What you call "the endowment " doesn't exist in any monolithic sense. "The endowment" is a disparate collection of donations from alumni such as scholarships, artwork, buildings, etc., governed by their respective, specifically-worded contracts. Many of these gifts aren't easily convertible to cash. In fact, a large cash gift is rarely offered at all and rarer still would any such gift come unconditionally.

> Government subsidies might explain it though. Why should Harvard spend their own money when they can spend mine?

The government's justification has historically been that the research value gained by putting the brightest minds to work at the frontier of academic science is worth the allocation of necessary monies. Whether that is (or has been) true is obviously debatable.