Educational Endowments and the Financial Crisis

Social Costs and Systemic Risks in the Shadow Banking System

Joshua Humphreys

Contributors: Christi Electris, Yewande Fapohunda, Justin Filosa, James Goldstein, Katie Grace

May 2010

This study of six New England college endowments during the financial crisis of 2007-2009 identifies deep-seated problems with the influential, high-risk “Endowment Model of Investing,” pioneered by wealthy schools such as Harvard and Yale. It analyzes endowments’ contributions to systemic risks in the “shadow banking system” and estimates the social costs of endowment losses on local communities and regional economies in the Boston metropolitan region and the Upper Valley of New Hampshire and eastern Vermont.

“[One] of the most trenchant, clear reports on the foibles of higher education finance since The Jungle muckracker Upton Sinclair self-published The Goose-Step: A Study of American Higher Education in 1922.”

–Wick Sloane in Inside Higher Ed

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