Thursday, October 2, 2008
More than a thousand colleges and private schools invested in the Commonfund are scrambling to make payroll after their rights to make withdrawals were suddenly frozen, according to the Wall Street Journal:
A fund that invests cash for about 1,000 colleges and private schools suddenly froze withdrawals this week, leaving school finance managers scrambling to make sure they have enough money for payroll and other bills. For 34 years, colleges and schools parked cash in the now $9.3 billion fund, which offered returns slightly above U.S. Treasury bills. That it now might take years for the institutions to get all of their money back shows how widely credit-market woes are reverberating beyond Wall Street. Monday, Wachovia Corp., the fund's trustee, said it was terminating the fund, liquidating its assets, distributing the proceeds and resigning as trustee, "to ensure that all investors would get equal treatment and that there would be orderly and equal distributions," says Laura Fay, a Wachovia spokeswoman. That stunned some of the colleges, which had believed they could get immediate access to the money if needed.
I was a guest on a local talk show yesterday where the prevailing sentiment was that both Donkeys and Elephants were just trying to scare us all into giving our money to a bunch of wealthy fat cats. "Look," I said. There are two reasons why people tell you something bad is about to happen. "First, they might just be trying to scare you. Second, something bad might be about to happen." I'm as indignant as the next guy about the $700 billion (I can't even type enough zeros for that), nobody helps me pay my bills. But I think the reason we are hearing scary stories is not because people are just trying to scare us. I think something bad is about to happen (unless we do something!).