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Wednesday, March 18, 2015

Sweet Briar a Victim of Predatory Lending?

As the Sweet Briar situation continues to unfold, a policy analyst from the Roosevelt Institute digs deeper into the school's financial statements, and discovers troubling information:

"[P]redatory banking practices and bad financial deals played an important and nearly invisible role in precipitating the school’s budget crisis. . . . A single swap on a bond issued in June 2008 cost Sweet Briar more then a million dollars in payments to Wachovia before the school exited the swap in September 2011. While it is unclear exactly why they chose 2011 to pay off the remainder of the bond early, they paid a $730,119 termination fee. . . . 

Just how big a deal are these numbers? The school has a relatively small endowment even among small liberal arts colleges: currently valued at about $88 million, with less then a quarter of that total completely unrestricted and free to spend. But in 2014, the financial year that appears to have been the final straw for Sweet Briar, total operating revenues were $34.8 million and total operating expenditures were $35.4 million, which means that the deficit the school is running is actually smaller than the cost of any of the bad deals it’s gotten itself into with banks."

Unlike most victims of predatory lending, however, Sweet Briar would have had access to high-level legal and financial advisors. If the financial deals were as bad as the report suggests, something went very wrong in the college's decision-making process.

Posted by Cassandra Burke Robertson on March 18, 2015 at 06:32 PM in Culture, Current Affairs, Life of Law Schools | Permalink

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