Trashing, Defending, and Deferring to Yeshiva University
University bashing is in fashion, from the broad-gauged film Ivory Tower to particular attacks on given schools. Some critiques usefully expose problems that need correcting with constructive solutions on offer. But others seem to trash the academy for other reasons, as with a recent diatribe against Yeshiva University, which seems more calculated to exacerbate the school’s problems than help it find solutions.
In an expose-style that seems to blow the school’s financial challenges out of proportion, Steven Weiss, who acknowledges having been expelled from Yeshiva in 2002, portrays Yeshiva’s leadership since that year variously as gullible, myopic, conflicted, or greedy. This piece stung because I am a graduate and former faculty member of Yeshiva’s law school (Cardozo) and I know and have worked with some of the people vilified in the story. While I am not familiar with all of the factual background of the University’s recent experience, Weiss’s story seems awfully one-sided and therefore the story, as much as the facts about Yeshiva, causes concern.
I share Weiss’s praise for Yeshiva’s former president, Rabbi Norman Lamm, whom I knew, worked with, and admired. Lamm, and later his VP for business affairs, Sheldon Socol, led Yeshiva from the brink of bankruptcy in 1975 to fiscal soundness and renewed its status for academic excellence and cultural distinction. (Rabbi Lamm told me how, when he was about to declare bankruptcy, his hand shook so intensely that he could not sign the papers.)
But Weiss then makes a foil out of Lamm, painting a golden era that ended after 2002 when he passed the baton to Richard Joel, the current president, who has faced a different set of challenges that entices Weiss’s wrath. In Weiss’s telling, after Lamm’s retirement and Joel’s succession, it’s been all downhill for Yeshiva and its students. Joel, whom I knew as an able administrator and gentleman when he served as Dean of Business Affairs at Cardozo, certainly has a different style than the rabbi-scholars such as Lamm who preceded him. But Weiss exaggerates in inexplicably inflammatory tones how this style difference has played out, in a story misleadingly headlined “How to Lose $1 Billion: Yeshiva University Blows Its Future on Loser Hedge Funds.”
The punch line to this part of Weiss’s tale, the centerpiece, is damningly misleading populist prose: “Yeshiva’s endowment was essentially one large hedge fund.” Yeshiva’s endowment, large at around $1 billion for more than a decade, was in 2002 a near 50-50 mix of risky securities and US T-Bills, Weiss says. In the ensuing years, as the University sold Treasuries to buy risky assets, and as their value soared, the mix became 80 percent diverse securities and 20 percent Treasuries. Weiss suggests that this occurred because of conflicts of interest on Yeshiva’s board investment committee. The committee had broad discretion over the endowment and several members were hedge fund managers who steered portions of the endowment to their funds.
Of course, during the financial crisis of 2008, all investment assets declined in value, but especially hard hit were many of Yeshiva’s positions. The University attributed a large portion of the loss, more than $100 million, to its account in the Madoff Ponzi scheme, though Weiss alleges that was a less a significant portion of the overall drop. By Weiss’s calculations, Yeshiva’s endowment today is worth only 75 percent of its value when Lamm handed the baton to Joel, down a total of $324 million. Weiss does not examine the specific securities in the portfolio, instead using broad and vague but incendiary terminology about Yeshiva’s endowment being a hedge fund (evoking Fed Chairman Ben Bernanke’s demonizing characterization of troubled insurance giant AIG as an insurance company with one big hedge fund on top).
Weiss also complains that Joel incurs annual operating deficits at Yeshiva, with expenses invariably exceeding revenue. He says annual deficits routinely run to tens of millions and add up to $470 million since 2008. He also reports that Yeshiva borrowed substantially in order to finance the construction of new facilities, saying total debt now stands at $567 million. Weiss lambasts both policies and presents them as inherently indefensible and irrational, without crediting possible rationales. Rather, for example, he makes debt financing seem laughable by dismissing the view of one board member that borrowing money is “more efficient” than spending cash.
Weiss’s gotcha piece is sub-titled “High-risk investments and conflicts of interest abounded at Manhattan’s prestigious university, leading to a $1.3 billion reversal of fortune,” a figure the piece repeats without being clear about the calculation. It seems that the $1.3 billion figure is the sum of the investment decline, cumulative deficits, and additional debt. The title, subtitle, text, and thrust of the piece make it sound as if the University lost $1.3 billion by virtue of acting like a hedge fund. But that’s not a fair rendering of the university’s budgetary, funding, or investing positions. Nor does the story discuss the non-financial aspects of these fiscal facts, which involve academic judgments about the relation among current and future pedagogical, scholarly, scientific, cultural and religious needs and resources.
In response to Weiss’s hatchet job, full of misleading statements and gaping omissions, Joel issued a statement, highlighting several simple facts that Weiss omits but whose inclusion would have added an element of balance: since incurring the heavy losses of the 2008 crisis, Yeshiva adopted a new approach to investments. It replaced direct board involvement with a professional investment office, updated oversight practices, and adopted stricter conflict of interest policies. With the new policies, Joel and Yeshiva’s board and other leadership recognized weaknesses that contributed to the problems that underlay the hyperbole of Weiss’s screed.
True, I would like to know more about Yeshiva’s finances as well as the academic thinking behind recent decisions about building or closing facilities and forming or ending joint ventures and other programs. I would like to see a fairer and more balanced assessment of those matters from talented researchers and writers such as Weiss. I’d be eager to know more about what goes on in the President’s office at Yeshiva and among its faculty. But I’m an outsider to my beloved alma mater now and must defer to the school’s leadership as a matter of their academic judgment unless presented with reason to rebut that presumption. Weiss’s piece, a regrettable part of today’s zeitgeist of university bashing, does not come close to raising doubt about Richard Joel’s presidency.