As the current economic crisis wreaks global havoc on banks and the stock market, Hopkins administrators are taking advantage of new investment opportunities, though faculty and administrators agree that it is too soon to tell how University endowments and student loan availability will be affected by the changing state of the economy.
According to an e-mail from Chief Investment Officer Kathryn Crecelius, the University has taken appropriate action to secure Hopkins's finances in light of the recent banking crisis.
"The endowment had very little to no exposure to those institutions that have failed or [have] been rescued," Crecelius wrote in an e-mail. "We had no investments in [Wachovia's frozen] Commonfund and do not participate in securities lending, where some institutions have seen losses."
While other universities, including the University of Vermont and Boston University have had to freeze new projects that require immediate funds out of fear that they will have difficulty accessing outside finances in the future, Hopkins, according to Crecelius, has sufficient liquidity to meet payout.
"We have taken over the past year and continue to take steps to make sure that our cash and fixed income assets are safe," she wrote. "We are looking for investment opportunities that the crisis and instability inevitably produce."
Senior Associate Vice President of Development and Alumni Relations Fritz W. Schroeder also maintained a positive outlook on the state of the endowment, citing a history of positive benefactors even during times of economic trouble.
"Throughout recessions in the past, donors have continued to give to those places they feel connected to and passionate about," he wrote in an e-mail. "At this point, we are making sure that we continue to visit with alumni and friends regularly and have conversations about their ongoing involvement and support."
Hopkins Economics professor Stephen Shore, however, disagreed, predicting that the unstable economic situation would inevitably lead to a future decline in alumni donations.
"I certainly expect a downturn in the economy would reduce alumni giving," he said. "We don't really know how it's affecting the endowment [yet], but the thing that's quite clear is that donations will be affected."
Louis Galambos, a professor of economic history, sees parallels between what happened to university endowments in the Great Depression and the current economic situation, which suggests that the University's decisions regarding the endowment could be crucial.
"In the 1930s, Harvard University stayed in equities. Yale University lost its nerve and shifted to bonds," Galambos wrote in an e-mail. As a result, "Harvard's endowment later doubled Yale's."
Professor John Driscoll, also of the Economics Department, predicted that Hopkins will have to take drastic steps to keep the endowment from being directly harmed by the banking crisis, although he does not see students' ability to get grants and loans in danger.
"I think that the professional managers Johns Hopkins has hired to manage its endowment will find it challenging to get the high rates of return seen in recent years," Driscoll wrote. "The University is a very large organization; [but] if it does find that it needs to restrain its spending, there are many possible areas it could choose from."
He pointed out that University spending cuts might not necessarily apply to student grants or to students' financial aid at all.
"I suspect that the administration would be reluctant to [cut student aid] given the difficult economic times that may lie ahead," he wrote.
Yet, both the administration and the economic experts point out that the current crisis is too recent to have a measurable, immediate effect on the University.
"We have not seen any measurable change yet," Schroeder stated in his e-mail. "Frankly, the 'crisis' is developing so quickly, and changing so frequently, that it's too early to see any evidence of impact on giving."
"[The Pundits] do not know if this [situation] will turn into The Big One ?- that is, a 1930s type Great Depression," Galambos wrote.
The effect of the financial situation on loan availability is also difficult to predict, according to professors and administrators.
"[In terms of] a student's ability to get loans, we're still waiting to see how that's going to play out," Shore wrote. He pointed out that some benefits may come about as a result of the commotion and confusion afflicting the economy.
"People see a financial downturn as time to go back to school, so applications for graduate programs may increase," he added. Hopkins students borrowing Stafford loans or Parent PLUS loans need not be directly concerned about loan availability.
The University participates in the Federal Direct Student Loan program, in which loan money is provided by the federal government rather than by a bank and will therefore remain available.
Additionally, according to Director of Student Financial Services Vincent Amoroso, students borrowing from the private sector should only experience limited difficulty.
"Given our academic reputation, high graduation rates and potential earnings for our graduates, lenders are still providing loans to our students," Amoroso stated in an e-mail. "As of now, we have not heard of a case where a student could not obtain a private loan."
