University accountants estimate the 10-campus system will lose as much as $136 million over the next 34 years on complex contracts.
The University of California has lost tens of millions of dollars, and is set to lose far more, after making risky bets on interest rates on the advice of Wall Street bankers.
University officials agreed to the financial deals – complex contracts known as interest-rate swaps – because they believed they could save money in the midst of an aggressive building spree.
But the deals are now costing the university an estimated $6 million a year, according to its financial statements.
And university accountants estimate the 10-campus system will lose as much as $136 million over the next 34 years that it is locked into the deals. Those potential losses would be reduced only if interest rates start to rise.
Already officials have been forced to unwind a contract at UC Davis, requiring the university to pay $9 million in termination fees and other costs to several banks. That sum would have covered the tuition and fees of 682 undergraduates for a year.
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