Wells Fargo cuts 26,500 jobs, shutters branches, declares "excess capital" and drops $40.6 billion on stock buybacks


I guess this is part of Wells Fargo’s “Re-Established” campaign to win back the public’s trust. #dumpsterfire


For one, dividends are paid from net profit which is derived from sales revenue, not stock price arbitrage. No profit no dividend. Therefore the incentive is for the business to achieve its sales targets from improving the business and not just meeting market goals.

Yes, stock buybacks are paid for from “excess capital” which comes from sales but that’s also money that’s not invested back into the business or employees.

Buybacks are a disincentive for management to invest in the business since it only benefits shareholders at the expense of everyone else. That’s not long term value. In fact, they encourage disinvestment and taking value out for short term gains.

The only way to realize the gains from a stock buyback is to sell shares. Not every investor is interested in doing that for myriad of reasons.

Businesses are more than just shareholders. Employees, customers, suppliers and communities are also stakeholders.

Edited to add: dividend investing is desired by a large segment of investors that are looking for long term stable returns. Retirement funds for example want reliable income from dividends not just growth.


We also realize the the stock buyback is to provide direct cash to shareholders who are taking advantage of the tax cuts to liquidate, and that the act of creating excess capital by shutting down a section of their business artificially inflates their stock price creating a precarious situation that their business has to catch up with or else it will dramatically fall in a few quarters - and if you are relying on that mutual fund for your retirement you want long term growth and not boom/bust cycles like these actions take. The only people that will be richer for this in a decade are the people who saved money on their capital gains taxes.


Jack Welch himself [CEO of GE’s enormous rise in value, after seeing it plummet in the years after his departure] came to be one of the strongest critics of shareholder value. On March 12, 2009, he gave an interview with Francesco Guerrera of the Financial Times and said, “On the face of it, shareholder value is the dumbest idea in the world. Shareholder value is a result, not a strategy… your main constituencies are your employees, your customers and your products. Managers and investors should not set share price increases as their overarching goal… Short-term profits should be allied with an increase in the long-term value of a company.”

What’s creepy is how much of what’s wrong with the US was born in a very short period of the early 1970’s. Milton Friedman proposing shareholder value is king, Arthur Laffer sketching his curve “proving” supply side works on a napkin for Rumsfeld and Cheney, and the last 2 helping to create the Neocon movement.


And where does dividend money come from? Exact same place.

Same as dividends…

And none of those people benefit from dividends either.

Right, and people who invest for those reasons should not invest in stocks whose main goal is stock price appreciation. There are tens of thousands of companies to invest in, and thousands of them are very strictly dividend-oriented in returning profits to shareholders.

The bottom line is that of all the reasons to dislike a company, stock repurchases should be so low on the list that it’s barely a blip. In terms of legal activities, tax avoidance schemes are a million times more significant waste of money and effort and productivity.


Where are your citations? WF announced last month a 10% reduction in staff over a period of a couple years, some of which will be accomplished through natural attrition. That’s not what you write, though, so you’re either really sloppy at collecting accurate information or you’re intentionally misleading your readers.


That obvious citation you seemed to have missed goes to here:


Which points to here:

It’s layoffs.

How about before you accuse someone of not citing anything, you should really try even the most cursory glance of a search for a citation. It’s called a modicum of intellectual effort.

I think it’s really you who’s being sloppy here, and trying to mislead.


One thing that has not been mentioned so far is that many top executives are paid bonuses based on stock price. As was mentioned previously, stock buybacks inflate stock price, but do nothing in regard to the underlying health of the corporation. Thus, the executives are artificially meeting whatever price goal was in their contract, but haven’t really made the company any better.

It’s bullshit.


You sound… dissappointed, new comrade?


Well, what can I say?
Brecht was right.


They fired over 25000 people… do you think they benefit from the stock buybacks? Or do they not matter, because they don’t own stock in WF?


“We’re sailing on the wide accountant-sea!”


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