The Markets December 11, 2007

Columbia Shutters Strategic Cash Portfolio

Columbia Management, a unit of Bank of America Corp., is shuttering its $12-billion Strategic Cash portfolio saying major institutional clients headed for the exits because of losses on complex asset-backed securities.
Reported by

A Wall Street Journal report said the Strategic Cash portfolio had $40 billion in assets a few months ago.

The fund was an enhanced money fund, a short-term investment pool that offered higher yields than more traditional cash investment offering, according to the WSJ. However, unlike traditional money-market funds, the Strategic Cash fund did not guarantee it would maintain a $1-per-share net asset value, even though the fund was managed toward achieving that goal.

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The fund’s current net asset value is $0.994 per share, officials said, according to the Journal.

Large investors will be redeemed “in kind,” which means they will be handed their share of the underlying securities. Smaller investors can take out cash, the news report said.

The Strategic Cash portfolio was open to investors with a minimum of $25 million.

Compliance December 11, 2007

Bill Would Allow Withdrawals from Retirement Accounts for Mortgages

A New York Congressman has proposed allowing homeowners with resetting adjustable rate mortgages to pull up to $25,000 out of retirement accounts or IRAs to be used to pay their mortgages or refinance into a fixed-rate home loan.
Reported by

According to a news report in the Staten Island Advance, the legislation proposed by U.S. Representative Vito Fossella (R-New York), would apply to adjustable rate mortgages resetting between 2005 and 2009.

Eligible homeowners cannot have incomes of more than $114,000 for a single person and $166,000 for a couple, and the withdrawal must be carried out within 90 days of the scheduled mortgage interest rate reset.

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To encourage repayment, homeowners would not be taxed for additional income if the loan is repaid within five years, according to the Advance.

“I think it’s a common sense way of allowing individuals who may be having mortgage issues to tap into their own accumulated capital to help them through a period of financial duress,” said Fossella of his proposed Homeowners Assistance Act, in the news report.

Officials say a major contributing factor to the nation’s mushrooming problem of home foreclosures was lenders granting loans to borrowers who could not afford the post-reset mortgage payments.

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