Last week, Harvard President Drew Faust sent out a university-wide email detailing to what extent the school of swank would be impacted by the global economic crisis. In short, Harvard "has weathered many storms" (read: "has lined their pockets well") but will suffer some set-backs in coming months. The fortune few will ride this one out with some paycuts and constraints. According to Dr. Faust:

Harvard is not invulnerable to the seismic financial shocks in the larger world. Our own economic landscape has been significantly altered. We will need to plan and act in ways that reflect that reality, to assure that we continue to advance our priorities for teaching, research, and service.

Thank God: Harvard is going to focus on teaching and research again. For a second, it looked like the nation's oldest institute of higher learning just enabled psychopaths and racial profilers. The announcement from President Faust, Larry Summer's replacement in Massachusetts Hall, sounds less like a policy shift than it does a PR stunt. Just 6 weeks ago, the Harvard Management Corporation (HMC), a bunch of suits who control the fate of the universe—err, the endowment—announced 8.6% growth on Harvard's already gargantuan $36.9 billion portfolio as Standard & Poor's lost 3.6%.  Break out the $100-bill-scented tissues.

While the next Dear "John Harvard" letter from the HMC isn't due until next summer, Harvard shows no signs of tightening the belt so far.  In her letter, President Faust emboldened the college's commitment to providing full rides to students whose families earn less than $60,000 per year. Meanwhile, the Harvard Kennedy School of Government just shelled out $10 million for a program to train emerging leaders from developing countries. [Insert: "Not so evil after all" comment here.]

Read Faust's letter in full along with some sob-stories about poor, jobless HBS grads after the break.

With its oak-paneled classrooms and marble-bathroomed dorms, Harvard has long been the epitome of conspicuous spending at American colleges. Even though the university champions great causes like financial aid and third world countries in times of "need," how about a little effort. According to a Moody's report, university endowments will shrink by 30% on account of the economic crisis, but that still leaves Fair Harvard with over $20 billion in the bank.  (Harvard Magazine provides a mock-up for how the university pays its bills for those interested.)

So why the boo-hooing, President Faust? Harvard may have done away with some of the more extravagant traditions like the Harvard Clambake, a campus-wide lobster party where countless crustaceans met their demise at the mouths of over-privileged college kids. But what's with flying out "career coaches" to pick up the pieces of the Harvard grads who had the misfortune of working at places like Lehman Brothers and Merrill Lynch after graduation? And whose salary are you talking about cutting? Be reminded that at least one student nearly starved to death in a hunger strike to provide Harvard security guards with a living wage.

Join the fray on where Harvard might cut some expenses. We'll post again shortly where Harvard could avoid spending their precious money on (i.e. champagne breakfasts at commencement) and some they should prioritize spending (i.e. Harvard Square's legendary homeless population). Meantime, here's the full text of President Drew Faust's email to the Harvard community:

Cambridge, Mass.
November 10, 2008

To Harvard Faculty, Students, and Staff:

I write today about the global economic crisis and its implications for us at Harvard.

We all know of the extraordinary turbulence still roiling the world’s financial markets and the broader economy. The downturn is widely seen as the most serious in decades, and each day’s headlines remind us that heightened volatility and persisting uncertainty have become our new economic reality.

For all the challenges such circumstances present, we are fortunate to be part of an institution remarkable for its resilience. Over centuries, Harvard has weathered many storms and sustained its strength through difficult times. We have done so by staying true to our academic values and our long-term ambitions, by carefully stewarding our resources and thoughtfully adapting to change. We will do so again.

But we must recognize that Harvard is not invulnerable to the seismic financial shocks in the larger world. Our own economic landscape has been significantly altered. We will need to plan and act in ways that reflect that reality, to assure that we continue to advance our priorities for teaching, research, and service.

Our principal sources of revenue are all likely to be affected by these new economic forces. Consider, first, the endowment. As a result of strong returns and the generosity of our alumni and friends, endowment income has come to fund more than a third of the University’s annual operating budget. Our investments have often outperformed familiar market indexes, thanks to skillful management and broad diversification across asset classes. But given the breadth and the depth of the present downturn, even well-diversified portfolios are experiencing major losses. Moody’s, a leading financial research and ratings service, recently projected a 30 percent decline in the value of college and university endowments in the current fiscal year. While we can hope that markets will improve, we need to be prepared to absorb unprecedented endowment losses and plan for a period of greater financial constraint.

The economic downturn also puts pressure on other revenues that fuel our annual budgets. Donors and foundations will be harder pressed to support our activities. Federal grants and contracts for sponsored research will be subject to the intensified stress on the federal budget. Tuition remains an important source of revenue, but in times like these we want to keep increases moderate, mindful that many students and families are facing economic strain.

Over the past several weeks I have been meeting individually and collectively with the deans of the faculties, as well as the Corporation, to share ideas on how we can best respond to this changed economic environment. We need to sustain our high academic ambitions at the same time that we bring greater financial discipline to all our activities. We have to think not just about what more we might wish to do, but what we might do at a different pace or do without. Tradeoffs and hard choices that can be avoided in times of plenty cannot be averted now. And, given the ongoing volatility and uncertainty, we need to plan and budget with a range of contingencies in view, including scenarios for reducing our spending both this year and next.

As we plan, we must also affirm our strong commitment to financial aid for our students. In Harvard College, that will mean carrying forward our recent years’ initiatives to make a Harvard education affordable for outstanding students from low- and middle-income families. As before, families with incomes below $60,000 will pay nothing to send a child to Harvard College, and families with incomes up to $180,000 and typical assets can expect to pay no more than approximately 10 percent of income. Across our graduate and professional schools, we will maintain financial aid budgets at least at their current levels — and ensure that our students still have access to needed loans, even though many banks are making them less readily available.

We have long been dedicated to research and the discovery of new knowledge across a wide range of fields of scientific and humanistic inquiry. In recent years we have made significant investments toward breaking down intellectual barriers across disciplines and across Schools to generate new knowledge and to develop new courses and educational opportunities for our students. These commitments must continue to guide us as we make decisions and choices in a significantly more constrained fiscal environment.

Harvard values its reputation as a stable and supportive employer, and we view our workforce as a critical part of all we do. We recognize as well the responsibility that comes with being one of the largest employers in the commonwealth of Massachusetts. At the same time, changing financial realities will require us to look carefully at compensation costs, which account for nearly half the University’s budget.

We are assessing all aspects of our ambitious capital planning program, including the phasing and development of our campus in Allston.

We are working with administrative and financial deans from across the University to develop new approaches for generating both savings and new revenue sources, building on the ideas and best practices of each of the Schools.

Harvard is a famously decentralized place, and one size will not fit all. Each School will face its own particular challenges. But we must at the same time join together to address these new circumstances with creativity and a spirit of common enterprise.

Today, perhaps as never before, we need to work collectively to develop approaches and efficiencies that will allow every part of Harvard to thrive in the years to come. Together, we must continue to advance the priorities that define us.

For all that has changed in recent weeks, we remain devoted to attracting the very best students, faculty, and staff to Harvard. We will undertake the daily work of education and scholarship with the same intensity and imagination. We will set our academic sights just as high, and we will ensure that the ambitions and vibrancy of our community and the strength of its commitment to the pursuit of truth remain unsurpassed.

Drew Faust