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April 23, 2008
National City's Woes Affect Ohio Pension Plans
It was an easy prediction to anticipate shareholder lawsuits over the National City buyout. Shareholders have lost 84% from highs and the hedge fund buyout group is diluting existing shareholders by close to 70 percent at a below trading market price. Not only are private shareholder the big losers -- employees who took company stock into 401(k) pension plans and sat on it and Ohio pension funds that try to invest in Ohio companies too baths as well. It is another hard lesson for Ohio public pension plans that should invest for pure returns rather than out of local social obligation.
April 23, 2008 in Securities Markets | Permalink
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Comments
I worked for National City for a couple years. They have a very generous matching 401(k) plan ($1.15 for every $1.00 contributed, capped at 6% of base salary). The only catch was that the matching contribution was in NCC stock. There was no transaction cost to trade out of it, and every payday I would get out of NCC and into an index. I'm sure not everyone did that, and they're paying for it now.
The thing is, some of this poor investing was intentional. We had a ton of middle managers who would brag to us trainees about how much of their 401(k) was invested in company stock, because they really believed in the bank. It's basically akin to your rant about law firms that don't have a written partnership agreement. These managers are in the financial advisory business! If one of the investment advisers under their command told a customer to put half their retirement savings into the same company they worked for, they'd get fired!
I'm glad I never drank that Kool Aid.
Posted by: Vince | Apr 24, 2008 3:46:33 PM
