Wells Fargo- The Wrong People are being Punished

MOZART325

The problem with punishing the corporate entity "Wells Fargo" is that the wrong people are being punished. Some of the employees (including management involved) should be punished.

But what is happening instead is that shareholders of Wells Fargo are being punished both direct and indirect. This applies to fines as well as boycotts.

If you own WFC stock, you are being punished.
If you own BRKA, BRKB you are being punished.
If you own XLF, you are being punished.
If you own VFINX, you are being punished.
If you own hundreds of other mutual funds, you are being punished.
The honest employees at WFC (the majority) are being punished.

I would guess that 90% or more of the posters on MFO are being punished when WFC has to pay a big fine. Overall, there are probably over 50 million investors who pay a share of the fines or lose money on direct or indirect WFC investments.

msf

If you owned WFC, you benefited from illegal activities for years. But you're not supposed to pay a price when this catches up to you? Heads you win, tails you're not supposed to lose? Same benefit whether ownership was direct or indirect (via funds).

The honest employees at WF, who also had the integrity and courage to point out the problems, were punished by WF. Not just recently; going back at least to 2010.
http://www.cbsnews.com/news/wells-fargo-accounts-fraud-california-whistleblower-yesenia-guitron/

The honest employees who simply refused to participate were punished by WF.
https://topclassactions.com/lawsuit-settlements/lawsuit-news/365419-wells-fargo-class-action-ethical-employees-threatened-retaliation/

The dishonest ones and the ones that merely acquiesced are the ones that WF rewarded.

BRK - You bought management expertise. You hired someone who has continued to support Wells Fargo. Buffett didn't even vote with his feet (dollars). As if he didn't expect more shoes to drop.
http://money.cnn.com/2016/11/11/investing/warren-buffett-wells-fargo-scandal/

Vanguard - supported Stumpf over and over, for years and years, with vote after vote in favor of whatever management said. You could have invested with a company that tried to make a difference. Your choice.

catch22

Since the bottom of the mud after congressional testimony......from the slime pit bottom of muted outrage relative to WFC, stock pricing...........how about a +22% price rise. Nov.1 to date.
The current closing price ($55.11) was exceeded during one other period about August 2015. This $55 range is the highest pricing this stock has obtained looking as far to the rear as one chooses.
Keep in mind, our investment world does not cycle around ethics; but around other factors that may have a harder and longer term impact.
Sadly, the WFC ongoing chapters of "running on ethics empty" will probably fade away.

@MOZART325 You may click onto the "ownership" tab at this M* link. At the "ownership" page you may expand the list to the top 20 fund holders (show more). For whomever holds broad U.S. indexes, etf's or other with a small percentage holding of WFC; these investments will be retained by the normal retail investor(s). The only way I/we at this house could pretend to be purely ethical investors would be to own individual stocks/bonds. Otherwise, we all hang out with global investment pimps. Just the way things are, yes?

http://beta.morningstar.com/stocks/XNYS/WFC/quote.html

msf

I thought about adding something about WFC's rising price, but then I'd have had to normalize it - compare with how other financial/bank stocks had done over the same period to see if WFC under or over performed. As you wrote, a single stock does not move in a vacuum.

With an incoming regime more amenable to industry self-regulation, I'm inclined to agree that ethical issues will fade. Apparently, Alan Greenspan's "distress" that a "hands-off approach towards the banking industry" doesn't work has already faded.
https://www.theguardian.com/business/2008/oct/24/economics-creditcrunch-federal-reserve-greenspan

Old_Joe

@msf- "Self-regulation"?? What the heck is that??

davidrmoran

Everyone has seen the Big Short, right?

Mark

@davidrmoran - are you referring to the size of someone's hands?

davidrmoran

haha, very good

rforno

Another reason why I don't own any funds with WFC in a major top-ten position. (I sold PRBLX when WFC became its largest holding.)

Also why i refuse to own bank preferred stocks that have non-cum dividends -- I don't want to be the one holding the bag when things go south and they suspend them.

Edmond

Without commenting here on the WFC situation, if you believe in corporate accountability, then of course the common-share owners of an enterprise should be held accountable -- to the extent they have an investment. After all, corporate decision-makers (officers) are selected by the BOD, and shareholders vote in the BOD. Common-share owners are the "risk-takers", well risk doesn't always mean "reward", sometimes it means "loss". If that kind of risk doesn't suit some, well, maybe investing in common-shares is not for them. The same principle applies in the event of a bankruptcy: generally common-equity owners "eat the loss", with the lenders then converted into the new owners to have another go at running the company.

Who else should be accountable, if not shareholders? Consumers? Debt-holders? The government?