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October 18, 2012

Letters to the Editor: Oct. 18, 2012

Kokomo — Radio man’s charge ignores the facts

Talk radio host Peter Heck’s response to a recent letter concerning Richard Mourdock’s purchase of Chrysler shares lacked any facts to back up his hyper-partisan blather.

The writer scolded Mourdock for playing “Bond Market Speculator,” purchasing Chrysler bonds with state funds in an effort “to make a quick killing.” Heck claimed the writer based his entire argument on the “Kokomo Tribune’s perilously liberal ‘Public Eye’ column and that Indiana’s portfolio managers all felt at the time the Chrysler investment was a safe one.” I guess knowing the facts about what you prattle about is not your strong suit, is it, Mr. Heck?

In August 2008 the investment manager of the Indiana State Teachers’ Retirement Fund (TRF) purchased Chrysler bonds at 43 cents on the dollar. In Wall Street speak, that’s what you call junk bonds.

At the time it was apparent that not only Chrysler but the U.S. auto industry was in trouble due to Wall Street’s economic tsunami that would soon come to light. Chrysler was in the worst shape from years of being slowly bled to death by Daimler and Cerberus. Now, why would anybody with a fiduciary responsibility over a pension fund take a gamble and buy any company’s bonds at 43 cents on the dollar? That’s guaranteed risk, isn’t it?

This question was answered by Steve Russo, executive director of the Indiana State Teachers’ Retirement Fund, when he said, “When TRF’s investment manager took the decision to make this investment, it was under the well established presumption that in the event of bankruptcy, TRF – along with the other secured creditors – would be first in line.” In another statement he said, “TRF manages the portfolio as a long term investor and makes investment decisions based upon a 30-year time horizon … By law, TRF is required to invest under the prudent investor standard. As a long term investor, TRF invests in assets that achieve a moderate level of return and risk.”

It’s pretty clear that they weren’t “investing in Chrysler and its workers,” as Mr. Heck implied. They certainly weren’t buying these bonds based upon a 30-year time horizon, and they don’t quite fit into the “moderate level of return and risk” category either, so how does this pass the prudent-investor standard that by law they are required to adhere too?

The facts point out that they risked the pension’s funds on Chrysler’s junk bonds, hoping for bankruptcy to more than double their money. Sounds a little like they were trying “to make a quick killing” to me, and it would to anybody who is aware of the facts – but I know Mr. Heck would not let facts get into the way of his partisan blather.

Dan Dickman, La Fontaine

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