Stanford University announced Tuesday that it would divest its $18.7 billion endowment of stock in coal-mining companies, becoming the first major university to lend support to a nationwide campaign to purge endowments and pension funds of fossil fuel investments.
The left’s financial geniuses have done it again. Because having $4.8 billion in debt just isn’t enough. Especially when your debt doubled between 2005 and 2009. And it’s now at a quarter of your endowment.
So Stanford is dumping those nasty coal stocks and investing in renewables which stop being profitable the nanosecond that taxpayers are forced to stop subsidizing them at crony capitalist gunpoint.
Not a problem for Stanford. Neither is having to sell taxable debt because your endowments are falling.
Top U.S. universities, whose endowments have been hit hard by fallout from the global financial crisis, are selling bonds to raise money to shore up their financial positions.
Stanford University became the latest top university to sell taxable debt to make up for recent losses in its endowment, the third largest of any U.S. university.
Stanford on Thursday sold $1 billion worth of debt in a sale led by Goldman Sachs, JP Morgan, and Morgan Stanley.
Meanwhile Standord’s endowment has increased far more slowly than its debt.
So sure, let the divestment movement roll. Ivy League colleges don’t need profitable stocks anyway. They just need to do whatever student agitators demand. And then issue some more tax exempt bonds.
It’s worked out so well for the rest of California. Just look at CALPERS where socially responsible investing resulted in a huge boom.
CalPERS leaped into “social investing” at exactly the wrong time. That trend had gained currency in the 1990s with an emphasis on buying into environmentally “clean” companies. Tech firms were high on the list, so the 1990s Internet start-up boom made social investing seem like a sound financial strategy. But when CalPERS debuted its Double Bottom Line initiative in 2000—so called because it would supposedly produce both good returns and good social policy—the tech bubble had already popped.
Many socially conscious investors then turned their attention to another industry that didn’t pollute: finance. One social-investing research firm named Fannie Mae the leading corporate citizen in America from 2000 through 2004. Other finance firms that attracted big cash from social investors included AIG, Citigroup, and Bank of America, according to an analysis by American Enterprise Institute adjunct fellow Jon Entine. When the market for shares of these firms imploded in 2008, so did the performance of social investors.
Desperate for higher returns, CalPERS also bought the riskiest portions of collateralized-debt obligations, accumulating $140 million of them by 2007. These were the packages of debt, largely subprime mortgages, whose defaults helped trigger the 2008 financial meltdown. According to a 2007 story by Bloomberg News, CalPERS bought these investments, known as “toxic waste” on Wall Street, from Citigroup, one of the sinking firms that the government later bailed out.
Not a problem, unless your pension depended on it. And then there will be a bailout. Because CALPERS and Stanford are all too big to fail. And California is too big to fail.
But the United States isn’t.