Law Schools, Wall Street

Open Thread: Is the Global Economic Crisis Coming to School?

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This weekend, the Times reported that the economic crisis is taking a toll on University endowments:

VC firms typically make “capital calls” to these investors whenever they need more money to pump into their startups. However now rumors are circulating that Columbia University’s endowment fund is illiquid — that is, it can’t raise the cash it needs to fund current commitments.? Harvard, meanwhile, is reportedly trying to sell a third of its private equity portfolio at a steep discount in a “secondary offering.”

One of my favorite pieces of useless information is that the largest “endowment” for a non-profit institution is the Catholic Church. The second largest? Harvard University. So I’m pretty sure that Harvard trying to sell off a 3rd of anything is the little known fifth horseman of the apocalypse:

When the Lamb opened the fifth seal I saw before me a Crimson horse. And its rider was named Deregulation, and Consumer Fear and Capital Retreat followed close behind. They were given power over the rich of the earth to kill by the crunch, the short-sell, and the capital call.

The point is that private universities, and therefore many top law schools, will have to start dealing with the after effects of the financial crisis very soon. Hiring freezes and financial aid restrictions could soon follow.

But public institutions could feel the pain immediately.

Read about how the economic crisis is effecting one public school after the jump.

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Late last week, all University of North Carolina students were informed that the state was cutting back on UNC’s budget. They were told that the cuts would effect each and every department and school (except the basketball program, I’m guessing. Tyler Hansbrough didn’t stay in school an extra year for nothing!):

Dear Students:

We know the global economic crisis will affect the University’s budget in the coming months and years. Short term, here’s what that situation means for us. North Carolina has cut one-time (non-permanent) state appropriations by 4 percent. We expect to be asked for an additional 1 percent any day now. To put that in perspective, state appropriations equaled $574 million, or 22 percent, of Carolina’s total operating budget. A 5 percent cut adds up to about $25 million.

We’re leaving decisions about the state reductions to each vice chancellor and dean; they know best how to minimize the effect on our people, programs and the quality of the education we provide to you and your classmates. We’re committed to protecting the value of your Carolina diploma.

To be prudent, we’re planning for the likelihood of permanent (recurring) state budget cuts for fiscal 2009-2010 because revenues are expected to decline. In the event of a permanent state budget cut, we would carefully scrutinize all University operations and programs.

We’re in better shape than many public universities that have been forced by their state’s circumstances to make very difficult budget decisions over the past several months – even before the current global financial meltdown. In North Carolina, we can be grateful for the historically strong support that public higher education receives from our General Assembly. Faculty research funding has stayed strong despite an already challenging federal funding environment. The successful Carolina First Campaign has strengthened teaching, research, and public service along with the endowment – and set

the bar high for continued private support.

These are extraordinary economic times, and the global financial crisis and its ripple effects create uncharted territory for most of us. We’re closely examining everything that we do to make responsible choices to position the University for the economic recovery. We’re committed to getting through this rough period as smoothly as possible with your help, cooperation and patience. And we pledge to keep you informed.

Sincerely

Holden Thorp

What other institutions are feeling the pinch? Because this has to be keeping law school deans up late at night.

Cash Fears Loom in V.C. Industry [NYT]

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