By: Brian Sikma

The turmoil that has enveloped Chrysler Corporation has had a substantial impact on our state.  From the parts suppliers who employ Hoosiers at their Indiana factories to the dealerships that dot the state and provide jobs to local mechanics and sales personnel, many have been impacted by Chrysler’s inability to stay solvent and afloat amidst a serious economic downturn.  But what has happened to the automaker also impacts Hoosiers who have never worked with or for the company or its many suppliers and vendors.  Because the state invested some road construction trust funds and some of the assets of the state’s police and teacher pension trust funds in secured Chrysler debt, the government’s mismanagement of the company’s reorganization has cost Hoosiers roughly $5 million.

The loss that these pension funds and the road construction fund have sustained has come about not because of Chrysler’s inability to stay solvent but because of the federal government’s decision to rewrite decades of bankruptcy law precedent.  Whenever a bond holder, such as these three state trust funds, invests in corporate bonds that are considered secured debt, they are investing in the company and, should the company fail, they are guaranteed a recovery of their investment by the sale of the company’s assets.  

When the federal government stepped in and began the process of organizing and managing Chrysler’s restructuring, they did so in a way that disregarded the fact that holders of secured debt are supposed to be first in line to recover their money.   This means that as Chrysler tries to restructure itself in the shelter of a bankruptcy court according to a blueprint forced on it by President Obama’s administration, it is jeopardizing the soundness and sustainability of trust funds that many Hoosiers rely on as part of their retirement.  Additionally, the state’s ability to build the roads that would generate jobs, improve the state’s transportation infrastructure and make Indiana a more attractive place for businesses to come to is threatened by the federal government’s actions.

Indiana State Treasurer Richard Mourdock has used his authority as manager of the threatened funds to file pleadings against the currently proposed Chrysler restructuring.  Mourdock is rightfully arguing that retirees and state taxpayers should not be forced to bear the brunt of this loss imposed by the disturbing actions of the federal government.  While it is important that Chrysler rework its structure and prepare itself to emerge from bankruptcy, it must not do so while following a plan that destroys the very trust on which it will be able to rebuild its business.
By stepping in and causing a $5 million loss to Hoosier retirees and taxpayers, the federal government has not only hurt Hoosiers, but it has also hurt Chrysler and started the very concerning practice of rewriting contracts that impact the economic standing of many Americans.  Investors observing their investments being destroyed by the federal government not only suffer an immediate loss but are also put on notice that any decision they make based on the mutual agreement and trust of the private sector may be quickly overridden if a government bureaucrat disagrees with the terms of the contract.  The unilateral rewriting of business and financial agreements by the federal government is a practice that must stop because it undermines the process by which our country will emerge from this downturn.
Our economy will recover and our nation will bounce back from this downturn if the federal government understands its real role in the marketplace.  The appropriate role of the federal government, and the job it should rightfully assume if we are going to see an increase in economic activity, the creation of jobs and the expansion of wealth, is to fulfill the duties of a referee.  A referee does not participate in the game but he or she does make sure that the rules are enforced.   When the federal government tries to participate in the economy by using its power to rewrite the rules and nullify agreements founded on mutual trust, then it exceeds its proper authority.  When, on the other hand, it enforces the rules fairly on all participants and holds parties to their contractual obligations, it is a party to the creation of the trust that is so necessary and vital to the operation of our economy.
The American people will emerge from this downturn strengthened for what lies ahead.  Chrysler Corporation and other companies that are going through restructuring will be poised to lead the way in the growing economy of the future, but only if the obligations that they have are not ignored or destroyed by irresponsible federal actions.  President Obama and his economic team must immediately cease their misguided efforts to dramatically make the government, and not the individual, the most important factor in our economy.turmoil that has enveloped Chrysler Corporation has had a substantial impact on our state.  From the parts suppliers who employ Hoosiers at their Indiana factories to the dealerships that dot the state and provide jobs to local mechanics and sales personnel, many have been impacted by Chrysler’s inability to stay solvent and afloat amidst a serious economic downturn.  But what has happened to the automaker also impacts Hoosiers who have never worked with or for the company or its many suppliers and vendors.  Because the state invested some road construction trust funds and some of the assets of the state’s police and teacher pension trust funds in secured Chrysler debt, the government’s mismanagement of the company’s reorganization has cost Hoosiers roughly $5 million.

The loss that these pension funds and the road construction fund have sustained has come about not because of Chrysler’s inability to stay solvent but because of the federal government’s decision to rewrite decades of bankruptcy law precedent.  Whenever a bond holder, such as these three state trust funds, invests in corporate bonds that are considered secured debt, they are investing in the company and, should the company fail, they are guaranteed a recovery of their investment by the sale of the company’s assets.  

When the federal government stepped in and began the process of organizing and managing Chrysler’s restructuring, they did so in a way that disregarded the fact that holders of secured debt are supposed to be first in line to recover their money.   This means that as Chrysler tries to restructure itself in the shelter of a bankruptcy court according to a blueprint forced on it by President Obama’s administration, it is jeopardizing the soundness and sustainability of trust funds that many Hoosiers rely on as part of their retirement.  Additionally, the state’s ability to build the roads that would generate jobs, improve the state’s transportation infrastructure and make Indiana a more attractive place for businesses to come to is threatened by the federal government’s actions.

Indiana State Treasurer Richard Mourdock has used his authority as manager of the threatened funds to file pleadings against the currently proposed Chrysler restructuring.  Mourdock is rightfully arguing that retirees and state taxpayers should not be forced to bear the brunt of this loss imposed by the disturbing actions of the federal government.  While it is important that Chrysler rework its structure and prepare itself to emerge from bankruptcy, it must not do so while following a plan that destroys the very trust on which it will be able to rebuild its business.

By stepping in and causing a $5 million loss to Hoosier retirees and taxpayers, the federal government has not only hurt Hoosiers, but it has also hurt Chrysler and started the very concerning practice of rewriting contracts that impact the economic standing of many Americans.  Investors observing their investments being destroyed by the federal government not only suffer an immediate loss but are also put on notice that any decision they make based on the mutual agreement and trust of the private sector may be quickly overridden if a government bureaucrat disagrees with the terms of the contract.  The unilateral rewriting of business and financial agreements by the federal government is a practice that must stop because it undermines the process by which our country will emerge from this downturn.

>Our economy will recover and our nation will bounce back from this downturn if the federal government understands its real role in the marketplace.  The appropriate role of the federal government, and the job it should rightfully assume if we are going to see an increase in economic activity, the creation of jobs and the expansion of wealth, is to fulfill the duties of a referee.  A referee does not participate in the game but he or she does make sure that the rules are enforced.   When the federal government tries to participate in the economy by using its power to rewrite the rules and nullify agreements founded on mutual trust, then it exceeds its proper authority.  When, on the other hand, it enforces the rules fairly on all participants and holds parties to their contractual obligations, it is a party to the creation of the trust that is so necessary and vital to the operation of our economy.

The American people will emerge from this downturn strengthened for what lies ahead.  Chrysler Corporation and other companies that are going through restructuring will be poised to lead the way in the growing economy of the future, but only if the obligations that they have are not ignored or destroyed by irresponsible federal actions.  President Obama and his economic team must immediately cease their misguided efforts to dramatically make the government, and not the individual, the most important factor in our economy.

Published in the South Bend Tribune and the Northwest Indiana Times.

Advertisements