2008 Woodie Awards
A-State loses grip on funds due to crisis in economy
Issue date: 10/9/08 Section: News
More than $6 million in ASU money is currently untouchable due to the U.S. financial crisis, Chancellor Robert Potts said Oct. 1 in his First Friday report to faculty and staff.
The monthly report was released two days early specifically for the announcement, which came after Wachovia Bank was forced into a "shotgun merger" with Citigroup, Inc., at the request of FDIC - the Federal Deposit Insurance Corporation.
ASU had more than $9 million in the Common Fund for Short Term investments, of which Wachovia Bank is the trustee, at the time of the merger on Sept. 28.
"ASU has used The Common Fund for Short Term investments for more than 13 years to park operating capital such as collected fees and tuition, which early in the semester is a substantial amount but is spent down for expenses during the course of the semester," Potts wrote. "We earn interest equivalent to the three-month Treasury Bill rate on our balances with the Fund."
Wachovia Bank e-mailed Dr. Ed Kremers, interim vice chancellor for finance and administration, Sept. 29 to inform the university that it was terminating and distributing the assets in the fund because of recent developments in the credit markets.
According to Commonfund, an organization which established the Fund for Short Term investments in 1974, the Fund for Short Term investments managed assets of approximately $9.3 billion on the behalf of around 1,000 clients as of Sept. 26.
Everyone using the Fund was able to immediately withdraw 10 percent of their asset's value from the Fund. Potts said ASU immediately withdrew the money Sept. 30, which left more than $8 million still in the account.
Additional money was released Oct. 1 and Tuesday to bring the amount of ASU funds still being held to more than $6 million.
"Based on the maturities of the commercial paper, a minimum of 57 percent of our investment in the Fund will be available for withdrawal by Dec. 31," Potts said. "The remainder of the Fund assets has longer maturities. Assuming that the market for these types of securities does not recover, then it might take until 2011 to fully "cash out" of this Fund."
Commonfund, in its official announcement, listed its top priorities in dealing with the Fund's end:
Find credit to extend to effected institutions that will not have sufficient money, returned from the Fund, to meet critical and immediate needs.
Establish a fund to act as an acceptable liquidity vehicle for transactional cash needs for educational institutions that will invest in the government's securities.
Designate a successor trustee within 60 days.
The monthly report was released two days early specifically for the announcement, which came after Wachovia Bank was forced into a "shotgun merger" with Citigroup, Inc., at the request of FDIC - the Federal Deposit Insurance Corporation.
ASU had more than $9 million in the Common Fund for Short Term investments, of which Wachovia Bank is the trustee, at the time of the merger on Sept. 28.
"ASU has used The Common Fund for Short Term investments for more than 13 years to park operating capital such as collected fees and tuition, which early in the semester is a substantial amount but is spent down for expenses during the course of the semester," Potts wrote. "We earn interest equivalent to the three-month Treasury Bill rate on our balances with the Fund."
Wachovia Bank e-mailed Dr. Ed Kremers, interim vice chancellor for finance and administration, Sept. 29 to inform the university that it was terminating and distributing the assets in the fund because of recent developments in the credit markets.
According to Commonfund, an organization which established the Fund for Short Term investments in 1974, the Fund for Short Term investments managed assets of approximately $9.3 billion on the behalf of around 1,000 clients as of Sept. 26.
Everyone using the Fund was able to immediately withdraw 10 percent of their asset's value from the Fund. Potts said ASU immediately withdrew the money Sept. 30, which left more than $8 million still in the account.
Additional money was released Oct. 1 and Tuesday to bring the amount of ASU funds still being held to more than $6 million.
"Based on the maturities of the commercial paper, a minimum of 57 percent of our investment in the Fund will be available for withdrawal by Dec. 31," Potts said. "The remainder of the Fund assets has longer maturities. Assuming that the market for these types of securities does not recover, then it might take until 2011 to fully "cash out" of this Fund."
Commonfund, in its official announcement, listed its top priorities in dealing with the Fund's end:
Find credit to extend to effected institutions that will not have sufficient money, returned from the Fund, to meet critical and immediate needs.
Establish a fund to act as an acceptable liquidity vehicle for transactional cash needs for educational institutions that will invest in the government's securities.
Designate a successor trustee within 60 days.
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