---------- Forwarded message ----------
Date: Thu, 12 Oct 2000 09:51:05 -0500
From: Alfred Kraemer <akraemer@MCW.EDU>
Subject: Time to re-assess risks of deposit accounts and prepayments?

(This is a message I posted on ACQ-net about 2 weeks ago. I have received
some comments but would like more feedback on the vulnerability of serials
prepayments when a vendor runs into trouble. In the meantime, it has
become widely known that many customers of a medical book vendor, Login
Brothers, are at risk of losing deposit account funds, etc.)

---------------------------------------------

I wonder if libraries are re-assessing the risks of deposit accounts and
prepayments (not prepayments that are required but those that are
optional) in response to recent developments which highlight the
vulnerability of deposit accounts if the vendor gets into financial
trouble.

I'm referring to deposit accounts as well as those serials pre-payments
which are made months ahead of the actual due date.

1. Question:

Are those of you who maintain deposit accounts with commercial library
material vendors considering not to continue them?

If you are going to continue using deposit accounts are you planning to
handle them differently, e.g. not carrying large balances?

2. Question:

Do you anticipate a change in serials prepayments? (I'm thinking of
libraries that pre-pay serials vendors months before the payment is due in
order to gain interest, etc).

I don't know exactly what happened years ago to libraries that were
affected by the Faxon situation? It appears that the negative fallout was
minimized by a number of factors.

Considering the time when the news of financial troubles emerged with
Login, I believe -and this is only my opinion- that there is likely that
some vendors include expected deposit payments into their cash flow
projections in such a way that if financial trouble occurs it is likely to
occur at the worst time: when the deposit/prepayment levels are at their
highest.

Thank you.

Sincerely,

Alfred Kraemer
Head, Technical Services
Medical College of Wisconsin Libraries
8701 Watertown Plank Road
Milwaukee, WI 53226

Phone: 414-456-4273
E-Mail: akraemer@mcw.edu