Indiana State Treasurer Richard Mourdock has quite rightly decided that an investment in anything run by the Obama adminstration isn’t worth the paper it’s printed on. In an article at WIBC today, it’s been reported that the state’s fund managers have been told that bonds issued by banks and automakers taking federal bailout money are no longer to be considered as an investment vehicle for the state.
In the real world, when a company goes into bankruptcy it is the bond holders who are normally paid first. That is part and parcel of buying bonds, and why they are considered a very low-risk investment. But the Obama-driven Chrysler bankruptcy cut that payment down to 29 cents on the dollar.
Mourdock says the Obama Administration’s handling of Chrysler’s debt wiped out $896,000 in value from the state’s investment of the proceeds from the 2006 lease of the Indiana Toll Road, and $147,400 from the Indiana State Police Pension Fund. Mourdock oversees both portfolios.
Mourdock says the Teachers Retirement Fund, which is administered separately, lost $4.6 million.
It’s only common sense to not throw good money after bad.
Too bad Washington doesn’t get it. While the bankruptcy judge has denied the motion filed by the Indiana investors to postpone the sale of Chrysler because it gives preferential treatment to other stakeholders instead of properly addressing the needs of its secured lenders, the government is going to lend Chrysler $600 million to cover potential losses incurred by GMAC Financial Services related to Chrysler loans and $260 million to replace funds transferred to its Canadian operations.
And lest it go unnoticed, it’s also being reported that the government is getting ready to give GMAC $7.5 billion (though GMAC still needs some $11.5 billion in capital reserves, according to the government’s stress tests), and by exercising options on its preferred stock, will become a majority shareholder with voting rights. Effectively creating their own bank holding company. Designed, of course, to lend people money for cars no one is going to want to buy.
Thanks for article. Everytime like to read you.
Robor
Hum, teachers retirement fund? How does that fit in with greedy speculators, police pension fund?
Other stakeholders happens to be the UAW for the most part and I’m a bit shocked at the Judge.
Yea Indiana gets it wonder when other states and pension funds will wake up? Or folks with stable bond funds in their nice 401ks?