That's.......not at all what the letter says. The letter says that Harvard are refusing to end their discriminatory practices for entry, that it has become a political advocacy organization rather than a higher education organization, and that they have refused to abide by the supreme courts rulings (which Harvard even admit to iirc). As such they will no longer get any federal funding. If they were to comply with the laws, they would get their funding.
This seems pretty fair by any measure. To get federal funding you obviously should be following federal laws.
No, the exact opposite. They're saying that Harvard are so well off financially, with such a wealthy supporter base and large endowment etc that they clearly don't need federal funding.