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Bank Freeze Leaves Hundreds of Colleges Cut Off From Short-Term Funds
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| Contributor | particleman |
| Last Edited | particleman Oct 01, 2008 11:46am |
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| Category | News |
| News Date | Wednesday, October 1, 2008 05:00:00 PM UTC0:0 |
| Description | Wachovia bank has frozen the accounts of nearly 1,000 colleges, leaving institutions unable to access billions of dollars they depend on for salaries, campus construction, and debt payments.
The freeze, which affects most institutions that invest their endowment income and other assets through Commonfund, has some colleges worried that they won’t be able to make payroll this period, said Verne O. Sedlacek, president and chief executive of Commonfund, which manages investments for nonprofit institutions. Many colleges use the organization’s short-term investment fund for operating expenses, “almost as a checking account,” he said.
As of last Friday, the Common Fund for Short Term Investments managed approximately $9.3-billion in assets for 900 colleges and roughly 100 private schools.
The freeze could have the biggest effect on smaller institutions like Bethany College, in Kansas, which has $700,000 invested in the fund. President Edward F. Leonard III said his institution has enough money to cover costs for now because students just paid tuition, but he’s worried about the second semester, when the college typically dips into its short-term funds to pay for a variety of operating expenses.
Minnesota’s private colleges are worried as well. On Monday, the state’s independent-college association sent a letter to its Congressional delegation, warning that some colleges would be unable to make their payroll obligations this week.
Colleges with larger endowments, like the University of Vermont, may find it easier to adapt. Daniel M. Fogel, the university's president, said his institution has “tens of millions of dollars” invested in the short-term funds, but he expects that it will be able to make do.
Russell K. Osgood, the president of Grinnell College, in Iowa, said his institution has a “modest amount” invested in the fund and did “not foresee any impact.” But he said he feared for some of his colleagues. |
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