<p>The cash call commitment issue is a very serious problem - for Amherst, for Harvard, for Princeton, for Yale. Trust me, the last thing anyone at Amherst ever dreamed of doing this winter was borrowing $100 million in taxable bonds at interest rates of 5% or higher. That’s an additional $5 million a year in budget cuts Amherst is going to have to find, as the cost of bailing out the cash flow problems.</p>
<p>Saving grace? The cash call commitments are spread over several years and Amherst’s Aaa bond rating means they can continue to borrow as needed. </p>
<p>It’s a serious miscalculation by the board and/or the investment managers. Heads should roll and probably will. Amherst didn’t need to be rolling the dice. The size of the endowment meant that it was perfectly fine to be conservative with the endowment.</p>