GW’s second episode of large-scale financial instability occurred at the turn of the 20th century, when the University was known as Columbian College.
In an attempt to garner more funds for the school from the Baptist Convention, Columbian College President Benaiah Whitman took some fairly drastic action, suggesting amending the school’s charter to create a board of trustees mostly comprised of Baptist members. Congress approved the amendment March 18, 1898, creating a 22-member board that would be two-thirds Baptists. Columbian College was created by an act of Congress.
The Columbian College Board of Trustees, headed by Whitman, sent a representative to the Baptist Education Society – part of the American Baptist Society – hoping that the society would offer financial support to the cash-strapped school. The answer to Columbian College’s pleas was a resounding no. Whitman presented his resignation soon afterward, despondent and discouraged that he was unable to raise the necessary funds. His resignation took effect April 30, 1900.
In an ironic twist, it was revealed later that part of the reason the American Baptist Society refused to give Columbian College financial assistance involved the requirement that two-thirds of the board be Baptist. Members of the society knew that Columbian College was founded on the principle of non-denominationalism and the new restrictions did not please them, according to Bricks Without Straw by Elmer Louis Kayser.
Charles Willis Needham was sworn in as Columbian College president June 18, 1902. As soon as he assumed office, Needham stressed the college’s dire financial situation to the Board of Trustees. The college’s income that year would total about $83,000 – not enough to cover expenditures that reached $98,000. The $15,000 hole combined with previously accrued debt, adding up to a deficit of $26,000. At the same time, despite the financial crisis, student enrollment continued to rise. In 1902, Columbian College had a student population of 1,383.
Needham viewed his mandate as president rather simply and all his actions were motivated by a single goal – to raise sufficient funds to continue the operation of the college.
In 1904, Columbian College became The George Washington University and a new seal was created. There were rumors that the University may change locations to Foggy Bottom and the West End, where it resides today, which generated much excitement.
But ever-present debt continued to loom overhead and even increased, providing a somber note to the celebratory atmosphere.
Despite donations from J.P. Morgan and Andrew Carnegie, the University could not overcome its massive debt. Buildings were mortgaged and re-mortgaged, professors were sent on leave, the borrowing power of the University was tested to the maximum and yet it seemed that no end was in sight.
The tension reached a boiling point, prompting a famous exchange between Needham and a senior professor at a faculty meeting. The professor challenged the figures presented by Needham. Responding bitterly, Needham said,Professor, you know, figures do not lie, to which the professor smartly responded, No, Mr. President, but liars figure. These types of vicious and hostile exchanges became almost commonplace on campus.
Although the situation was dire, a slight glimmer of hope presented itself Feb. 25, 1910. President Needham found himself testifying in front of Congress about an amendment to a piece of legislation that would give money to GW as the premier institute of higher education in the District. He testified to the financial stability of the school and cited extremely inflated figures that hid the University’s growing debt.
On April 25 of the same year, the U.S. attorney general announced a thorough investigation of GW’s financial condition. Because there was legislation pending that would affect GW and because many people thought Needham’s numbers were overblown, the attorney general’s office embarked on some detective work. Following the investigation, Needham offered his resignation as president April 27, 1910.
Two special bank accountants for the Department of Justice investigated GW and issued a report detailing exactly how inflated the figures in Needham’s testimony were. They placed the value of real estate and equipment at about $800,000, and the total outstanding debt at about $550,000. The Department of Justice also determined that the University’s spending had exceeded its income by about $450,000 since 1899.
In subsequent reports, the news for GW only worsened. Findings showed that GW used $350,000 of its endowment and other trust funds to defray operating and other expenses. According to University Historian Elmer Louis Kayser robbing Peter to pay Paul was a common practice, and taking money from the endowment and trusts to pay daily operating costs was routine.
As a result of the University’s brush with the Justice Department a plan was developed to repay all of the University’s creditors. The University promised to pay $350,000 to the Washington Loan and Trust Company within 10 years, and conveyed the deeds on its H Street property downtown to the National Savings and Trust Company. If the University were to default on any of these agreements, the attorney general would liquidate all of GW’s real estate and property.
Amidst all of this turmoil, Rear Adm. Charles Stockton took over as GW president and served for almost three years without ever receiving a salary. The situation was bleak. Budget cuts were made, and the condition of the University was ominous. Even so, Stockton was determined to turn things around.
GW slowly but surely rebuilt its financial security, becoming one of the most prosperous universities in the area and the country today.