Dear Harvard: You Have $50 Billion in the Bank - Use It Now

In a statement released yesterday, the Administration announced that it would be undertaking …

“… a comprehensive review of federal contracts and grants at Harvard University and its affiliates … as part of the ongoing efforts of the Joint Task Force to Combat Anti-Semitism. The Task Force will review the more than $255.6 million in contracts between Harvard University, its affiliates and the Federal Government. The review also includes the more than $8.7 billion in multi-year grant commitments to Harvard University and its affiliates to ensure the university is in compliance with federal regulations, including its civil rights responsibilities. Today’s actions by the Task Force follow a similar ongoing review of Columbia University. That review led to Columbia agreeing to comply with 9 preconditions for further negotiations regarding a return of canceled federal funds.”

[NB:  While many people have been describing Columbia as having "settled" its dispute with the Administration, this announcement makes clear that the Administration views the agreement with Columbia as having settled only the "preconditions for further negotiations regarding a return of canceled federal funds." I.e., "You're not off the hook yet, and we have not yet decided to 'return … canceled federal funds'"]

These actions also follow a series of parallel actions targeting a number of other universities (U. Penn, Georgetown Univ.) as well as a number of large for-profit law firms (Paul Weiss, Perkins Coie, Covington and Burling, Skadden Arps, WilmerHale), similarly threatening each of them with a cut-off of federal money (and, in the firms’ case, a denial of access to federal agencies on behalf of their clients).

One can understand the fear that this has generated for law firms and for universities.  Law firms – unlike universities – don’t have endowments, and they are, generally speaking, vulnerable to the kind of severe financial shock that Trump’s action might cause them.  Some have caved in rather quickly, because of that. [Some - including Jenner and Block, Perkins Coie and, I'm happy to note, WilmerHale, where I'm an alum - have chosen to fight back rather vigorously].

Universities are in a much better position to fight back, because they sitting on top of immense piles of money that they can use to offset, at least in the short-term and even, if necessary, in the longer term, the withdrawal of federal money.

Obviously, $255 million coming in through federal contracts (like the $400 million and $190 million that were cited as Columbia’s and Penn’s share of federal monies) is a lot of money.  But Harvard has an endowment of $51 billion; the interest alone can probably cover a good chunk of the $255 million in lost federal money. Penn’s endowment is around $22 billion, Columbia’s is $14 billion or so.  They could each survive for many years – until long after the Trump Administration is just a memory – without a nickel of federal money coming in, if they’re willing to draw down those endowments.

Isn’t that the point of having an endowment? To allow you to weather political storms like this with your integrity as an institution of higher learning intact (and even enhanced)? Keep in mind that, for all of the reasons set forth in the “Statement from Constitutional Law Scholars on Columbia,” Trump’s actions are largely unlawful; he neither has the statutory authority to unilaterally determine whether recipients of federal funds are complying with their responsibilities, nor may he use the withholding of federal grants and contracts as a means of punishing individuals or firms for exercising their constitutional rights.

So you’ll get much of the money back, in the end. There are large principles – of academic freedom, and freedom of speech, thought, and inquiry – at stake here, and if you’re not willing to use that $50 billion to protect you from undue political interference, you’re too close to being just a hedge fund that happens to hold some classes on the side.

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