Relevant and even prescient commentary on news, politics and the economy.

La cupidité

If I’m reading this link from my usual news source correctly, Joseph Stiglitz’s new book Freefall: America, Free Markets, and the Sinking of the World Economy is being sold in France under the title Le triomphe de la cupidité (The Triumph of Greed).

The sole B&N customer review so far is a confused jumble:

If you take away the authors attempts to sell the need for big government and socialism it is a excellent book on present problems in the financial markets. He shows how we are living beyond our means and that in the future our living standard will probably go down. He does a excellent job at examining the large banks failures and the need for regulations to protect the public from the large banks greed.

If you take away the need for big government, you get the need for more regulation. If you take away the need to control large bank failures, you get large bank failures produced by excess risk (“living beyond our means” = “privatize the profits, socialize the risks”).

Fifteen years ago, everyone coming out of Business School was talking about how they learned about “risk.” While it is true that those people are not running large financial institutions, they are starting to reach upper management levels. So it’s possible that “smart guys started working on Wall Street” won’t be the problem next time. (h/t Floyd Norris, again)

They might get it right the next time.

Is that the way to bet?

Happy cupidité Valentine’s Day.

*For the record, I was still six years away from entering it, eight from graduation. Never let it be said I was a First Mover.

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About funding education

From Rdan’s Sallie Mae post I got the urge to hunt because vtcodger mentioned greed.

Greed? Yes, I have recently learned that one person who works to manage the endowment fund for Harvard got a bonus for last year performance that was less than the year before of $2M. Imagine that! The endowment is so large and produced so much, that $2m could be handed out like a tip. (Of course, this is second hand knowledge.)

So let us see how Harvard is doing.
The fund is currently valued at $34.9 Billion.

Harvard University’s endowment earned a 23.0 percent return during the fiscal year ending June 30, 2007.
From fiscal 2001 to fiscal 2007, for example, scholarships and awards to students from University funds increased by over 94 percent, to $302 million from $156 million. Endowment dollars distributed for overall Harvard programs rose more than 70percent during the same period, from $615 million to $1.04 billion.

$1.04 billion or 3%. Only 3%. Yet:
Since its inception, HMC has averaged an annualized rate of return of 13.3 percent.

The industry average is: the median for the 151 large institutional funds as measured by the Trust Universe Comparison Service (17.7 percent), as well as the 20.9 percent that marks the top 5 percentile.

Granted, I’m sure and as they say there are restrictions. However, Harvard says they are trying to spend 5% annually. They note tuition only covers 2/3 of the cost. Well if they really tried to get to that 5%, they would have another $705 million for it. At their tuition of $47,215, that’s 14,932 students. The total enrollemnt is only 25,017 including part-timers.


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