Are Colleges in Trouble Because of the Wall Street Crisis?

October 3, 2008

Almost 1,000 colleges have had their bank accounts frozen by Wachovia, which has affected their operations, mainly on employees’ salaries, payment of debts, and campus construction.

Prior to the freezing of the bank account, Wachovia sold its banking operations to Citigroup. Wachovia on Monday announced that it no longer serves as one of the trustees of the fund. The plan participants will only be allowed to withdraw 10 percent of their own assets, which is the value that the securities have reached maturity. Colleges can’t withdraw their money until 2010.

For more than 35 years, Wachovia has been in operation and is invested in Triple-A government and corporate paper, according to W. Judson Koss, a Commonfund spokesperson.

The colleges have been conducting transactions with the bank in relation to their funds like checking accounts, withdrawing funds for payroll, depositing tuition fees, maintenance and operating expenses, and other short-term needs that might arise.

This account freeze would bring out the greatest impact on smaller educational institutions as those with bigger endowments would easily adjust. Meanwhile, some college personnels are not worrying about their payroll. In addition, the University of Vermont has stated that around half of the university’s operating assets, amounting to $79 million, are invested in the bank.



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