A Harvard Student (re)Considers I-Banking
Posted on November 29th, 2011 in Uncategorized | 44 Comments »
A few weeks ago, Yalie Marina Keegan explained her ambivalent feelings about the flood of Yalies into investment banking.
Now, writing in the Crimson, Harvardian Peter Bozzo considers the same question: Why do so many smart, creative people, who never thought a bit about becoming a banker before coming to Harvard, end up doing just that?
His answer complements Keegan’s essay, which suggested that investment banks are just much, much better at seducing recruiting young people than many other potential employers are.
Bozzo writes that Harvard, for its part, is very, very good at funneling young people towards i-banking.
…much of the answer has to do with the resources devoted to career counseling for students whose interests point them toward occupations outside the world of finance and consulting. Certainly some students enter this world because of the financial benefits, but for others it’s simply the most visible and defined career path after graduation. Students can meet with recruiters and interview on campus; the Office of Career Services provides extensive counseling for undergraduates pursuing finance or consulting careers….
As much as she has prioritized anything, Drew Faust has emphasized a re-orientation of Harvard students away from reflexive entry into finance and towards a greater diversity of occupations. Sounds like reorienting the Office of Career Services might be a tangible way of making that happen…
44 Responses
11/29/2011 4:45 pm
There is a problem, but it is not OCS policies or practices. Harvard tends to give interviewing space to companies that show up in Cambridge wanting to hire Harvard students. Consulting firms have the resources to do that more than homeless shelters do. It is a little hard to know what equal access would mean, when it involves leveling the playing field between employers who can afford to come to Cambridge and ones that can’t. I suppose we could have a financial aid program for employers from under-resourced sectors of the economy?
There actually are some serious efforts to get more information about public service careers out there. But in general, given the problems that new college graduates are facing nationwide, I just can’t excited about the “problem” that we matriculate lots of kids who have little money and after four years lots of high-paying job are being offered to them.
I think the real problem is not with the advice being offered by career services but with the failure of the university to instill in its students a sense of civic responsibility as they move from being 18-year-olds to 22-year-olds. Locking the doors against the consulting and finance firms would be a very unfair bandaid to apply after we have had four years to educate people about the point of being educated, and have failed to do so.
RB, is it any different at Yale or Princeton?
Come to the panel on Monday! http://cyber.law.harvard.edu/events/2011/12/civiceducation
12/1/2024 8:16 am
See case 2806 on the agenda of the Cambridge Historic Commission tonight… perhaps those 19 large placards will be used to promote public service?
http://www2.cambridgema.gov/Historic/legal_chc_current.pdf
12/1/2024 8:22 am
The stance of Evelyn Hammonds reported in this article is most intriguing:
http://www.theatlanticwire.com/national/2011/11/occupy-harvard-goes-after-gingrich/45244/
12/1/2024 8:53 am
Kudos to Richard Thomas for his courageous support of the Occupy Harvard movement.
12/2/2024 9:50 pm
Ah yes, I banking.
http://dealbook.nytimes.com/2011/12/02/top-goldman-sachs-executive-departs/
12/3/2024 6:36 pm
Richard, this also seemed like the kind of story you might post about: http://www.dailymail.co.uk/news/article-2068140/Battle-deep-Angler-snares-20-stone-deadly-stingray-hour-standoff.html
12/4/2024 5:33 pm
And Professor Mankiw got it right again.
http://www.nytimes.com/2011/12/04/business/know-what-youre-protesting-economic-view.html?ref=business
12/4/2024 6:45 pm
As I understand it the students walked out for just that day, so it’s a bit specious to write (two days after the end of the semester’s classes, though he could mean next term):
“My fervent hope is that any students who are still protesting the class will return”
And the Occupy movement does seem to be trying to educate itself,
including at Harvard.
Occupy Harvard Teach-in
Wednesday, December 7th
Science Center Hall D
Free and open to the public!
3:30 Brad Epps, Professor of Romance Languages and Literatures, Harvard FAS
Fear and Power
4:00 Archon Fung, Professor of Democracy and Citizenship, Harvard Kennedy School
Why Has Inequality Grown in America? What Should We Do About It?
4:30 Andrew Ross, Professor of Social and Cultural Analysis, New York University
The Occupy Movement and Student Debt Refusal
5:00 Stephen Marglin, Professor of Economics, Harvard FAS
Heterodox Economics: Alternatives to Mankiw’s Ideolog
5:30 Richard Parker, Lecturer in Public Policy, Harvard Kennedy School
Wall Street’s Role in the European Financial Crisis
6:00 Christine Desan, Professor of Law, Harvard Law School
Booms and Busts: The Legal Dynamics of Modern MoneY
6:30 Walter Johnson, Professor of History, Harvard FAS
Slavery and Capitalism in the United States
7:00 Juliet Schor, Professor of Sociology, Boston College
Economics for the 99%
7:30 John Womack, Professor of Latin American History and Economics, Harvard FAS
At Harvard and in the USA: Vigilance, Inquiry, Alienation, and Hope
Note at 5:00:
Stephen Marglin, author of The Dismal Science: How Thinking Like An Economist Undermines Community
12/4/2024 7:24 pm
RT. Thanks for the lineup. I’m particularly interested to hear the lectures of Andrew Ross and Richard Parker.
I’m shocked that some of these topics are being covered while these two others are ignored:
1. Why Americans Have Lived Beyond Their Means For The Last Thirty Years And What We Can Do About It.
2. Congressional Waste: Why America Has Lived Beyond Its Means For The Last Thirty Years And What We Can Do About It.
In case you missed it, this is just one of the reasons we are having problems. http://www.nytimes.com/2011/12/04/health/policy/parting-shot-at-waste-by-key-obama-health-official.html?ref=us
12/4/2024 7:59 pm
May see you there, Sam, and weren’t we going to have lunch?
Sure, you could have those too. Also 3. Insufficient revenue. Why current tax policy favoring the affluent cannot be sustained and what to do about it.
I assume some of the answer to your 1. has to do with the fact that Wall St. and the banks thought it was in their interests (as it was for a while) to provide easy credit/sub prime loans, etc. where they should not have been provided.
What I didn’t see in the Mankiw column was any interest in the what we can/should do about it angle. That’s what the Occupy movement seems to me to be wanting us to think about.
Wherever this is going do you think we would be better or worse off if OWS had never happened?
12/4/2024 10:15 pm
Speaking of easy credit and sub prime loans, — Bob Rubin, please just go.
12/4/2024 10:57 pm
Well said, Harry. I gather he doesn’t really turn up much anyway, but yes, time to go. Nothing new, but try this from today’s 60 Minutes around 4:15, though the lead-in is interesting and of course the guy who tried to warn was sacked (around 7:00)
http://www.cbsnews.com/video/watch/?id=7390542n&tag=contentMain;contentAux
As Cicero would say, Quo usque tandem abutere, Robertine, patientia nostra
12/4/2024 11:12 pm
Add a ? and a ! or two to the end of my last
12/5/2024 9:12 pm
Harry,
With all due respect, the comment on your blog
“… but it was Rubin I was thinking of. He was the financial brains behind Harvard’s high-risk over-leveraged investment strategy, from which the university still has not recovered.”
is incorrect. I can’t say it any more plainly than that.
12/5/2024 10:49 pm
How about “aider and abettor”? Or do you think he was out of the loop and others were making these decisions by themselves?
12/6/2024 9:28 am
The high- risk over -leveraged started way before Bob joined The Corporation. After Bob joined, he had almost nothing to do with the investments or the investment policy;” almost” in the sense that he was a Corporation member.
I would strike the words “aider and abettor” as well as the financial brains. Citi was one thing, Glass Steagall another, but nothing with regard to Harvard investments.
12/6/2024 10:04 am
I get it. Summers became president in July 2001. Rubin joins the Corporation in April 2002. We were already so leveraged by this time (“way before” Rubin must mean before Summers) that these two former US Treasury Secretaries can’t be held responsible for the the mess. I will take it on your authority that if I tracked the growth in debt the numbers would support you, though I am not sure I would accept that being just an ordinary Corporation member gets him off the hook, given his professional expertise.
In any case, given the whole picture, do you think Rubin should still be a fiduciary of Harvard?
12/6/2024 11:50 am
Harry, you got it. It started way before Larry, but few looked at the derivatives off balance sheet. You may recall my mentioning that when I did in the late 90s, and pointed it out to President Rudenstein, he told me to “go away.”
I have no idea as to whether he should still be a fiduciary. There are very intelligent people on The Corporation, including friends of yours whom you respect. I think that if they felt Bob should not be a fiduciary, they would get him to leave.
12/6/2024 12:26 pm
How about the proliferation of debt financing of capital projects, Sam? Wouldn’t that be more like 2001-6, as in: (vel sim.) “what Harvard can do is limited only the limitations of the Faculty’s imagination” (LHS).
12/6/2024 1:03 pm
RT
The proliferation of debt financing is a very different problem and has nothing to do with what Harry was asking. But let’s go to it.
If you get rid of an asset or a prospective asset, prudence dictates that you get rid of the liability. In this case, the prospective asset was gone because The Corporation made the decision to stop the project.
Richard, tell me what you think should have happened at that point, what happened and who should be responsible for the overall financial management of a project like that.
Best,
12/6/2024 1:28 pm
Allston, right? I was actually talking about CGIS, North Yard, Medical School Buidlings (and Allston), etc. for none of which as I understand it (and I may be on unsure ground here), was the money, or at least all of the money, raised.
Widener renovation, started in 1999 (and funded), came in on time and on budget $99M.
I seem to think there was a change in thinking about capital project funding this millennium, and maybe not just at Harvard.
To your last question, the Corporation, I assume
12/6/2024 3:12 pm
You’re right. The Corporation was ultimately responsible for monitoring the balance sheet.
When Larry left and the decision was made to terminate Allston, the swaps could have been closed with a very minimal loss.
Instead, no one, no one, no one, not The President, The Corporation, The CFO or HMC paid any attention to the liability and…
On another point, as you said, there was a change in thinking about capital projects at universities. I saw it at others including my alma mater.
I don’t think there is anything wrong with taking on debt to fund projects. It happens all the time in the real world. However, when a university takes on debt to fund, it has to realize that its income in future years is mainly reliant on grants, tuition and funding from the endowment.
Grants( to some extent) are predictable and tuition is predictable, but funding from the endowment, as this university and others have seen, is not. That is why a portfolio has to have a margin of safety in the payout ratio and has to have some liquidity. The payout ratio was too high in the past (but the faculty loved it Richard) and it caused, and still is causing, all sorts of problems.
From my standpoint, the payout ratio is still much too high, although the faculty probably doesn’t see it that way.
How many times can one say it… the payout ratio as it is calculated today is much too high and is going to cause major problems sometime in the next ten years. As I see it, the investment returns going forward are not going to be anywhere near the returns of the last twenty-five years and those universities that are unwilling to face up to this will be in “bad shape.”
12/6/2024 4:31 pm
Very interesting, Did you know that the people running capital for the university believe that they pay cash for capital projects and don’t use debt…true.
12/6/2024 9:51 pm
I think the attitude, quite rightly, changed with the economic realities in c. 2008, 4:31. The current FAS Dean is on record as not planning unfunded building projects, and so reverting to the pre-Summers/Kirby attitude.
12/6/2024 10:11 pm
Sam, I will be honest. My reference to leveraging was ignorant and confused. I really was thinking about the debt financing of buildings. I have revised my post to correct the record.
Having acknowledged that … Of course it sometimes makes sense to borrow money to build things. But I don’t think Larry and the Corporation ever expected, as you suggest, to pay off those enormous debts for the Northwest Building and CGIS out of endowment payouts. So your digression about payout rates, however sensible, is beside the point of the matter Richard raised,
In the May 4, 2024 Faculty meeting, Summers was quite clear in how he wanted the faculty to approach the coming golden era: The President hoped that the Faculty, in reflecting upon these matters, would not be preoccupied with the constraints imposed by resources, for Harvard was fortunate to have many deeply loyal friends. For a compelling definition of what would provide the optimal educational experience for Harvard undergraduates, and the most attractive environment for its faculty members to carry out their missions of research and teaching, Harvard would be able to generate adequate resources. The only real limitation faced by the Faculty was the limit of its imagination.
Of course, as it turned out no donor wanted to pay for a building that had already been built. It is one thing to tell a donor that you need his money to move Harvard’s programs forward; it is another thing to tell a donor you need his money to pay off a huge debt you have already incurred in order to create activity that is already going on. If the former Treasury Secretary had any worries about the risks involved in this sort of extravagance, he was, at a minimum, ineffective in mitigating them.
Sam, I can’t quite accept that you are being forthcoming when you express ignorance about whether Rubin should still be a fiduciary of Harvard. Having acknowledged my naivete about business matters, I still can’t imagine that anyone who has watched the 60 Minutes piece and knows the gist of what happened at Citigroup would think it wise to keep him on any corporate board. Even a good Washington Rolodex isn’t worth the liability, i should think.
12/7/2024 12:11 am
Harry,
Now I understand what you really meant about the debt. Glad you corrected your blog.
I also understand your comments on how you think Larry wanted to pay off the debt (not out of endowment funds). You may well be right.
As far as not quite being forthcoming when I express ignorance (actually said ” I have no idea”) about whether Bob Rubin should be a fiduciary, I would point out that I don’t have any experience about corporate board selection. None.
I do, however, have vast experience in looking at corporate boards. More than 95% of corporate boards, in my opinion, are really at the mercy of the CEO and have very little say as to what goes on. There are exceptions of course, but in general that is unfortunately the situation. With regard to banks (and I’ve looked at hundreds and hundreds of banks over the years), I would put the figure at 99%. A bank board has no clue about what is really going on in the company.
However, current board members of The Corporation, and also the last senior fellow, have vast experience on the qualifications relating to the fitness re fiduciary responsibility (of board members). It seems to me that they, including the current President of the university, believe strongly that Bob is qualified. If that weren’t the case, why would he still be on The Corporation three years after Citi imploded? Are you saying that Bill Lee and Drew Faust and Bob Reischauer (and before that Jamie Houghton) among others do not know how to judge?
12/7/2024 6:28 am
Sam-
Is this last post sarcastic?
Of course Drew Faust isn’t fit to judge someone’s qualifications n this context. In an honest moment, she’d probably tell you that herself. She has absolutely no Wall Street experience and never evinced the slightest interest in that world. She’s a historian.
But as we’ve all seen the past few years, there are lots of reasons why people who are incompetent or have bad judgment are invited to join and remain on corporate boards. Who in the clubby world of the Harvard Corporation is going to go to Bob Rubin and say, “Bob, I look at the repeal of Glass-Steagal, and I look at Citigroup, and I look at your passionate advocacy of Larry Summers as Harvard president, and there’s really no other conclusion other than that you have terrible judgment, so it’s really time for you to go.” It’s absurd to think that anyone on the Corporation is going to rock the boat thusly.
12/7/2024 6:59 am
All of which makes the Winokur case so interesting. He is probably the better man, and resigned out of selfless respect for the institution.
12/7/2024 8:47 am
Richard.
I’m really surprised that you do not think Drew Faust is fit to judge someone’s qualifications in this context.
We disagree.
Harry, I know both Winokur and Rubin. You have no idea, nor do I, as to why Pug resigned.
The Citi and Enron situations were entirely different. One was a massive corporate screwup, the other was a fraud.
What do you think about directors who were involved in the screwup still being on the board? One, Dick Parsons, a really great person whom I first met 30 years or so ago, is the Chair.
Qualified to lead or not?
12/7/2024 9:14 am
Sam,
You seem to have forgotten that the memo that started this whole thread was addressed to Rubin. One way to characterize the 60 Minutes piece was that “screwup” might not be the most apt term to describe what happened at Citi.
12/7/2024 9:44 am
Harry,
I’m thick. What memo?
I did not see the 60 minutes piece on Citi. I usually don’t only like to get “the gist” of things, particularly when it is something I know a lot about. Am sure 60 minutes has slanted it the way the program usually slants things.
I have read the voluminous Citi filings; have followed the company for a long, long time, back to the Wriston days of the 70s. Had I been a shareholder, I would have been very, very unhappy with what went on. Totally pissed. A total corporate screwup of the worst kind. Chuck Prince’s comments that we have to keep on dancing until the music stops was a great tipoff as to the excesses that were going on. As far as anything else, well I guess what 60 minutes said, whatever that was, is the truth (sarcasm).
12/7/2024 10:25 am
RT - understood re FAS. However Central has no idea what the situation is between funding and spending - completely and functionally illiterate when it understanding the financial requirements of capital projects, not just new buildings. Gobsmacked at the lack of appreciation.
12/7/2024 11:52 am
Sam—No disrespect intended to Drew here, but why would she be qualified to judge the merits of a former Treasury secretary in terms of specific investment advice? It’s not her field.
I’d also point out that virtually every comment you write is informed by the perspective that people who are not financial professionals rarely understand the intricacies of finance.
That’s a perfectly legitimate argument to make, and I’m not sure why you would abandon it simply because Drew Faust is involved.
12/7/2024 12:02 pm
It’s worth a look, Sam.
http://www.cbsnews.com/video/watch/?id=7390542n&tag=contentMain;contentAux
12/7/2024 12:08 pm
Richard,
Gee, I thought for some reason that I was writing about the ability of Drew Faust to make a decision as to “the qualifications relating to the fitness re fiduciary responsibility (of board members).”
I had no idea that it was “why would she be qualified to judge the merits of a former Treasury secretary in terms of specific investment advice?”
The ability to judge whether someone can make an intelligent decision as to someone’s “fitness re fiduciary responsibility” ( (Drew Faust most certainly can), is far different from vetting a former Treasury secretary in terms of specific investment advice (she probably couldn’t).
12/7/2024 12:23 pm
I suspected we were talking about different terms, Sam-that’s why I defined mine.
In fact, I don’t think Drew is really capable of judging someone’s fitness re fiduciary responsibility, in the sense that I don’t think she has the desire or the clout to do anything about it if she felt that someone was not qualified. I would be genuinely surprised if Drew had ever undertaken this intellectual exercise (with practical consequences) regarding Bob Rubin. She’d probably consider how picking that fight would affect her own political capital and then leave it alone. Which is why Drew Faust is the president the Corporation wanted—someone who won’t rock the boat. Even if she had the desire to, which I sincerely doubt, she doesn’t have the stature to take on Bob Rubin…. so whatever feelings she may have about his merits simply don’t matter.
12/7/2024 12:43 pm
Wow Richard. That’s quite a statement about Drew Faust.
I disagree with you.. totally disagree.
Best,
12/7/2024 1:42 pm
Sam-I would be delighted to be proved wrong. But yes, that’s how I feel, and I don’t even necessarily think it’s Drew’s fault—it’s somewhat in the nature of being an insider candidate, valued for her skill at not making headlines, who was chosen partly because of her ability to remain on good terms with both Larry Summers’ critics and Summers herself. But to be honest, I think that Drew’s relationship with power has always been that of someone who accrues power by not threatening power, while at the same time being highly competent and skilled at internal politics. Remember, Drew’s mandate above all else was: Get Harvard out of the press. She’s succeeded admirably. I would love to see signs that she’s grown in the job and is ready to assert herself independent of the situation which gave birth to her presidency—but they don’t exist. DGF is 64 now—though you won’t find that fact on her official bio page. She’ll ride out the job for another six years, traveling around the world as her salary creeps toward $2 million a year, and when she retires, the world will applaud her historic status as Harvard’s first woman president. Voila—there’s the game plan. It is not in her nature to pick a fight that might damage her image. Can you find a single record of this in her history? But look where her approach has gotten her—why on earth would she change now?
12/7/2024 1:43 pm
Whoops! Make that “Summers himself.” Wasn’t trying to start a rumor there.
12/7/2024 3:56 pm
I assume “Richard” is RB not RT?
12/7/2024 6:01 pm
It is indeed, Harry. RT is far too responsible to much such claims!
12/7/2024 11:05 pm
Yes! I’m always just RT
2/27/2014 12:07 am
provigil pills for sale, provigil price
6/24/2014 7:30 pm
buy online generic isotretinoin where can i buy accutane online