Liquidity management yields solid waste with hot gaseous byproduct

A billion here, a billion there... As Everett Dirksen observed, it does add up:

Oct. 17 (Bloomberg) -- Harvard University’s failed bet that interest rates would rise cost the world’s richest school at least $500 million in payments to escape derivatives that backfired.

Harvard paid $497.6 million to investment banks during the fiscal year ended June 30 to get out of $1.1 billion of interest-rate swaps intended to hedge variable-rate debt for capital projects, the school’s annual report said. The university in Cambridge, Massachusetts, said it also agreed to pay $425 million over 30 to 40 years to offset an additional $764 million in swaps...

“Substantial losses” in Harvard’s General Operating Account, a pool of cash from which bills are paid, further put pressure on the school, the report said. The net asset value of the account fell to $3.7 billion from $6.6 billion during the fiscal year, according to the report.

With the frequency that the phrase "the best and the brightest" is thrown around, to watch the institutions that advocate and enable these financial schemata to manifest in "a free market" get burned in a pyre of their own making is delicious beyond measure, and sweet beyond belief.

The article also offers up this tasty tidbit:

The annual report provides new details on Harvard’s derivative-related losses. Many were entered into in 2004, said Harvard spokeswoman Christine Heenan. Lawrence Summers, director of President Barack Obama’s National Economic Council, was the university’s president at the time. White House spokesman Matthew Vogel declined to comment.

No comment is necessary, Mr. Vogel.