Yeshiva University's hundreds of millions of dollars in losses since 2008 are mostly due to high risk investment schemes adopted by President Richard Joel and younger board members who took power after the much more fiscally conservative Rabbi Norman Lamm retired as president more than a decade ago. School to be broke by next year, Moody's says.
Yeshiva University's hundreds of millions of dollars in losses since 2008 are mostly due to high risk investment schemes adopted by President Richard Joel and younger board members who took power after the much more fiscally conservative Rabbi Norman Lamm retired as president more than a decade ago.
What's more, YU will be broke by next year, Moody's says.
YU and Joel also allegedly tried to hide the losses to make them appear to be the result of Madoff's Ponzi scheme when, in truth, a significant amount of the losses came from risky investments other than in Madoff's fund made by Joel, the board and investment committee.
But Lamm isn't entirely blameless in YU's freefall.
He allowed conflicts of interest on the YU board and investment committee in order to get the best and brightest on Wall Street involved with YU.
And after he retired to a cushy job as YU's chancellor, the new president, Richard Joel, and younger board members allowed those conflicts of interest to grow and to be unchecked.
…[Yeshiva University] lost more than $500 million on its high-risk investment portfolio—after selling off nearly $500 million of ultra safe U.S. Treasury bonds when the new regime took over a decade ago, plowing the proceeds mostly into hedge funds and corporate stocks. Assuming the strategy of increasing risk in its investment portfolio would pay off with higher returns, the new president and the board that hired him took on a bevy of new expenses, spending down their cash reserves and resting much of Yeshiva’s fate on their hedge fund gambles. Now that those investments have proved to be losses, Yeshiva faces more than $550 million of debt, and it appears to have been tapping into the principal of its investment portfolio to cover annual deficits. On their own, any one of these changes—the half-billion-dollar hit to its portfolio, the diminution of liquidity, and the mass of debt—would be a significant, though bearable, difficulty for a university; together, their effect has been devastating.…
The investigation, which involved the review of more than 10,000 pages of legal and financial documents, dozens of interviews, and many New York State Freedom of Information Law requests, shows how the leading lights of Wall Street helped achieve those losses for Yeshiva.
Some of the most prominent names in investing—Berkshire Hathaway’s David S. Gottesman, Redwood’s Jonathan Kolatch, Oppenheimer’s Ludwig Bravmann, and Salomon’s Gedale Horowitz—guided the school’s finances in a way that was quite exceptional among universities. The portion of Yeshiva’s assets allocated to specific risky investments ranked near or at the top of all schools by the time the 2008-09 crash came, and Yeshiva’s losses rank among the largest in the country.…