It’s a Family Affair: Ivy Leaguers Manage, Lose Alma Maters’ Money
If we have learned one thing from market meltdowns, it's that Wall Street is utterly glutted with the Ivy League's overeducated ilk, from top to (curvaceous) bottom and everywhere in between. Now, another wrinkle: An Ivy League university's funds, temporarily frozen and cruising for annihilation at the hands of financiers educated at that same institution.
We are talking, of course, about Penn. According to the DP, Penn keeps a small portion of its coffer at Commonfund Treasury, a $9.3-billion operation specializing in the management of educational cash, helmed by a handful Princeton, Yale, and Wharton grads. Wachovia (a Commonfund trustee), announced today the coming termination of all short-term Commonfund accounts. Something about liquidity and distributing assets? Foreseeing the pandemonium this announcement would cause, Wachovia helpfully froze affected accounts to prevent the First Horse of the Finance Apocalypse: A Bank Run.
Luckily, the entirety of Penn's frozen funds is a measly $100K, which means all they have to do is, like, cash two undergrad tuition checks, and they'll be back in the black. (Although perhaps with a shittier credit rating.)
Since this is a somewhat complicated story, you will perhaps want to read this Commonfund-penned paper explaining how,
Although debt is not a panacea without risk, incorporating debt into the capital structure of a university offers a number of advantages.
Like the advantage of having no access to your money! A virtual piggy bank, but without the little hole in the bottom for getting the money back out.
In case you are still confused, here is the exact extent of my understanding of debt structures and the current economic crisis, as explained in 21 seconds during the bank run scene in "It's a Wonderful Life":
Basically, as long as Penn doesn't jump off that bridge on a cold, windy day, everything will be fine.
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October 7th, 2008 at 6:39 pm
It’s a Wonderful Life is pretty much my entire context for the economic crisis as well. As near as I can figure, the bailout is basically the equivalent of the federal government rummaging around in its purse and proclaiming, “We have two thousand dollars!”