Tuesday, September 30, 2008

The Financial Crisis: What Went Wrong?

I have posted my current understanding of what went wrong on my tax blog, http://understandingtax.typepad.com/understanding_tax/ If I've missed something important, please let me know. This is very much a work-in-progress.

It is not too early to be thinking about implications for law schools. Among other things, most readers of this blog are paid by schools that get their operating funds from loans taken out by students. If credit markets really do dry up, times may get lean indeed, in an immediate and personal way. Federally guaranteed loans are likely to continue to be available. Supplemental loans, however, may become harder to get and/or more expensive. Students who need supplemental loans to attend school may be forced to defer their educations until the crisis blows over. Schools whose students are local and can live at home are less likely to be hard hit.

State schools are already feeling the crunch, but should anticipate more severe cutbacks in the next few years. State tax revenues are likely to fall much further before they begin to improve. Schools with large endowments will face an unpleasant dilemma: whether to eat into principal or live on tuition. Remember that prior to the Great Depression, Harvard's and Yale's endowments were equal. Yale sold. Harvard held. Yale never recovered parity.

0 Comments:

Post a Comment

Links to this post:

Create a Link

<< Home