Yale’s fortune off 25%, but the really stunning figure is not that, but this:

The 25 percent decline has a very significant impact on operations because income from the endowment supports 44 percent of the university’s annual expense base of $2.7 billion, Levin said.

Yale projects an annual budget shortfall of $100 million next year and growing to over $300 million by 2013-14.

This compares to Harvard’s reliance for 35% of operating expenses on endowment income.  But the good news, at least according to the Yale President:

Levin says the endowment is still very large and is at its same value as January 2006.

Yale will continue to recruit faculty and maintain improvements to financial aid it announced last year for low- and middle-income families, he said.

Perhaps this is true, though it’s hard to see how they can sustain this long-term without spending endowment principal, which most schools (NYU is an exception) are reluctant to do. 

Curiously, the troubles at wealthy private universities may be good news for state universities, since it reduces the likelihood of "raids" on senior faculty at wildly inflated salaries.  Even if Yale continues hiring, as I expect it will, there will surely be fewer cases of offering faculty elsewhere 50% increments on their current compensation, the kinds of things that happened not infrequently over the last decade. 

UPDATE:  A philosopher at Harvard writes with an important clarification:

I wanted to mention that your Harvard/Yale comparison is a little misleading.  At Harvard each faculty is fiscally autonomous.  So what’s relevant to Philosophy is the financial state of the Faculty of Arts and Sciences.  And the FAS relies on endowment income for 54% of operating expenses.   Currently the FAS is projecting a $100-133 million shortfall in its budget for next year.   (The annual budget of the FAS clocks in at about $1 billion.)   Hence the job freeze.  However, the administration is committed both to maintaining our high level of financial aid (undergrad & grad) and to not letting financial factors influence promotion decisions.