As you know, Larry Summers is Director of the White House National Economic Council, where he has advocated tax cuts instead of spending on infrastructure. Obama trusts Summers to get us out of our current mess.
Not long ago, Summers was the President of Harvard, which once had a formidable $18 billion endowment. A lot of that money is gone now, because it was invested in derivatives. Way back in 2002, an analyst named Iris Mack -- then a member of the Harvard Management Company -- voiced concern to an aide to Summers about these investments, which struck her as far too risky.
She was fired.
5 comments:
So Summers 'fired' her? Actually she resigned, which was reasonable because she did not agree with her employer's policies.
Lots of things happened that year: not all of them can be blamed on Summers.
So far, this story is more an embarrassing appearance than much of factual knock on Summers. Apparently she was fired by the head of the group that was doing the investing management for Harvard, one Mr. Meyer, not by Summers.
The Crimson reporting doesn't much involve Summers, other than in a possible betrayal of confidence of this whistleblower by his chief of staff who had allegedly promised that the critical e-mail would be kept confidential. It's fair to infer that Summers knew and directed his COS to make it available to Meyer, although that is not directly claimed in this report. The report does not allege that Summer controlled this action, nor even that he voted for the action as one member of the board.
How much was the 6-year later loss of 30% due to derivative trading, considering that if they had held common stock, it would have been down 40-50%?
This article doesn't come close to answering that question. And the 6-year performance from that point on was so strong and beyond the average returns for endowments that even given the 30% loss, the total return remained very strong regardless, almost a backhand admission that the strategy was good, not ruinous.
XI
Maybe Larry didn't trust her math skills.Lori
There's not enough information in either the Crimson article or the Boston Globe article (not cited on the blog) to evaluate the success or failure of the endowment's investment strategy. As a previous commenter suggested, a lot of us would be happy to only be dealing with a 22% drop right now. All that's really clear is that Summers either does not understand the meaning of the word "confidential" or is incapable of honoring a promise of confidentiality.
Somewhat O/T, but a reminder of a similar situation with Brooksley Born at the CFTC also involving Summers.
http://www.stanfordalumni.org/news/magazine/2009/marapr/features/born.html
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