State Treasurer Richard Mourdock made a decision three years ago that was fraught with risk for thousands of Hoosier jobs and his own political future.
He tried to stop the Chrysler bankruptcy deal.
Within minutes of his decision, he became a target -- especially for many in the auto industry.
"I thought that my political career was over," Mourdock recalled.
Instead, he now could become the spoiler in the re-election bid of Indiana's iconic veteran lawmaker, Sen. Richard G. Lugar, in the May 8 Senate primary . . .The story doesn't explain that Gov. Mitch Daniels sided with Mourdock's decision to fight the bankruptcy deal for Chrysler. As Daniels wrote in his recent book:
The plan required secured bondholders to accept 29 cents on the dollar for their investments. That came as a shock to Indiana. The Indiana State Police Pension Fund and the Major Moves road construction fund, managed by the treasurer, and the Teachers' Retirement Fund, managed by a board, all had Chrysler bonds.
Mourdock said he bought them in the summer of 2008 at 43 cents on the dollar -- cheap because the auto industry already was in trouble.
It's a decision that his political opponents question.
Mourdock, though, argued then and now that the risk was acceptable because these were secured bonds, and a secured creditor gets priority in recouping money in the event of bankruptcy.
Accepting the deal meant the police fund would lose about $147,000, the highway fund $896,000 and the teachers' fund $4.6 million, the treasurer's office said at the time.
Nationally, banks acquiesced, though they stood to lose the most from the deal. So did the only other states that had funds invested: California and Michigan.
"I remember meeting with the governor," Mourdock said. "We were just in shock that this could be happening, that these people could be rolled this way."
Still, Mourdock hesitated.
"I went back and forth. You wonder, is it the right thing? Is it the wrong thing?"
Mourdock and I, as trustees of the pension plans, decided that submission was just not an acceptable course. We authorized the lawsuit and, with the help of cut rates from attorneys incensed about the principles being violated, pursued it even after the courts allowed the cramdown to go through.
Indiana's retirees never got their $6 million back, but our resistance was not totally fruitless. A fascinating bit of legal history was made months later, when, almost surreptitiously, the U.S. Supreme Court in December 14, 2009, announced that the Chrysler case would be accorded no precedential value. The rights of secured creditors were secure once more.
In the lower court that first declared it would not be bound by the Chrysler case, the judge likened Indiana's efforts to "the little man in Tiananmen Square when the tanks rolled in." The tyranny here was more benign, but the government's disdain for law was pronounced nonetheless . . .