The Financial Crisis Hits Harvard

Posted by: Geoff Gloeckler on November 11, 2008

by Dan Macsai

The credit crunch has hit Harvard University, its president, Drew Gilpin Faust, said yesterday. In an e-mail to faculty, staff and students, she suggested its $36.9 billion endowment could sink as much as 30% this year (referencing a projection from Moody’s).

“We must recognize that Harvard is not invulnerable to the seismic financial shocks in the larger world,” Faust said.

Within the past few weeks, other schools have announced similar setbacks. Yesterday, Dartmouth College said it was tightening its budget after its $3.66 billion endowment lost $220 million during the Wall Street meltdown. Brown and Cornell also recently imposed hiring freezes.

But Harvard, the world’s richest university, stands to lose more than most. If the 30% projection holds, the school will lose $11 billion, or about $550 million in income. A university official familiar with its financial picture also told the Boston Globe that the Faculty of Arts and Sciences, Harvard’s largest faculty, “is confronting a loss of roughly $4.5 billion in the market value of its endowment, which would translate to a net loss of $225 million from its budget.”

In response, the source said, the university is “considering imposing a wage freeze for administrators and faculty, as well as a budget freeze on all programs.” Via e-mail, Faust confirmed that Harvard is looking for ways to cut costs across campus and will re-asses its plan to expand across the Charles River in Allston, Mass. But she remained committed to keeping tuition stable and increasing financial aid for low- and middle-income families.

“Harvard is resilient enough to weather quite a storm, but exactly what this means, we’ll have to see,” Wilfried Schmid, a math professor who also serves on the Faculty of Arts and Sciences council, told the Globe. “Harvard is still the top university, and we’ll do whatever’s necessary to stay there.”

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