Wednesday, October 01, 2008

Another sign of the credit crunch 

The nation's financial crisis hit home for Minnesota colleges and universities this week when an investment fund used by several to pay short-term expenses said it would close and cut off nearly all access to cash.

The move prompted David Laird, president of the Minnesota Private College Council, to warn the state's congressional delegation Monday that some of the group's 17 members would not be able to make payroll Tuesday.
Source. The money was with a fund operated by Wachovia Bank, who restricted withdrawals on Monday. Those who yearn for the no-Fed days will note that this was a common practice of banks at that time.
News of the Short Term Fund's demise this week made Mike Sullivan, chief investment officer at the University of St. Thomas, feel like he had dodged a $40 million bullet.

That's the amount of St. Thomas' money he had tied up in the Short Term Fund until about 1 1/2 weeks ago when some troubling signs convinced him it was time to move the money into Treasury bills.

"It was a hunch I played, an absolute hunch," Sullivan said. "That's money we will be using over the next two to three months. That is money we'll be using to make payroll, pay bills ... This is a very, very big deal in higher education right now. What are colleges going to do to make payroll?"

...While St. Thomas dodged the Commonfund bullet, Sullivan's not sure he'll always be so lucky. The credit crisis has become so pervasive, it's hard to tell where money will be safe.

"I am almost prepared for something out there in this liquidity crisis and confidence crisis to go against us," he said. "There is just so much happening out there."
None of the MnSCU schools are reported to have been in this fund, so SCSU readers should relax.

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