Federal bailout screws teacher and police pension funds

[hack89]

Remember how President Obama blamed Chrysler's bankruptcy filing last month on "a small group of speculators" who turned down Treasury's $2 billion final offer for their $6.9 billion in debt? Well, it turns out that hedge funds and other short sellers weren't the only secured creditors who got a raw deal from Uncle Sam.

Indiana Treasurer Richard Mourdock revealed this week that his state's police and teacher pension funds have lost millions of dollars in the Chrysler "restructuring." Indiana's State Police Fund and Major Moves Construction Fund, which finances roads and bridges, together lost more than $1 million. And the Teacher's Retirement Fund "suffered, at a minimum, a loss of $4.6 million due to the action of the Federal government," reports Mr. Mourdock.

Far from being speculators, these funds represent retired public employees, including cops and teachers. The funds paid a premium to buy "secured" status, only to discover that they were politically outranked by the United Auto Workers in the White House hierarchy

http://online.wsj.com/article/SB124286497706641485.html

[MercutioATC]

1. OMG!!! Somebody LOST money on an equities investment???

This is HUGH!!

[AngryAmish]

3. This is not equity - it is debt

Get it?

[MercutioATC]

5. Ooh! Even better!

Bondholders finally got a haircut!

[AngryAmish]

6. Finally?

Do you understand the difference? Do you understand why one wants to be a bondholder instead of shareholder?

Why the glee when public employees have their pensions cut is beyond me.

[hack89]

4. Usually the government doesn't overturn legal contracts to favor politically favored groups

over others with a better legal claim to the money.

Far from being speculators, these funds represent retired public employees, including cops and teachers. The funds paid a premium to buy "secured" status, only to discover that they were politically outranked by the United Auto Workers in the White House hierarchy.

"In the past, to be 'secured' meant an investor was 'first in line' in the event of a bankruptcy and 'non-secured' creditors would receive value after secured-creditors were paid," Mr. Mourdock says. "In the Chrysler bankruptcy, however, secured creditors received $.29 on the dollar even as non-secured creditors received higher values and ended up with a 55% ownership of the new company, which is fundamentally wrong and a dangerous precedent to the capital markets."

[AllentownJake]

2. I wonder if the Indiana Treasurer is making as big of a stink

of the other equity and bonds the funds have lost money due to poor market regulation. I'm guessing the losses from those investments far exceed Chrysler. If they don't, the fund was way to overexposed in one company.