In an act suggesting that Bowdoin is not immune to the credit crisis gripping the country, Wachovia Bank froze a fund containing less than five hundred thousand dollars of the College's money on Monday. The same fund contained millions of dollars of college money before Bowdoin transferred a large portion of it to other investments this summer, according to Senior Vice President for Finance and Administration Katy Longley.
"Fortunately, the College moved the funds elsewhere to safer investments," Longley said of the summer withdrawal.
According to President Barry Mills, a sizable portion of the funds were moved because of the nature of the investments.
"The investments that were being made [by the fund managers] didn't make us comfortable," Mills told the Orient on Thursday night.
Bowdoin was one of more than 1,000 participating colleges and private schools in a $9.3 billion account that Wachovia held in a short-term investment fund, managed by the Connecticut nonprofit Commonfund. On Monday, Wachovia announced that it was stepping down as trustee of the fund, and that it would allow participants—including Bowdoin—to withdraw only 10 percent of their assets. The percentage later grew to 37 percent on Thursday afternoon, and is expected to reach 57 percent by the end of this year. The limited access to funds prompted concerns from participating schools about meeting day-to-day expenses.
Longley said that Bowdoin's investments in the fund consisted of a reserve health plan fund, valued at "less than half a million dollars." The fund, however, did not include assets essential to the day-to-day operations of the College, like payroll.
"The frozen investments with Commonfund are for a health plan reserve fund the College is legally required to keep," Longley said. According to Longley, the fund is required as part of the 1974 Employee Retirement Income Security Act (ERISA).
"Bowdoin's Commonfund investments are truly a reserve fund," said Mills. "It really has no impact on the College."
"It's not a fund we use, or even are able to touch. It's a small reserve fund," Longley said.
Longley said that the general operating funds of the College come from "Treasury bills, money market funds, and deposits in local banks." She said that local banks with College deposits are being closely monitored, but said the banks have a lot of liquidity.
"I don't think we could be in safer deposits if we wanted to be," she said.
Other colleges had millions invested in the Commonfund account. According to an October 2 New York Times article, the University of Vermont had approximately $79 million invested in the fund.
"A lot of other schools have millions and millions invested in the fund," Mills said. "Except for the reserve fund, we were completely unaffected by Commonfund."
Smaller institutions have also been hit by the freeze. Bethany College, a college of 830 students located in West Virginia, had $700,000 invested in the fund. According to an October 1 Chronicle of Higher Education article, Bethany may face difficulty covering expenses since the school normally uses short-term funds—like those currently frozen—to pay for operating costs.
"There's a lot of risk out there," Mills said of the current economic climate. "Right now, if you've got a hundred dollars, you keep it in your pocket, you try and protect it. You don't try to make it a hundred and fifty."
This article was corrected on October 3, 2008.