In the rush to shower plaudits all over the University of Canterbury’s proposed “philanthropic bond” issue we might pause to ask exactly whose philanthropy is involved here.
The University – in very large measure a state funded institution whether through direct taxpayer dollars or indirectly through soft interest loans to fee paying students – lies in the “too something or other to fail” category.
In short it won’t go bust – a characteristic unlikely to escape the beady eye of investors both institutional and individual let alone the brokers scalping off a commission selling these instruments of charity.
It may well be the case that foreign student and other non NZ taxpayer revenue will contribute in some measure to the modest coupon – I see no explicit, legal separation of the commercial from the non commercial to date – but into receivership the University will not go.
Even in devising the deposit guarantee scheme for banks, the Treasury had the financial institutions in question pony up a fee for the guarantee – and one related to risk at that.
If ever anyone was both best placed to design such a fee and facing the worst possible incentives to do same, it would be the former RB Deputy Governor who is currently VC of Canterbury.
This however seems, at present, less likely than getting a reasonable rating for a junk bond funded Undie 500 in 2010.
We might bear in mind that taxpayers generally like to choose their own charities thank you rather than having their funds oh so obscurely channelled through the most innocuous sounding distribution pipe to underwrite risk in a university building programme.