Indiana's treasurer draws a line in the sand regarding corporate bailouts, bankruptcies
(Talk of the Town photos by Jennifer Zartman Romano) Above, Indiana State Treasurer Richard Mourdock was present in Columbia City during a historically significant day, speaking with Columbia City Rotarians about the state's major announcement about refusal to invest in bailed out companies. Below, Mourdock talks politics with 94-year-old Rotarian Elmer Heinley.
By Jennifer Zartman Romano
Rotary guests typically enjoy lunch among the members, but when the Governor calls, you go.
“It’s been a crazy kind of day,” said this afternoon’s speaker at the Columbia City Rotary Club meeting, State Treasurer Richard Mourdock. Instead of engaging in pleasantries with local Rotarians, Mourdock sat in his car in the parking lot of Parkview Whitley Hospital discussing the delicate state of the State’s economy with Governor Mitch Daniels and, more specifically, the state’s decision to take a stand on the bailouts. 
The phone call, it seems, was a bit preoccupying for Mourdock – that and the fact he’s likely to be on FOX News this evening talking further about some news he released for the first time ever today in Columbia City.
According to a press release issued by Mourdock, the State of Indiana will no longer purchase secured debt from any company that was recently bailed out by the US Government.
“The US Government has now put too much risk on those companies,” Mourdock said. “200 years of government and law say that in a bankruptcy, the first to be paid back are the bondholders. The US Government just told the banks they’re too big to fail.”
“We’re considering a lot of options for how we will proceed,” Mourdock said. “I have a fiduciary responsibility to protect our funds. We have to make an issue out of the way we’re doing things.”
“History is being made in Indianapolis and right here in Whitley County because you are the first to hear this,” Mourdock said.
Mourdock further spoke of the economic situation in the state and in the nation, saying, “I’m sick to death to turn on the news.” It’s not necessarily the grim news he doesn’t want to hear, but the optimistic slant that makes it sound like bounding out of the recession will be an easy task. In a few words, he says, it won’t.
“Every time it happened in the past, the US was the most business friendly place in the world,” he said. Recent trends and the advantages being created for businesses to relocate overseas are making the US less of a destination and more a place people are leaving.
“People say we have a problem with immigration – we have an even greater problem with emigration,” he said, adding that as companies choose to locate their businesses in places like China, India and Mexico, people are taking their wealth with them.
“Today we are among the world’s greatest debtors. If China hadn’t bought our debt, we’d be in a world of hurt,” he said.
It wasn’t all doom and gloom, though, as Mourdock feels the State of Indiana is better poised than many to handle what is happening around us.
An interesting note: Mourdock said that for the seventh consecutive month in a row, the state’s till on the state sales tax has been decreasing – something that’s never happened in the history of the state. In fact, during the Great Depression, the state’s sales tax income only decreased for two months in a row and then rebounded.
“People have stopped spending money,” Mourdock said, adding that Hoosiers have been continually spending more and more money since 1952 and this is the first time they’ve just stopped.
“People have started saving their money and paying off their debts,” Mourdock said. “That’s a good thing.
Mourdock surmised that even though financially the country is in a tough spot, there is one thing to keep in mind: Failure is not an option.
To read more of the specifics involving Mourdock's press release and the state's position on investing in companies that have been federally bailed out, click the link below:
Indiana State Treasurer Richard Mourdock issues investment directive as a result of losses stemming from Chrysler bailout
Indiana State Treasurer Richard Mourdock announced effective immediately that no portfolios under his control will make additional investments in secured corporate debt of businesses that are receiving infusions of federal funds. In addition, Treasurer Mourdock is communicating his message to Hoosier fiduciaries of public monies who might otherwise make investments in securities that can be devalued due to the unilateral action of the federal government.
"I serve as the Trustee of the Indiana State Police Pension Fund and am responsible for investing the Major Moves Construction Fund. Both of those funds suffered losses when the Obama administration overturned some two-hundred years of established law by redefining ‘secured creditors’ to mean something less,” explained Mourdock. “In the past, to be ‘secured’ meant an investor was ‘first in line’ in the event of a bankruptcy and ‘non-secured’ creditors would receive value after secured-creditors were paid. In the Chrysler bankruptcy, however, secured creditors received $.29 on the dollar even as non-secured creditors received higher values and ended up with a 55% ownership of the new company, which is fundamentally wrong and a dangerous precedent to the capital markets.”
“Indiana's pensioners should not be punished as a result of investment managers making historically sound decisions. The managers did nothing wrong, but the portfolios have been victimized due to the actions of the federal government in the Chrysler bankruptcy. Losses have happened once, due to the action of the feds, and as fiduciaries, we must be certain Indiana pensioners and portfolios are not victimized again. Henceforth, we will not add to the portfolios ‘secured’ debt from companies such as General Motors, other manufacturing companies, or those insurance companies who have or will be receiving bailout funds. Given the recent actions of the federal government, the risk is too great for any prudent investor to accept,” clarified Mourdock.
Conservatively, the Indiana State Police Pension Fund lost $147,400 and the Major Moves Construction Fund lost $896,000. Though not a fund managed by the State Treasurer's Office, the Indiana Teacher's Retirement Fund suffered, at a minimum, a loss of $4,600,000 due to the action of the federal government.
"As Treasurer and as Trustee of public funds, I will continue to review and consider all options that are available for the recovery of these monies,” stated Mourdock. "My message to all who are investing on behalf of Indiana's retired public employees is the federal government will disregard Hoosiers interest as it pursues unprecedented policies that strike at the heart of the capital system. We must act to protect funds against the actions of the federal government."