Crimson's Cash?

I just finished a Robert B. Parker book, called "Bad Business," that deals fictionally with the financial solvency of a energy brokerage. It's undoubtedly based on the Enron scandal, but it got me thinking about a few things here at Harvard.

It's a funny thing. We've got an endowment up around $26 billion (that's "billion" with a "b") but we're in some dire financial straits. Our former president -- Larry Summers stepped down this month -- proposed a brazen plan when he first came on board. We were to build a great big new campus across the Charles River in Allston. He announced plans, hired architects and contractors, and plotted out a vigorous capital campaign to pay for it all.

Then, of course, he stuck his foot in his mouth. He made some really pig-headed comments about women in science in front of a group of, well, women in science. Then he publicly humiliated and abraded a very popular African American studies professor, befriended a corrupt economist, and cheesed off a host of egotistical but clout-ful professors.

The big result of all this, of course, was his resignation. But nearly overlooked and yet far more important in my opinion is this: he never launched the capital campaign to pay for Allston construction. And now the bills are rolling in.

Big deal, right? Billions in the bank, right? Barely scratch the endowment. Heck, Harvard's been making double-digit returns on its investments for the past 10 years! Won't notice a thing.

I'm not so sure.

I think that Harvard might be seriously strapped for cash. I think that the endowment is very heavily invested in long term payouts and, more importantly, equity trusts. Liquidating the long term stuff now wouldn't cover the cost of the initial investment. And equity trust are fictional money stores -- listed as capital but really based on the continued investments of confident investors. So long as they keep investing, that is.

I also suspect that the people who know the true state of Harvard's finances -- their top-ranked in house investors -- are getting paid exorbitant bonuses (often over $10 million a year per fund manager) not to reward their investing skills but to purchase their silence. Why else would these folks, on their departure, be granted significant Harvard investments in order to set up and maintain their own investment firms?

Or maybe I'm just paranoid.