The Los Angeles Times ran an opinion piece today written by Anthony W. Marx, the president of Amherst College, in which he eloquently defended independent decision-making by independent colleges. In the past year or so, Congress has had its knickers in a twist about the rising value of college endowments at some private colleges–even as tuition rates have continued to rise.
Now with the economic downturn, I expect the outrage about balooning college endowments will subside–because they’re not balooning very much right now. Up until the past few weeks, the “American Way” has been characterized by debt burdens, excessive leverage, and wanton spending. Our collective profligacy has caught up with us, and the immediate future doesn’t appear very rosy.
If we remember Aesop’s fable of the grasshopper and the ants, we can think of Congress and the rest of the outraged public (or, the grasshoppers) complaining that private colleges (the ants) were unnecessarily stuffing their mattresses with investments. Well, winter has now come, and the ants are sighing with relief that they made some good decisions.
Congressional grasshoppers, left out in the cold, how have to turn their attention to the messes they neglected, rather than continuing to complain about the apparent wisdom of the ants. Most private colleges have weathered economic storms for decades, if not centuries in some cases. While some colleges have gone under (and a few of the more spenthrift colleges may lose their shirts in this downturn), we don’t hear about Harvard or Yale or Vanderbilt going belly up like AIG, Lehman Brothers, or Washington Mutual.
Undoubtedly well-endowed colleges and universities will feel the economic pain of the current crisis, and while many (like Amherst) will try to continue to offer large financial aid packages to those who need them. It will be interesting to see, however, if all of them will be able to make good on every pledge they made a few months ago when their endowments wer at record highs. If university endowments have shrunk by 40% in the past year (as has the average porfolio), we may see some colleges backtracking.
Ants will be ants.
Mark Montgomery
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