Larry Summers got involved in a risky investment strategy that lost Harvard University $1.8 billion dollars. Given Summers's critical placement in President Obama's economic team, his putative sins as president of the university are drawing scrutiny. Is Summers really responsible for this breathtaking loss of money, and should taxpayers be worried? Here are the thoughts of top business bloggers as they try to untangle the matter:
- Get a Load of This Guy Felix Salmon was one of the first to the table with some withering comments regarding Summers's arrogance: "Most people," he begins, who have "hired a legendary fund manager on a multi-million-dollar salary to look after investments and liquidity, would listen to the advice of that person." What Summers wanted to do, writes Salmon--"invest 100% of the university's cash in the endowment," later talked down to 80%--was ridiculous: "the Harvard endowment was never designed as a place to invest sums of cash which might be needed immediately." He also notes, for those keeping track, that "there's no indication ... of any kind of apology from Summers."
- More Harvard than Summers? The Big Picture's Marion Maneker points out, reviewing the Globe story, that "the real fault lies with the school's leadership after Summers resigned." Summers may have been a bit "aggressive" with the cash, but the university kept with the risky investment strategy long after Summers had left.
- Actually, Harvard Came Out Ahead Responding to Felix Salmon, economist Brad DeLong crunches some numbers and figures out that Harvard got a 21% return on its investments between 2001 and 2007, suggesting that Summers may not have been as criminally negligent as some might think.
- No, It Didn't Former Goldman Sachs employee Yves Smith dismisses this notion, pointing out that Harvard might not have "committed to a long-term building program," among other expenses, had it been investing "more conservatively." The current budget cuts due to the losses, she says, "are large and wide-ranging," with no more hot breakfasts in the undergraduate dining halls. She's also none too impressed with those blaming Harvard at large for the losses, rather than Summers.
- Fantastic--This Is the Guy Running Our Economy Whether Harvard adequately re-strategized after Summers's departure isn't the relevant matter to most. Glenn Reynolds succinctly articulates the blogging world's general discomfort at the Globe story: "But don't worry, now Larry Summers is playing with your money."