There has been much collateral damage from the sub-prime crisis. And
there is more in the offing. Much of this is just an outgrowth of
the banking profession's obsession with getting people into debt, even
those who are unqualified...and the devil will pay. Some of this
damage, however, is truly startling, its origins obscure and its
repair elusive.
For ten days now, the Boston Globe has been full of articles on the financial collapse
of the 26 year-old Massachusetts Educational Financing Authority which
announced, deep in mid-summer and at the very dawn of return-to-school-
days, that it will not be able to provide anybody with any college
loans this year. Deval Patrick, who became governor before the
economic calamity that has hit the country was clearly seen ran on a
winning spend-spend platform, has been heroically trying to save
middle class and lower middle class students from the deeds of the
financiers. But the fact is that the MEFA is down and out, without
cash itself and without credit, too.
Quite naturally, the governor has been appealing to the state pension
fund to invest in the student loan authority. But, I am afraid, this
will only imperil the pensions of other workers down the line. The
solution is obvious but it will not work.
The next obvious remedy was Harvard, and I don't know whether the
President and Fellows of Harvard College will be able to protect Drew
Faust from her and everybody else's instincts to put the university's
endowment up for raking. Yes, Harvard is an extraordinarily rich
institution, like Stanford and Princeton, Yale and Amherst (to pick on
another Massachusetts institution). But its endowment also funds a
diverse program of undergraduate study, graduate study in a hundred
degrees, professional schools, research in the sciences, social
sciences, humanities and as many cross-disciplinary fields that you or
I could imagine.
It is especially onerous to burden Harvard and other such wealthy
educational centers with the grim results of policies (both financial
and academic) for which they had and have no responsibility. Why not
burden Citigroup and Bear Stearns, Merrill and Lehman instead?
These, after all, had more to do with the collapse of the market than
the treasurer of Harvard College.