Back in 2004, Harvard purchased a ginormous amount of interest-rate swaps to fund an expansion. But in 2008 when the market tanked, the swaps turned toxic, and banks that had sold them to the university issued margin calls, putting Harvard in a tight position and forcing them to borrow $2.5 billion from the state of Massachusetts to get out of the swaps, a transaction that carried hefty penalty fees. One of the banks was JPMorgan, helmed by Harvard Business School graduate Jamie Dimon. Did JD cut his alma mater any slack, advise them to maybe wait a bit, not to panic? Hell no! Business is business, after all.
JPMorgan went after them like a debt collector after a deadbeat auto owner, according to today’s report from Bloomberg:
Harvard would have avoided paying the costs of its swap obligations by waiting. Its banks, including JPMorgan Chase & Co., headed by James Dimon, were demanding cash collateral payments — ultimately totaling almost $1 billion — that Harvard in 2004 had agreed to pay if the value of the swaps fell. At least $1.8 billion of the swaps the school held were with JPMorgan, said a person familiar with the agreements. Dimon, a 1982 Harvard Business School alumnus, declined to comment on the agreements through a spokeswoman.
When they got the loan and paid the bank back, they briefly celebrated over dinner and canapés. Which JPMorgan then expensed to Harvard, naturally.
Harvard and JPMorgan celebrated the bond issue by hosting a cocktails-and-dinner party at the French restaurant Mistral, in Boston’s South End neighborhood, where appetizers start at $15 and entrées cost about $40, according to e-mails obtained from the state finance agency. JPMorgan invoiced the agency $388.78 for three employees who attended: Caswell, Marietta Joseph and Danielle Manning.
Classy.
Harvard Swaps Are So Toxic Even Summers Won’t Explain [Bloomberg]
