The Boston Globe had a terrific story this week looking at just how Harvard came to lose $1.8 billion in its cash accounts (separate from its massive endowment losses) over the past year. The tally could run even higher in the form of interest payments on bonds issued to cover the losses.
The story, by staffer Beth Healy, describes warnings from top officials about how risky some of Harvard's investment choices were becoming in recent years. At the top of the list of those who ignored many of those warnings? Harvard's then President Larry Summers, the former Treasury Secretary and current director of President Obama's National Economic Council and the White House economic team.
According to the story:
"In the Summers years, from 2001 to 2006, nothing was on auto-pilot. He was the unquestioned commander, a dominating personality with the talent to move a balkanized institution like Harvard, but also a man unafflicted, former colleagues say, with self-doubt in matters of finance.
Certainly, when it came to handling Harvard's cash account, the former US Treasury secretary had no doubts. Widely considered one of the most brilliant economists of his generation, Summers pushed to invest 100 percent of Harvard's cash with the endowment and had to be argued down to 80 percent, financial executives say. The cash account grew to $5.1 billion during his tenure, more than the entire endowment of all but a dozen or so colleges and universities."