QE Hammers 5 Businesses: Citigroup Inc. (C), Bank of America Corp (BAC), Verizon Communications Inc. (VZ)

AT&T Inc. (NYSE:T)

You probably know that AT&T posted a $3.9 billion loss for 2012.  The interesting part is that lower interest rates caused a majority of the loss.  AT&T lowered the discount rate for its pension calculation, which increased its future costs.  In fact, AT&T announced last year that, in order to fund its widening pension liability, AT&T would contribute $9.5 billion of company stock to its pension account.

Verizon Communications Inc. (NYSE:VZ)

Taking a different approach, Verizon decided to outsource its pension management.  Last year, Verizon gave Prudential $7.5 billion to manage.  Verizon too has struggled to keep its pension expenses to a minimum.  The company took $4.4 billion worth of charges against its pension valuation.

And its pension has been a drain on resources.  In Q4 2012, for example, Verizon Communications Inc. (NYSE:VZ) funded its pension with an additional $1.7 billion.  Here is a question that I am still thinking through: If rates stay low, how will this additional expense affect Verizon’s staple 4.6% dividend payout?

Conclusion

The Fed is expected to keep rates low for at least the next two years.  If such a policy stays in effect, I expect bank profits and pension charges (unfunded liabilities) to continue.  With such policies in effect, companies will be tempted to tightly manage headcount in an effort to curb costs.

Perhaps the Fed modeled these employment swings when it implemented its Quantitative Easing measures.  So maybe these job losses are just casualties of the plan.  However, the ironic part is that when it comes to banks and pension charges, the Fed’s policy aimed at job creation is actually curbing job growth at large companies.

The article QE Hammers 5 Businesses originally appeared on Fool.com and is written by Chris Marasco.

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