Page 69 - Bloomberg Businessweek July 2018

◼ FINANCE Bloomberg Businessweek July 2, 2018

in part to renovate undergraduate dorms.
from Faust’s other legacy: a decade of poor invest- Goldman Sachs
Such benefactors, in effect, bailed out Harvard

ment performance at the university’s $37.1 billion
time, it returned an annualized 4.4 percent, com- Meets Main Street
endowment, higher education’s largest. During that

pared with 5.9 percent for the average Ivy League
school. By lagging the average, Harvard missed out
on about $6 billion in investment gains over the ● Its online lender Marcus aims to be a “teddy
past decade, according to an estimate by Wellesley bear.” But sometimes consumer borrowers
College economist Phillip Levine. (His model made end up in a hole they can’t get out of
various assumptions, such as for spending rates.)
Like all elite colleges, Harvard is growing more
dependent on a smaller group of superwealthy Kade Parker had never heard of Goldman Sachs
philanthropists. Almost one-third of the dollar value Group Inc. in 2016, when a letter from the bank
of gifts to all colleges in the last year came from a offering his wife a loan arrived at his house in
dozen donors, according to the Council for Aid to Hornbeck, La. (population 480). The 27-year-
Education. At the same time, the percentage of old oil worker had recently taken a pay cut and
alumni who give at all to colleges has been falling for needed to reduce his monthly credit card bills.
two decades. Harvard graduates are far more loyal After calling to make sure it wasn’t a scam, he says
than those of the typical college; still, only 17.3 per- he took out a loan for around $15,000. “We were
cent gave last year, the lowest level since 2000. trying to move some money around, make it eas-
Jonathan Hoffman, Harvard class of 1969, says ier on us,” Parker says. “I told them the situation,
he gave “substantial sums” a decade ago but cut they said no problem.” Then he got laid off, and a
back to $100 a year—and now, nothing—because year and a half later he filed for bankruptcy, list-

26 he didn’t think an institution that pays its endow- ing more than $135,000 in unsecured debt, includ-
ment managers millions of dollars a year needed ing 10 credit cards and loans from online lenders
his cash. He gives to Room to Read and Habitat for SoFi, Prosper, and Affirm.
Humanity instead. “There are so many organiza- The Goldman Sachs loan came from Marcus,
tions in need,” he says. Such sentiments may help the online banking business the company started
explain why colleges are getting little sympathy in in 2016. Marketing to regular people was a sur-
their attempt to roll back Congress’s new tax on the prising shift for Goldman, whose bankers advise
richest endowments. on giant corporate mergers, trade for hedge
Harvard says 152,000 families contributed to funds, and manage money for multimillionaires.
its fundraising campaign, which it says improves But Marcus has already attracted 1.5 million cus-
society by expanding access to education and by tomers and made $3 billion in loans. It markets
advancing research. The university is committed to itself with direct mail and jokey commercials that
“a better Harvard and a better world,” says Tamara paint the company as the responsible alternative ● Number of
Marcus customers
Rogers, vice president for alumni affairs and devel- to credit cards. Onstage at a CB Insights confer-
opment. Under Faust’s tenure, Harvard, for the ence on June 20, Harit Talwar, the former Discover 1.5m
first time since the 1600s, started naming schools Financial Services executive hired to run Marcus,
and deanships for donors. It named the engineer- was reminded that Goldman Sachs was once com-
ing school after Paulson. (Michael Bloomberg, the pared to a “vampire squid” for its financial crisis
founder and majority owner of Bloomberg LP, dealings. Talwar said he’d like Marcus to be called
which owns Bloomberg Businessweek, made a a “lovable teddy bear.”
$32 million gift for a leadership program, Harvard That’s why analysts and investors were sur-
announced in 2016.) prised in February when Goldman said in a
Faust’s successor is Lawrence Bacow, a former financial disclosure that as many as 20 percent
president of Tufts. As for the endowment fund, of Marcus borrowers at the end of last year had
it got a new chief last year: N.P. Narvekar, from credit scores lower than 660, which would put
better-performing Columbia. �Michael McDonald, them in the subprime category. A spokesman for
Janet Lorin, and Ivan Levingston Goldman says that about 15 percent of its loans are
subprime and that many of those borrowers had ILLUSTRATION: ANA BENAROYA
THE BOTTOM LINE Harvard’s most recent fundraising campaign higher credit scores when they applied. Other cus-
has brought in more that $9 billion, thanks in part to large donations
from Wall Street’s elite. tomers saw their scores rise. “It’s not our role to be