Securities Market Crunch Hits Nonprofit Groups
February 15, 2008 | Read Time: 1 minute
Some prominent nonprofit groups are facing higher interest rates on loans because of Wall Street’s credit crisis, reports The New York Times.
At issue are so-called auction-rate securities, which usually have low interest rates. The Metropolitan Museum of Art is now paying 15 percent on auction securities, the newspaper says. Universities such as Georgetown and cultural institutions such as the de Young Museum in San Francisco have also taken major financial hits in the past few days.
G. David MacEwen, chief investment officer for fixed income at American Century Investment, explained, “What is going on here is a credit crunch. And the cost of the credit and the availability of credit even for good borrowers has clearly taken a big hit.”
While it is unclear how long such high interest rates will persist, some experts say they expect things to settle down soon. Cathryn P. Steeves, portfolio manager at Nuveen Investments, says, “At the end of the day, people will still be willing to buy paper from the Metropolitan Museum of Art at very favorable tax-exempt rates.”
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