Harvard University is reeling from a uniquely bad business gamble. The school lost at least $500 million when it bet that interest rates would rise. The money went to investment banks this year due to $1.1 billion of interest-rate swaps intended to hedge variable-rate debt for capital projects. The loss will likely grow considerably. It also agreed to pay $425 million over 30 to 40 years to offset an additional $764 million in swaps.
Harvard sold $2.5 billion in bonds to pay for the “swap exit.” This comes with the school’s largest record loss of endowment in 40 years.
This ruinous economic planning is being blamed in part on former Harvard President Lawrence Summers. But rest assured, he is no longer Harvard President. President Obama made him the director of the National Economic Council.
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