Does the Financial Meltdown Vindicate Harvard’s Efforts to Build Its Endowment?

Harvard University’s mammoth endowment — which at one point totaled $36.9-billion — has, in the past few years, drawn scrutiny from members of Congress and others who said the institution should be spending more on its students.

But Jack Siegel, writing at Charity Governance, says that amid the current economic meltdown, Harvard’s decision “to accumulate for a rainy day begins to look like the prudent exercise of judgment that it has always been.”

According to The Boston Globe, Harvard may have lost as much of a third of its endowment and is now planning to reduce spending. A freeze on wages is reportedly being considered.

Mr. Siegel says he hopes that Sen. Charles Grassley, the top Republican on the Senate Finance Committee who has raised questions about Harvard’s large endowment, “will remember this downturn in the economy.”

“A deep pocket is a good thing in hard times,” says Mr. Siegel. He writes that nonprofit groups should watch legislators such as Mr. Grassley, who may try to seek additional revenue from nonprofit groups as the federal budget deficit continues to mount.

But other observers may see the actions of Harvard and other Ivy League institutions in a less favorable light than Mr. Siegel. In response a Chronicle of Higher Education article about announcements by Brown and Cornell Universities that they would impose hiring freezes because of their shrinking assets, a reader named Bill wrote that the “purpose of an endowment” is “to get you through the tough times.

“When you sit on $6-billion, it seems to me that you could use some of it to make up for the revenue that’s lost,” he wrote. “But no .. the most important thing to virtually every college president is the size of the endowment.”

How do you see the financial crisis changing calculations about charities’ endowments? Does Harvard seem wise, as Mr. Siegel says? Or is the university wrong to propose cuts, given it still has a large endowment?