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Five questions: Indiana treasurer ponders course for yield rise

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Richard Mourdock, a 62-year-old geologist and former coal-mining executive in his second term as Indiana’s Republican treasurer, has plenty to brag about.

The Hoosier State’s economy has been outpacing Illinois and Iowa since the recession ended in 2009, according to data compiled by Bloomberg. Its state and local bonds are also beating the $3.7 trillion U.S. municipal-debt market, with last year’s 2.1-percent decline versus a 2.6-percent drop for the Standard & Poor’s Municipal Bond index.

Indiana’s rebound comes amid the auto industry’s recovery as well as passage last year of the biggest tax cut in state history, including a 5-percent reduction of the levy on income. Gov. Mike Pence, a 54-year-old Republican, on Jan. 14 called for phasing out the tax on business owners’ equipment.

Mourdock was first elected treasurer in 2006 and was re-elected in 2010. A foe of the federal bailout of Chrysler Corp., he lost a U.S. Senate race in 2012 to Democrat Joe Donnelly and will leave the office next year because of term limits. The following is condensed from a recent phone interview:

Q: As the chief investment officer managing $7 billion in state funds, you are restricted by the state constitution to U.S. government and U.S. agency securities. What are you doing to maximize returns as the Federal Reserve keeps its benchmark rate at almost zero?

A: The world being upside down as it is, we certainly have more money in deposit accounts right now than we’ve had in the past. We actually earn better interest there than we do from our normal federal paper.

Q: What would you do if the U.S. economic recovery spurs a rise in interest rates? How would you adjust the maturity of your holdings?

A: It’s all going to be about watching and measuring duration. So we’ll be adjusting duration, I suspect, trying to match the environment. We’d probably be looking at going out somewhat. We don’t trade much stuff; we generally hold it to maturity. So if we can find a way in increasing rates to start sliding a few things that way, we’d likely do so.

Q: How should Pence and his administration handle repaying to the federal government the $1.4 billion Indiana borrowed for unemployment benefits?

A: There will be real consideration of doing a bond issue to try to deal with that. With the potential of the rising-rate environment, I think it would be a good time for them to consider that. And if they ask me my advice, I would certainly suggest they take a serious look.

Q: During an October 2012 debate for your Senate race, you answered a question about pregnancy from rape by saying life is a gift from God. You later said your statement was twisted by opponents to suggest God pre-ordains rape. What was your lesson from that incident?

A: If there is a moral to that story in a political sense, sometimes you just need to express less rather than more. That goes against my nature; I’m a pretty transparent person. And sometimes as a candidate, unfortunately, transparency is not necessarily an attribute.

Q: You have a master’s degree in geology from Ball State University and worked in the energy business for 30 years. Has there been a time when you were able to apply your experience as a geologist to your work as treasurer?

A: I learned years ago as a geologist the fundamental fact of economics is that all wealth comes from the earth. It comes from what we grow, what we harvest, what we dig up, what we mine, what we pump, what we produce. And then we put it in this chain of events we call our economy. Having that bit of background, I think, has always given me a unique look at the world of finance.

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  • "Decode" bond comment
    Good question. I believe Treasurer Mourdock is stating that a possible option for settling the state's $1.4 billion debt to the federal government is to borrow the money in the municipal bond market at today's low interest rates before rates start moving up, thus minimizing interest costs.
  • ????
    My business (and all others) pay thousands of dollars in tax surcharages for the default on these loans. And we have never had a layoff!!! We are just paying for our Pence-Daniels administration irresponsible state finances. Can some onedecode what Mourdock states here??? I don't get it. Q: How should Pence and his administration handle repaying to the federal government the $1.4 billion Indiana borrowed for unemployment benefits? A: There will be real consideration of doing a bond issue to try to deal with that. With the potential of the rising-rate environment, I think it would be a good time for them to consider that. And if they ask me my advice, I would certainly suggest they take a serious look.
    • No, not odd
      The question was not odd...it was a relevant and timely question as Roe V Wade was being assaulted. What's odd id that you don't seem to get that.
    • Five Questions
      Mr. Mourdock's answer was a good one though expressed in a way that allowed his opponent and the press to misconstrue what he said and what he meant. Isn't it odd that a question on rape and abortion was inserted into a race for the United States Senate at the last minute?
      • Note to Richard
        Richard - honestly, you don't seem like a bad guy, but here's some advice: maybe try to express better, not less. Transparency from our politicians is ALWAYS a good thing.

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        1. A couple of issues need some clarification especially since my name was on the list. I am not sure how this information was obtained and from where. For me, the amount was incorrect to begin with and the money does not come to me personally. I am guessing that the names listed are the Principal Investigators (individual responsible for the conduct of the trail) for the different pharmaceutical trials and not the entity which receives the checks. In my case, I participate in Phase II and Phase III trials which are required for new drug development. Your article should differentiate the amount of money received for consulting, for speaking fees, and for conduct of a clinical trial for new drug development. The lumping of all of these categories may give the reader a false impression of physicians just trying to get rich. The Sunshine Law may help to differentiate these categories in the future. The public should be aware that the Clinical Trial Industry could be a real economic driver for Indiana since these revenues supports jobs and new job creation. Nationally, this account for 10-20 billion which our State is missing out on to a large degree. Yes, new drug and technology development has gotten most of the attention (e.g. CTSI, BioCrossroads, etc.) However, serious money is being left on the table by not participating in the clinical trials to get those new drugs and medical devices on the market!!!! I guess that this is not sexy enough for academia.

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