+ But while
our economy may be weakened and our confidence shaken, though we are living
through difficult and uncertain times, tonight I want every American to
know this: We will rebuild, we will recover, and the United States of America
will emerge stronger than before.
+ We have
known for decades that our survival depends on finding new sources of energy,
yet we import more oil today than ever before. The cost of health care eats
up more and more of our savings each year, yet we keep delaying reform.
Our children will compete for jobs in a global economy that too many of
our schools do not prepare them for.
+ Over --
over the next two years, this plan will save or create 3.5 million jobs.
More than 90 percent of these jobs will be in the private sector, jobs rebuilding
our roads and bridges, constructing wind turbines and solar panels, laying
broadband and expanding mass transit. Because of this plan, there are teachers
who can now keep their jobs and educate our kids. Health care professionals
can continue caring for our sick. There are 57 police officers who are still
on the streets of Minneapolis tonight because this plan prevented the layoffs
their department was about to make.
of this plan, families who are struggling to pay tuition costs will receive
a $2,500 tax credit for all four years of college.
+ I want to
speak plainly and candidly about this issue tonight, because every American
should know that it directly affects you and your family's well-being. You
should also know that the money you've deposited in banks across the country
is safe, your insurance is secure. You can rely on the continued operation
of our financial system; that's not the source of concern.
+ This time
-- this time, CEOs won't be able to use taxpayer money to pad their paychecks,
or buy fancy drapes, or disappear on a private jet. Those days are over.
... I will not send -- I will not spend a single penny for the purpose of
rewarding a single Wall Street executive, but I will do whatever it takes
to help the small business that can't pay its workers or the family that
has saved and still can't get a mortgage.
+ That is
why, even as it cuts back on programs we don't need, the budget I submit
will invest in the three areas that are absolutely critical to our economic
future: energy, health care, and education.
+ It begins
with energy. We know the country that harnesses the power of clean, renewable
energy will lead the 21st century. And yet it is China that has launched
the largest effort in history to make their economy energy efficient. We
invented solar technology, but we've fallen behind countries like Germany
and Japan in producing it. New plug-in hybrids roll off our assembly lines,
but they will run on batteries made in Korea.
our recovery plan, we will double this nation's supply of renewable energy
in the next three years. We've also made the largest investment in basic
research funding in American history, an investment that will spur not only
new discoveries in energy, but breakthroughs in medicine, in science and
We will soon
lay down thousands of miles of power lines that can carry new energy to
cities and towns across this country. And we will put Americans to work
making our homes and buildings more efficient so that we can save billions
of dollars on our energy bills.
But to truly
transform our economy, to protect our security and save our planet from
the ravages of climate change, we need to ultimately make clean, renewable
energy the profitable kind of energy.
So I ask this
Congress to send me legislation that places a market-based cap on carbon
pollution and drives the production of more renewable energy in America.
That's what we need.
And to support
-- to support that innovation, we will invest $15 billion a year to develop
technologies like wind power and solar power, advanced biofuels, clean coal,
and more efficient cars and trucks built right here in America.
of our auto industry, everyone recognizes that years of bad decision-making
and a global recession have pushed our automakers to the brink. We should
not and will not protect them from their own bad practices. But we are committed
to the goal of a re-tooled, re-imagined auto industry that can compete and
win. Millions of jobs depend on it; scores of communities depend on it;
and I believe the nation that invented the automobile cannot walk away from
+ Now, let
me be clear. ... If your family earns less than $250,000 a year, a quarter
million dollars a year, you will not see your taxes increased a single dime.
I repeat: not one single dime.
Director Is on Harvards Hot Seat
may be the nations wealthiest university, but it is short on cash.
relies on its endowment to generate a third of the money for its operations,
and the endowment is on the verge of posting its biggest loss in 40 years.
With much of its money tied up for the long term, it is scrambling to meet
some obligations, The New York Timess Geraldine Fabrikant writes.
frozen salaries for faculty and nonunion staff members, and offered early
retirement to 1,600 employees. The divinity school has warned it may not
be able to cover tuition for all its students with need, the school of arts
and sciences is cutting its billion-dollar budget roughly 10 percent, and
the university president said this week than the unprecedented drop in the
endowment was causing it to delay its planned expansion, starting with a
$1 billion science center, into the Allston neighborhood of Boston.
has even added to its debt by issuing $1.5 billion in new bonds, its largest
such offering ever.
ship around turns heavily on Jane Mendillo, who took over the Harvard endowment
on July 1 which in hindsight looks like the worst possible moment
to step into a job once held by some legendary investors. The endowment,
the largest of any university in the nation, has shrunk by at least $8 billion,
to $29 billion, since she arrived.
Ms. Mendillo inherited a complex portfolio, with many investments involving
leveraged bets on equities and commodities that are difficult to unwind.
Within days of her arrival, oil prices peaked and, with other commodities,
began a precipitous fall. Stock prices commenced a sharp decline. Then came
the cash calls on her portfolio.
In an interview
with The Times, she recalled the Sunday in September when she learned Lehman
Brothers would file for bankruptcy a night she was celebrating her
50th birthday as the beginning of her 12-hour workdays. Clearly,
that was a big turning point, she told The Times, adding that her
longer-term strategic goals were overrun by urgent needs, like raising cash.
were some things that I knew were going to happen and be challenges,
said Ms. Mendillo, who speaks softly, choosing her words carefully. There
were others that I dont think anybody could have foreseen.
One she might
not have anticipated was the intense pressure caused by the Allston expansion,
The Times said, citing one person with knowledge of the endowment. Several
years ago, the university had envisioned an ambitious capital expansion
program stretching for more than a decade. Lawrence H. Summers, then Harvards
president, had raised the possibility of locking in interest rates that
appeared to be at historic lows, a plan the university adopted, The Times
said, citing several people familiar with the endowment.
All went well
at first. But in the second half of last year, interest rates plummeted
and Harvard turned to the endowment to meet hefty collateral calls, which
could rise to $1 billion if rates remain weak, according to a person with
knowledge of the university. According to a statement Friday from James
R. Rothenberg, treasurer of the university, Harvard has taken a series of
steps to reduce the risk associated with the transaction.
was squeezed partly because it had invested more than its assets, a leveraging
strategy that can magnify results, both good and bad. It also had invested
heavily in private equity and related deals, which not only lock up existing
cash but require investors to put up more capital over time.
To free up
cash, Ms. Mendillo has had to make some unpleasant choices, selling $1 billion
in equities, including some in hedge funds with outstanding performances.
A source familiar with the endowment identified Convexity Capital, run by
one of her predecessors, Jack Meyer, as well as Baupost Group, led by Seth
Klarman, The Times said. Though she would not confirm relationships with
specific managers, Ms. Mendillo told The Times, We have taken money
from a lot of funds as the size of the portfolio has changed.
She also sought
to sell some of the endowments large private equity positions, to
other universities, has pushed into alternative investments, including private
equity, which now constitute 13 percent of its total assets. In good times
these investments return money as deals are completed. Now the returns have
dried up, yet the commitments for new money remain, causing perhaps her
university needs cash, and we have investments that need capital,
Ms. Mendillo told The Times.
She has raised
the equivalent of 3 percent of assets for a cash reserve. For a long
time, Harvard had a negative 5 position, she said. That means
that 105 percent of the assets are invested at most times.
say that Ms. Mendillos overall investment strategy is unclear and
that while the crisis erupted faster and with more magnitude than could
have been predicted, she could have moved more quickly to manage the risk.
Supporters counter that her predecessors essentially left her hamstrung
with a portfolio that was illiquid, and give her high marks on investing
does not beat you over the head with her knowledge, although it is clear
that it is there, Andrew K. Golden, who oversees the endowment at
Princeton, told The Times.
said its overall endowment portfolio declined 22 percent from July through
October and that it could end the fiscal year in June down 30 percent. That
performance is in line with the average for university endowments, though
some have done better. Yales endowment was off 13.4 percent in the
comparable four-month period, while Princetons was down 11 percent,
and both have projected a total 25 percent drop for the fiscal year.
many schools are responding by taking on more debt. Princeton sold $1 billion
in bonds recently, its first taxable offering since 1994.
on the hot seat, Ms. Mendillo ran the much smaller endowment of Wellesley
College. But she honed her investing style earlier at Harvard. After graduating
from Yale and its school of management, she was an equity analyst and a
consultant. David Swensen, a friend who manages Yales fund, advised
her to work for Mr. Meyer if she wanted to learn portfolio management. She
started covering steel and insurance industries, because that was
what was left over and stayed 15 years.
racked up a stellar record running the endowment, putting Harvards
returns second only to Yales. But complaints about the size of managers
pay packages, relative to the academics pay, ultimately prompted Mr.
Meyer and many of his acolytes to leave in 2005.
A period of
relative instability ensued. Harvard hired Mohamed El-Erian, who stayed
just two years before returning to a top post with Pacific Investment Management
Company. Before and after Mr. El-Erians stint, the endowment relied
on board members as interim managers.
Harvard endowment posted a strong 8.6 percent gain in the year before Ms.
Mendillo arrived, David A. Salem, who heads the Investment Fund for Foundations,
says he believes that Mr. El-Erian did the school a disservice by hiring
people to carry out certain strategies and then jumping ship.
declined to comment for this article, The Times said.
who knows Ms. Mendillo from the board of the investment fund, also told
The Times that Mr. El-Erian appeared to have left Harvard with an extremely
illiquid portfolio, a situation complicated when a permanent replacement
was not named for seven months after his departure.
citing two people familiar with Harvards strategy, said the endowment
had entered into swap agreements under which it paid short-term interest
rates and received the returns on stock and commodities indexes. Those indexes
declined sharply in the third quarter last year, and Harvard had to come
up with collateral just as it was forced to meet other cash needs.
has let go about 25 percent of her staff, or roughly 50 people, as the portfolio
shrinks, Ms. Mendillo seems intent on keeping 30 percent of the assets under
She is also
trying to manage expectations.
preparing the Harvard portfolio for the next one to three years for returns
that will not be as attractive as what we expected on average, she
told The Times.