Indiana’s treasurer won’t invest any more money in the corporate debt of companies receiving federal funds after state pensions were stung by millions of dollars in losses in the Chrysler LLC bankruptcy.
Treasurer Richard Mourdock says the administration of President Barack Obama changed long-standing investment rules in the bankruptcy proceedings, causing the Indiana State Police Pension Fund to lose $147,400 and a road construction fund managed by Mourdock’s office to lose $896,000. The Indiana Teachers’ Retirement Fund, which is controlled by its own board of trustees, pegged its losses at about $4.6 million.
Those losses are a small sliver of the overall value of the funds — the police fund holds about $350 million, the road fund $2.5 billion and the teachers’ fund $6.9 billion.
But Mourdock said the losses shouldn’t have happened. He said the Obama administration put the financial interest of other parties ahead of secured lenders such as the state, even though secured creditors are typically first to get paid in a bankruptcy.
“It’s just flat-out wrong — it’s infuriating to me,” Mourdock said. “It’s not right that state policemen and teachers suffer this loss.”
The Obama administration has said that all sides — including the auto workers union and Chrysler bondholders — had to sacrifice to save the company.
“President Obama’s commitment to the auto industry allowed Chrysler to survive and saved tens of thousands of American jobs,” said White House spokeswoman Amy Brundage. “Indiana workers and their families know that saving American jobs must be a top priority during these difficult economic times, and that’s what this administration has done.”
Four banks holding 70 percent of Chrysler’s secured debt agreed to wipe out the debt in a deal that would give the lenders 29 cents on the dollar. When a handful of debt holders objected, saying they deserved more, Obama said they were seeking an “unjustified taxpayer-funded bailout,” and they later agreed to accept far smaller repayments from a bankruptcy reorganization than they had first demanded.
Mourdock said it doesn’t make sense for the state to invest in secured debt of companies receiving federal funds if previous rules no longer apply.
“Given the recent actions of the federal government, the risk is too great for any prudent investor to accept,” Mourdock said.
Mourdock is revamping his office’s policies to specify that investment managers shouldn’t buy any more secured debt from companies receiving federal bailout money. He is urging other managers of Indiana retirement funds — such as state universities — to follow suit.
The Indiana Teachers’ Retirement Fund, which provides monthly benefits to more than 41,000 retirees, is managed by a six-member board of trustees that makes decisions about how the money is invested. Communications Director Molly Deuberry said the board’s next meeting is scheduled for June.
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