Wednesday, May 20, 2009

How Barack Obama Giveth And Taketh Away From Indiana

State Treasurer Richard Mourdock has harsh words for President Barack Obama for changing the rules of bankruptcy in the case of Chrysler, causing state funds invested in the company by the state's Indiana State Police Pension Fund and a road construction fund to be lost. State losses will total over $1 million. The Indiana Teachers' Retirement Fund racks up a loss of $4.6 million. Mourdock claims President Obama put the interests of others ahead of secured lenders like the state. As a consequence of Obama's action, Mourdock plans to discontinue any state investments in companies receiving federal bailout assistance. That would have been the wiser course of action even before this latest announcement.


jabberdoodle said...

Did you mean $1B?

Blaming Obama for the lack of foresight and lack of basic investment acumen of the State folks is off base. It hardly matters if a company is taking Obama bucks when they are telling everyone that they are likely to end up in bankruptcy court. If you are risk averse, you get your money out.

The folks handling the public's money have been way too risky with the investments and somebody needs to be held accountable. Pushing the blame to Obama may work for the Republican Party haymakers, but it does nothing to protect hard working Hoosiers from a repeat of these huge mistakes in the future.

Anonymous said...

Agreed, jabber, but only to a certain extent. Indiana policy makers need to be held accountable, but Obama's policy are also destructive to the states (and to state residents) rather than helpful. It's not a partisan issue and looking at it from a "us and them" perspective will never fix the problem.

But the biggest financial bungle Obama is committing is continuing the treasonous the previous administrations hyper inflation and wealth transfer from our pockets into private interests. Obama continues to spend us into oblivion at a pace that equals the self-destructive policies of Bush. In the meantime, our economic competitors in Russia and China are methodically buying up resources across the globe, are using our ever-cheaper financial instruments to leverage their own growth, are amassing 100's of tons of the worlds gold, and are dancing across the globe forming alliances while our leadership is out twisting arms and deploying forces to nations that stand in our path.

We need to get a grip on investment and financial planning in Indiana. That's a definite. But if we can't reign in the planned economic implosion that our White House is continuing to execute, all of the bailing, repairing, and rebuilding that takes place within Indiana will be for naught. And again, it's not a partisan issue.

jabberdoodle said...

I don't see it as 'us vs. them' to point out that the Republican party is trying to foist blame on Obama for trying to fix the economic debacle caused by Bush. And I respectfully disagree that his policies are harmful.

If you are correct, why is Indiana trying to be first in line for the Obama bucks instead of being philosophically pure - matching its actions with its words? Its because the money will help keep people employed and better help those who do lose their jobs at least for the short term. Indiana has to help itself for the longer term, no doubt. But the efforts by the Obama administration should help blunt some of the more extreme impacts and hopefully stop the fiscal cascade into a depression.
And, I don't care who made fiscally risky investments - state republicans or city democrats. It wasn't their money they were risking and it is the taxpayer who is now on the hook for all of the mess. Accountablility is not happening and it should. There also should be restrictions put in place to keep the taxpayer money out of risky instruments in the future, but I don't see any movement in that direction either.

Instead we see Obama bashing because it is an easy political defense of bad investment choices.

Anonymous said...

jabber - I disagree with blaming it on the previous administration - both share the same policy goals. The only thing that has changed are the names and faces.

If Americans and Hoosiers want true economic security, it's not going to happen until the redemopublicratican party is replaced at both the state and federal levels. They are the single common denominator who has consistently overspent, overtaxed, overborrowed, and overextended on both sides of the aisle. They are also the single group who has involved us in costly and damaging international agreements, crises, conflicts, and commitments.

With regards to recovery, don't expect any kind of leveling off until sometime after 2011, because mortgage defaults have only just begun. The number of ARMs that will be recast in the next 12 months is 5x higher than the number for 2009, which will ultimately be much higher than 2008. Many ARMs that began 5 years ago at under $1500/mo will be jumping next year from just below $2000/mo to almost $3800. As of today there are $469 Billion worth of those loans on the market. If the average loan is $400,000 the impact is to over 1 million households, or more than 3 million people - and that's folks who still HAVE jobs, and in most cases their properties are now woth less than their loan balance. And that's only for loans in the Alt-A category.

So all of this talk about recovery and Obama bucks is nothing more than a dog and pony show. The federal dollars that go to the states are nothing more than the banks making hay while the sun is shining by using the Obama Administration to sell more loans to the taxpayers. Anyone who thinks it's a benefit is simply not thinking. If there was ever any real Obama stimulus plan it would have included the re-opening of US manufacturing facilities and a return to successful economic strategies that were eliminated in order to expose our economy to cheap, unregulated, underpaid foreign economies.

Eclecticvibe said...

"Accountablility is not happening and it should."

Accountability is happening, but only to the voters who put our leadership in place. The politicians are passing the buck here. America has an extremely high re-election rate. Voters have got to pay closer attention in order to demand great accountability from elected officials.

fulpy said...

why isn't this Murdock's fault? WTF was the state's pension funds doing in low/junk rated companies? I understand looking for returns but between this and the ISTA fiasco our financial management needs a serious review.

Gary R. Welsh said...

Maybe he thought it would help save Chrysler's 6,000 jobs in Indiana, including 5,000 in Kokomo alone. As I recall, the State of Indiana put money towards a Chrysler bailout back when Lee Iacocca was trying to rescue the company.

fulpy said...

One more thing, SHorebreak, I'm not disputing your # of ARM's resetting, but I am disputing the payment jumps. We are at historical lows for the Indices most ARM's are pegged to (LIBOR, PRIME, 1 year treasury), so while we may have a lot of ARM's resetting it should not trigger a wave of foreclosures.

Anonymous said...

fulpy - my rate examples are based on 1 month LIBOR plus 2.9% at the time the loan was issued. Rates HAVE dropped so the final jump probably won't be as high, as you've mentioned, so long as the Fed decides not to increase. A better revised number is probably closer to $3000 or $3100/mo - which is still no walk in the park in contrast to the first few years when payments were 50% as high.

If it were me, could I swing a payment in the low $2000 range? Sure. In the low 3's? I'd survive, but bye-bye vacation, and my wife would probably need to go back to work. So how about families who already have two incomes and who are already pinching pennies because nobody got the expected raises, promotions, or better jobs after they closed? I expect to see the percentage of defaults to increase exponentially.

If I'm over-estimating, then good - I played it safe and nothing is lost. If I take the stance that it's not so bad, and I move forward with some planned investments, I stand to lose my shirt if the bottom DOE drop out. From a risk based perspective I'd rather continue watching the numbers and wait until the data shows that things are settling before moving out of safe harbor. Right now, despite what the paid analysts on MSNBC, FOX, and CNN are telling their viewers, we're heding for rougher waters.