The Economic Crisis just hit my University and probably yours

[Lucky 13]

I am an employee and graduate student at a fairly large public university in New England. The President of the University just sent out this letter to faculty and staff:



The University of XXXXXX
Office of the President
October 1, 2008

From: XXXX, President
To: Members of the XXX Community
Re: XXX and the Financial Markets

I am writing to alert you to a situation that is affecting nearly 1,000 higher education institutions nationwide, as reported in the Chronicle of Higher Education and The Washington Post (attached). We learned on Monday from the Commonfund that Wachovia (the trustee bank for Commonfund) had frozen 90% of the assets in its Short Term Fund. XXX invests the majority of its operating cash assets in the Short Term fund, and we immediately withdrew the maximum amount allowed under these new restrictions in order to maximize our ability to access sufficient cash to meet our payroll and other obligations.

Yesterday the University participated in a lengthy conference call with the President of the Commonfund and representatives of many other affected institutions. During the call we were briefed on the redemption requirements and told that an additional 16-19% would be released by the end of the day today (Wednesday). Furthermore, more money is to be made available in increments over the next three months with a cumulative total of 57% to be available by December 29th and a cumulative total of 85% available by December 2010. At this time these assets do not appear to be at risk, but it will take some time before the University can withdraw all of its money. The time frame will be subject to credit market conditions.

I want to assure you that XXX will be able to meet its near-term cash flow needs. We are also in the process of negotiating a line of credit with a local bank to cover any potential gaps in cash needs and as insurance should the promised redemption schedule change or not materialize. We are also in the process of investigating alternatives to invest incoming cash somewhere other than in the Commonfund during this time of instability.

I expect that you will be hearing reports about this situation in both local and national media over the next several days. We believe that we have a satisfactory and sound plan for dealing with this very fluid situation, but we will be constantly re-evaluating our position based on continuing developments in the markets. Unfortunately, it appears that at least some small institutions may be more adversely affected by these developments.

I will keep you apprised as needed regarding this situation.

[grannie4peace]

1. i hope everything works out for you. :):):)

[AllieB]

2. Do you work at BU?

The university just announced a freeze on hiring and construction projects.

I hope that everything works out. Hang in there! :hug:

[Lucky 13]

3. Nope... that's another University to add to the list

shhh...(I'm at University of Vermont)

[jeanpalmer]

4. Wachovia has been in trouble for some time

I wonder why anyone would leave money market funds with them. Why didn't they transfer the funds to a safe bank? Were they trying to get an extra % interest? IMO anyone leaving money, especially large sums that are not FDIC insured, with really weak banks, like WAMU and Wachovia, were not prudent with their money. The handwriting was on the wall, for everyone to see.

When INDYMAC failed, thousands of people had more than the insured amount with them, even though INDY had been teetering on bankruptcy for months. Go figure.

[Lucky 13]

8. I'm betting that since this involves over 1000 universities...

... that they had some deal that locked them in to keeping their money with Wachovia. There had to have been some restrictions in place that wouldn't allow a move away from Wachovia. I will try to look into that and find out more info... probably has to do with this "Commonfund".

But ok... for the sake of argument, let's blame the University Boards who make these decisions about banking and investments. They are in the same category/class of people as on Wall Street. Some are ON Wall Street. The decisions they make effect the lives of THOUSANDS of employees and students. But the employees and students of the Universities 1) have no control over which banking institutions we do business with and 2) are the ones that are going to get fucked over by this.

The boards of the universities and the CEOs of wall street and the banking industry could be fired with no golden parachute tomorrow and they'd still go home to their mansions, multiple cars, yachts, and savings. When our funding is frozen or dries up we are ska-rood.

Once again, bad decisions were made by the powerful and the result is the lower and middle class suffering.

I have now caught up with some members of congress. Whose fault is it? Bush, CEOs, Wall Street, Bankers, Sub-prime lenders, the Congress. Yep. Agreed. They all suck. But they are right... we can't worry about afixing blame before we act on this. People are going to come to whatever conclusion they come to. But if we don't do something about this NOW lots of good people who are just barely making it anyway are going to be unemployed, having to quit school, and are at risk of becoming homeless.

[JackintheGreen]

5. I'm a grad student in the Mid-Atlantic

and I've been fearing this same scenario. No word yet, though. Fingers crossed for us all.

[barack the house]

6. Don't give in to fear tactics the banksters will relent first if you just hold tight.>

Apparently back in FDRs time he was aware of the criminality of the banks and reffered to them as banksters.

[barack the house]

7. One person put it best Bush can't say touble is on the horizon & it work as trouble is already here.

[Lucky 13]

9. But what happens in the mean time?

How long are we supposed to "hold tight"?

INSTITUTIONS may have some leeway to "hold tight" but individuals don't. Once this starts hitting individuals, there IS NO LEEWAY. How long before the pain currently felt by the University gets passed on to staff and students? At a small University it shouldn't take long.

Nobody WANTS to bailout WALL STREET or the banking industry. But if they fail, we will fail.

The last thing I want is for ANY of this money to go to paying exorbinant CEO and executive salaries. I wish they would right in some clause not only eliminating golden parachutes, but for any institution we bail out the CEO's salary should be LIMITED to some amount determined by assets, employee wages, or some other factor. How is it you can run a company into the fucking ground and be rewarded with millions?

[TornadoTN]

10. This isn't just Universities - the business world is getting rocked

Maybe that's already obvious to many and many businesses deserve it, but there are a lot of hard working and well-run businesses in this country that are getting royally screwed the longer this thing plays out. The bailout is more of a rescue plan now because it is hitting main street.

My own company, who pretty much runs things like a good, responsible business should, is getting hit with a lot of problems with funding by our customers in current and long-term contracts. The lines of credit are drying up for projects in many sectors (I am in energy and environmental fields) and we've already had several projects that have had to be re-negotiated because of the severe lack of availability of funds. Short term we're sound, but medium to long term I can see some major problems especially when those contracts become unenforceable because of a financial disaster. Our 400+ employees rely on our customers indirectly and our company to put dinner on the table and that simply won't happen when the customers don't have the money to continue operations.

It's trickling down fast.

[Lucky 13]

11. No doubt.... this is just one example of it hitting ME where I live.

We're all in for a world of hurt.

[TornadoTN]

12. I feel your pain.

Honestly, you guys are probably in a lot better position to weather the storm to some degree, as higher education (especially state funded or operated) is a higher priority. What scares me is when this thing really settles into main street and the businesses start to shutter their doors (even more than they already are) these people lose the opportunity to send their kids on to college or university. All of the money they have will go to living. At some point, the government and the states will run out of money to fund grants and scholarships and thus the decline of our society begins to be viewed as Romanesque.

It's that bad. The people arguing against this bail-out on our side have their hearts in the right spots but their mind is missing the connection to their own back pockets and their own families.

[REACTIVATED IN CT]

13. How is this hurting you ?

From the letter:

I want to assure you that XXX will be able to meet its near-term cash flow needs. We are also in the process of negotiating a line of credit with a local bank to cover any potential gaps in cash needs and as insurance should the promised redemption schedule change or not materialize. We are also in the process of investigating alternatives to invest incoming cash somewhere other than in the Commonfund during this time of instability.


Do you work in their Finance Dept ? Are you having to work harder to find credit and to find other investment options ?

Or are you a victim of fearmongering and somehow not reassured by the letter which was sent out to allay any fears you might have?

[blondeatlast]

14. Your compassion is touching. Fuck the people if it means your political purity is questioned.

Only an asshole would react that way.

[REACTIVATED IN CT]

15. Right back atcha! n/t

[Duppers]

18. I agree

REACTIVATED should be DEactivated.

[RollWithIt]

17. Well, I'm personally laying off 4 employees (who I like) next Tuesday

Because my small business short term credit lines are being revoked. I'm profitable and have been for some time. The problem is I'm also seasonal with my heaviest business from Nov 1 to April 30 each year. So I'm 30 days away from getting back into the heavy season, and the banks cant extend credit.

BTW, go fuck yourself and your high and mighty opinions of what is and isn't real.

[chill_wind]

16. "We are also in the process of negotiating a line of credit with a local bank

to cover any potential gaps in cash needs and as insurance.."

That sounds both wise and promising. Local banks are said to be hanging on and in many scenarios benefiting quite well.

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=389&topic_id=4145029&mesg_id=4145029

[BlooInBloo]

19. Nope, sorry. There is no economic crisis. DUers tell me so.