Harvard, from Dan Grossman

December 19, 2009 |

 Let's run this by the various new ethics courses Harvard now requires in its Law and Business schools.

Making a two billion dollar payment to JP Morgan Chase (or whomever) to terminate a swap agreement is not, it seems to me, buying a security in a public market that might be affected by premature disclosure. Rather, it is a calculation by the parties of the amount the swap agreement is under water, and thus the amount Harvard must reimburse JP Morgan Chase for Harvard to be let out of the swap agreement.

If this is accurate, then the reason for suppression from the public hearing and the bond documents Harvard's intended use of the bond proceeds is not to protect Harvard's swap termination transaction from fluctuation due to market rumors. Rather, it's to protect Harvard management from the embarrassment of disclosing its unfavorable swap transaction and its horrendous use of billions of dollars of endowment funds contributed by loyal alumni.

Thus the question for the ethics courses: Is Harvard's suppression of the customary or legally required disclosure of its intended use of the funds ethical?


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