[Summers] is so convinced of his own genius, and he is so convinced that he is smarter than anyone else, that he is very bad at listening to other people, people who might be able to stop him, prevent him from doing really stupid things. I’m sure that he had people telling him, don’t be emailing Jeffrey Epstein, that’s a bad idea. But he would just go ahead and do it anyway because he has that kind of hubris, right?
He did one of the world’s worst ever fixed income trades when he was president of Harvard, where he decided that he was going to build a massive new campus across the river. And he knew that this massive new campus was going to cost a lot of money. And he was also convinced that interest rates were very low and they wouldn’t go down any further. And in fact, they were going to go up further.
And so he reckoned that when Harvard in the future was going to borrow money to build the campus, he wanted Harvard to be able to borrow the money in the future at the interest rates today. So he entered into this incredibly complex sort of future forward swap thingy. And then, of course, interest rates went down rather than up. He had to unwind the swap because they never built the campus. And he cost the university about a billion dollars.