and deserves to centrally plan economic matters for the entire nation is ridiculous, particularly since that is impossible.

You are also right to say words have meaning.  Here are some:

"Reckless spending"

As in, during Summers' tenure as Harvard University President, he engaged in the most reckless spending in its history.

"Debt servicing"

As in, now that Summers is gone, Harvard pays $571 million per year just to service the debt run up during his Presidency.

"Bankruptcy"

As in, Harvard would be bankrupt if it was not bankrolled by the U.S. government.  Like most Ivy League schools, Harvard receives a significant amount of funding from federal sources, which is why their social "junk" sciences department is 100% pro-government.  You don't bite the hand that feeds you.

PrestonCheek,

It does seem that he loses intelligence at the same rate options lose time.  

prose976,

Agreed. It's both parties.  Throw them all out.  Abolish the Federal Reserve.  End the wars.  Bring every last troop home from the 130+ countries occupied by U.S. forces.

dibble905,

Thanks for the information.  I think the point of this article wasn't to highlight the swaps - which are merely an exercise in subjective valuation - but to point out that nobody at Harvard has a freaking clue what they are doing, that Summers ran the most extravagant Presidency in Harvard history, and that there is a lot of blame to go around.  

Thanks to all for the recs and comments.

David in Qatar 

 

 

    

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#10) On July 26, 2009 at 10:33 AM, outoffocus (22.86) wrote:

never thought in a million years that the Left would give us a President worse than GWB, but congratulations, you've almost done it.

Obama gave us all the signs before the election that he was going to be a crappy president, people just chose to ignore those warning signs.

 Obama following Bush is one lousy president following another.

What this really shows me is that American Citizens do no know how to pick a president anymore. This is the core of whats wrong with the 2 party system.  For at least the last 3 elections we have simply been picking the lesser of 2 evils and crossing our fingers. Most people in this country just simply vote along party lines regardless of who is in the running.  Also, most people dont get involved in the political process until the November election day.  Up until that point they let MSNBC and FOX news do all the electing for them.

I think Obama would have been a good president if he knew how to pick people around him.  Unfortunately if you surround yourself with imcompetence, you yourself will appear incompetent.  I dont think Obama realized that when he ran for office.  I think he just thought that all the president has to do is just lead.  

I knew when he ran for office that he would be a one term president.  With all the problems in America right now, theres no way you can lead this country and be liked by the end of the first term.  So I "hoped" that he would be willing the make the unpopular decisions that would be in the best interest of this country.  But alas, hes surrounded by people who only have their self interests and conflicts of interest at heart.   

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#11) On July 27, 2009 at 11:06 AM, FleaBagger (29.46) wrote:

Ron and David (and anyone else who knows what I'm talking about) - Do you think that Obama will be unpopular with the American people in 2012? And if so, what is the salient difference between him and Roosevelt, or what is the difference between the American people today and the American people in 1936 (and 1940)?

If Obama's popularity is shrinking by the day, is that due to an improvement in the education and/or character of the American people vs. those of the 1930's, and is it a reason for hope?

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#12) On July 27, 2009 at 11:18 AM, dargus (91.64) wrote:

Hmmmmm...so the endowment is now worth only 20 billion? How will they ever cope? It is also woth putting that 1 billion number in perspective. "[The endowment] lost $8 billion between last July and October."

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