Administration April 29, 2010

Goldman Sachs E-mail Shows Harvard on Losing End of Trade

April 29, 2010 (PLANSPONSOR.com) – An e-mail released by the U.S. Senate indicates Goldman Sachs executives knew clients would lose in a large trade in mortgage-backed securities.
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The Boston Globe reports that in a February 14, 2007, message detailing the decline of high-risk subprime mortgages, Goldman executive Daniel Sparks wrote to colleagues: “That is good for us position-wise, bad for accounts who wrote that protection.’’ He cited Harvard University and three others as being on the losing end of a $500 million derivatives trade.

The e-mail indicates Goldman’s chief executive, Lloyd Blankfein, was sent a copy, according to the Globe.

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Harvard spokesman John Longbrake confirmed the university made the investment. “The investment referenced in the e-mail was deliberately unwound, and was part of an investment strategy that is no longer pursued,” he said.

The school in fiscal 2008 lost 27% of its $37 billion endowment and another $1.8 billion in operating cash because of bad investments (see Harvard Endowment Slammed with $11B FY Loss). Harvard also paid $500 million to get out of interest-rate swaps that failed when rates fell instead of rising (see Harvard Reports Large Cash Loss).

In the year of the Goldman trade, fiscal 2007, the endowment posted a gain of 23%.

Mohamed A. El-Erian, who was running the endowment at the time, declined to comment to the Globe.

Benefits April 28, 2010

Insurer Study Finds Income Protection Important During Disability

April 27, 2010 (PLANSPONSOR.com) – Having disability income protection can help blunt the emotional and financial impacts of being laid up for an extended period, insurer MetLife said Wednesday.
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A news release about The MetLife Study of the Emotional and Financial Impact of Disability said adequacy of that disability coverage can make a significant difference in how much people suffer during their recovery period.

Specifically, Metlife said the study found that:

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  • 90% of participants who said they had inadequate coverage felt that the disability had a major or devastating effect on their emotional lives, compared to 63% of those who felt their coverage was at least somewhat adequate.
  • 54% of those with inadequate coverage felt that their disability had a major or devastating impact on their relationships, compared to 37% of those whose coverage was felt to be at least somewhat adequate.
  • 77% of those with inadequate coverage experienced feelings of depression and anxiety during their disability, compared to 58% of those whose coverage was at least somewhat adequate.

In addition, 88% of those with inadequate coverage said the disability had a major or devastating impact on their feelings of financial security, compared to 61% of those who felt that their coverage was at least somewhat adequate.

Seventy-seven percent of those who felt that their coverage was inadequate reported withdrawing money from savings, investments or retirement accounts, compared to 51% of those who felt coverage were at least somewhat adequate. Fifty percent of those with inadequate coverage said they borrowed money from friends or family as a result of the disability, contrasted to 24% of those whose coverage was at least somewhat adequate.

Finally, 62% of those with inadequate coverage said they are currently living paycheck-to-paycheck, compared to 37% of those whose coverage was at least somewhat adequate.

The MetLife Study of the Emotional and Financial Impact of Disability was conducted in March 2010 by Zeldis Research Associates, and surveyed 300 people, ages 25 to 55, who had experienced a non-workers’ compensation/non-pregnancy disability that prevented them from working for six months or more but have since returned to work.

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