Lost in the hullabaloo over the recent Vanity Fair profile on Sarah Palin and her subsequent, if unrelated, resignation was the magazine's article "Rich Harvard, Poor Harvard" by Nina Munk. The spread chronicles the massive expansion of Harvard's wealth, which grew from $4.8 billion in 1990 to $36.9 billion and the rapid pace Harvard opened new buildings. But since October the endowment has lost $8 billion dollars, with President Faust warning it could lose as much as $11 billion by the end of fiscal 2008. Now trash cans overflow, shuttles are fewer, and athletes have to suffer through continental breakfasts.

"Rich Harvard, Poor Harvard" is full of blind quotes pointing fingers at which administrator screwed which pooch. No matter who is responsible, though, one thing is clear:

"They are completely fucked."

To find out just how fucked Harvard is you have to buy the August edition of Vanity Fair. That is, unless you read our recap after the jump.

Munk provides a lot of juicy anonymous quotes because almost no one would talk to her on the record. Besides that, her article gives solid numbers and confirms what everyone knew already: Larry Summers is a dick. According to Munk, the endowment took off in 1990 after Harvard fired the grandfatherly and altruistic Walter Cabot, '55 in order to let Jack Meyer take the reigns of the Harvard Management Company. Meyer, a Harvard M.B.A. moved money into crazy hybrid investments and abandoned Cabot's cautiously slow investment strategy.

Meyer and his team of portfolio managers moved Harvard's money into all sorts of things: private equity, real estate, oil, gas, fixed-income arbitrage, timberland, hedge funds, high-tech start-ups, foreign equities, credit-default swaps, commodities, venture-capital funds, junk bonds. As if all those exotic, illiquid investments weren't enough to amplify the returns, Meyer added a heap of leverage.

That worked spectacularly. "Between fiscal 1990 and 2008, Harvard's endowment boasted an average annual growth rate of 14.3 percent," writes Munk. Not only was Meyer, et. al. banking for Harvard, but they were making bank for themselves. The Harvard Management Company compensated its managers as any firm on Wall Street would have. Meyer's employees got 10 percent of what they made for the university, meaning Harvard's top earners enjoyed incomes 25 times greater than what the Harvard president's salary was by Munk's calculations.

But as Meyer and his top associates were making "as much as $30 to $40 million a year," a bunch of alums started harshing the Management Company's buzz. The group of alumni, all class of '69 and thus most likely hippies, told Summers they thought money was bad and Meyer & co. shouldn't make as much of it. So Meyer went Galt and quit to start his own hedge fund in 2005, screwing Harvard even more by taking 30 of his top employees with him.

In the wilderness of the hedge fund boom Harvard put bushels of its money into those funds, including a $500 million investment in the now-defunct Old Lane partnership. As Meyer had always pointed out, over compensating in-house people was better than over compensating strangers, but now Harvard was paying annual management fees of 2 percent of its managed assets and 20 percent of the annual returns. Happy now, alumni? Munk states Harvard even fell for "lockup periods" and "gate provisions," which prevent withdrawals and later limit them, respectively.

The next manager, Mohamed El-Erian managed the endowment well, but quit after only two years. According to Munk's sources, Harvard hated El-Erian super lots because he was an outlander.

El-Erian, an outsider, quickly became the subject of unsubstantiated attacks, many of them based on rumor and malice...He was "a complete fraud," a former Havard Management Company employee assured me. He "wrecked the place." "He's not an investor," opined someone else. He didn't belong.

So there Harvard was without an endowment manager. Again. Following what seems to be a trend of unobjectionable, steady women replacing highly objectionable, brash men, the Harvard Management Fund selected Jane Mendillo. In a story where everyone trash talks everyone else Munk offers, "No one I've spoken to has a bad word to say about Mendillo." Mendillo is busy cleaning up the endowment mess by trying to raise cash for Harvard and getting out of its interest-rate swaps then President Larry Summers pushed. The only problem is that people only want to offer her 50 cents on the dollar for them. Oops.

So big deal Harvard's endowment lost billions, right? Doesn't most of the operating income come from donations, tuition, and puppy kisses? Well, it used to.

Harvard's soaring endowment has become the engine fueling the university's growth. In 2008 alone, so-called distributions from the endowment were $1.2 billion, representing more than a third of Harvard's total operating income, up from only 16 percent two decades ago.

Thanks to Larry Summers, who ordered building after building, a new campus across the Charles in Allston, increased financial aid, and hired new faculty, Harvard was spending like a drunken sailor poet on payday.

During the boom years, it was assumed without question that the value of Harvard's endowment would keep rising. Trusting in that false certainty, the already profligate university went wild, increasing its annual operating budget by 67 percent, from an inflation-adjusted $2.1 billion in 1998 to $3.5 billion in 2008—this, even as the number of students remained constant.

Wishing Boston would be to science what 15th century Florence was to art, Summers was spending more like the Sun King. Then the faculty chased Summers out of office because he did things like fight with Cornel West and call women bad at science. So they replaced him with Drew Gilpin Faust, who, like Mendillo, people hadn't heard of and no one has anything bad to say about.

For now Harvard isn't cutting costs, but "resizing," and instead of staff cuts they are "reorganizing." Reorganizing hot breakfasts out of undergraduate dining halls, that is, and depriving professors of free coffee. The horror! Also, while it seems students can still afford Evian, there's no one to pick up after them. The golden age is truly over.