Well Done, Mr. Mourdock

By: Wes Culver
June 5, 2009

On Tuesday, June 2nd, the US Court of Appeals for the 2nd Circuit agreed to hear Indiana State Treasurer Richard Mourdock’s claims against the government’s managed restructuring of Chrysler Corporation. The centerpiece of the plan is to sell the bankrupt automaker to Italian automobile manufacturer Fiat. Unlike bankruptcies of the past though, this bankruptcy is like none ever before. The federal government managers of this situation have used the power of the federal government to step in and dissolve the rights of Chrysler bond-holders.

Chrysler bonds are owned by many, many people in our country. Many people may have them as part of their 401K or their retirement investment fund and not even know it. The elimination of the rights of these bondholders substantially decreases the value of any fund or portfolio that owns Chrysler debt.

In Indiana three public funds, the State Police Pension fund, the Teachers Retirement Fund and the Major Moves Highway Construction Fund own large amounts of Chrysler bonds. These funds have collectively lost roughly $5 million as a result of the federal government’s unwise rewriting of bankruptcy law and the rules that govern bankruptcy court proceedings.

The question about Chrysler is not whether or not they should go bankrupt, but who they should belong to coming out of that bankruptcy. Law and history both say that those who invested in the company and owned the company should the ones that own it upon its emergence from court. Perhaps because of political expediency, or perhaps because of well-intentioned but misguided thinking, the government has changed long-standing law with the result being a terrible shift away from previous bankruptcy precedents.

The transfer of wealth that is taking place here is not the transfer of wealth from the “rich” to the “poor”. The transfer of wealth is going from those who invested in an American company to an Italian automaker that is getting 20% ownership for free! Indiana State Treasurer Richard Mourdock’s principled opposition to this action should earn him the respect of all who believe that obligations are to be honored and responsibilities are to be fulfilled irrespective of how convenient such action is.



Wes Culver (R-Goshen) represents Indiana's 49th House District in the Indiana General Assembly.