This Big Bank Just Proved Why the GOP Tax Law Is a Scam for the American People

January 24, 2018

Yesterday, Wells Fargo announced what they are really doing with their massive corporate giveaway – a huge share buyback. At current share prices, this new buyback is a $22 billion boon to the corporation and their wealthy shareholders.

“Wells Fargo has approximately 4.9 billion shares outstanding. The Wells Fargo board of directors also increased the company’s authority to repurchase common stock by an additional 350 million shares.” [Press Release, 1/23/18]

In December, Wells Fargo issued a press release touting the benefits of tax reform. They then briefly admitted that the pay raises were pre-planned and had nothing to do with the Republican tax scam.

LA Times: Wells Fargo says raises were not linked to tax bill passage — then backtracks. “Wells Fargo & Co.'s move to raise its minimum pay to $15 an hour was part of a long-term plan and not related to the passage of the Republican tax overhaul as the company implied, said a bank spokesman, who later backtracked and stated the hikes were a result of the bill's approval. … The San Francisco bank had implied the direct linkage to the tax legislation in a news release Wednesday, shortly after Congress passed the tax overhaul, which slashes the corporate tax rate to 21% from 35% starting Jan. 1. Asked by The Times to clarify the connection on Wednesday, Wells Fargo spokesman Peter Gilchrist said there was none. ‘As it relates to team members, minimum pay is a topic that we continue to review as part of our efforts to attract and retain talent, and we have been on a path to increasing the minimum hourly rate, having most recently increased it in January 2017,’ Gilchrist said in an email in response to an inquiry from The Times. Asked directly to confirm that the pay raises were not a result of the tax bill, Gilchrist said, ‘That is correct.’ On Thursday, Gilchrist backtracked. ‘We believe tax reform is good for our U.S. economy and are pleased to raise our minimum hourly pay to $15 as a result,’ he said after The Times' article appeared online. He would not comment on the reason for the earlier statement or whether Wells Fargo would have raised its pay if the tax bill had not passed. [LA Times, 12/21/17]

Despite this, President Trump repeatedly touted Wells Fargo at the signing of the tax bill.

This promised pay raise was a minimal portion of the corporate giveaway they received from the GOP Tax Scam.

CNN Money: “The wage hike and additional charitable giving will cost Wells Fargo about $215 million in 2018, according to investment bank KBW. That represents just 5% of Wells Fargo's total estimated earnings benefit from the tax overhaul, KBW estimates. ‘It's a token compared with what companies are actually saving. Where is the rest of the money going? said Jeffrey Sonnenfeld, senior associate dean at the Yale School of Management.” [CNN, 1/3/18]

Since this announcement, Wells Fargo has continued their pattern of bad behavior, overcharging customers and closing branches. This is further evidence that they are focused on benefitting shareholders over customers or their employees.

CNN Money: Wells Fargo plans to close 800 more branches by 2020. “Wells Fargo, scrambling to cut costs and offset soaring legal expenses, plans to pull the plug on 800 more bank branches by 2020. The planned closings, announced on Friday, will leave Wells Fargo (WFC) with about 5,000 branches. The bank closed more than 200 branches last year, but still finished the year with more than 5,800, the most in the United States.” [CNN Money, 1/12/18]

Charlotte Observer: Furious Wells Fargo Customers Say Bank Accounts Drained, Overdrawn By Double Charges. “Some Wells Fargo customers say their bank accounts were drained – and in some cases overdrawn – when their automatic bill pay setups were charged twice for payments. Livid customers took to Twitter on Wednesday, when the problem appears to have started, to vent their frustration. Some complained of waiting for more than an hour on the phone to speak to a Wells Fargo representative.” [Charlotte Observer, 1/18/18]

Experts say the vast majority of companies will use their windfall from the GOP Tax Scam for buybacks that benefit corporate executives and wealthy shareholders –  not wage increases for workers.

Morgan Stanley: “Indeed, we asked a special question in this month's survey on companies' plans for how they would use the proceeds from reduced corporate taxes. Analysts' were asked to indicate if companies would use these proceeds for increased worker compensation, capex, or share buybacks/dividends/M&A. Analysts could provide multiple responses to this question. 83% of analysts surveyed indicated that companies under their coverage would put gains from lower taxes to use for share buybacks, dividends, and M&A. Moreover, 50% of analysts indicated this would be firms' only response, while the remaining 33% indicated that firms' would pursue share buybacks, dividends, and M&A in conjunction with capex and/or increased compensation. Surprisingly, only 22% of analysts surveyed indicated that companies would direct at least some of the gains from tax reform to increased worker compensation.” [Morgan Stanley Research Update, 1/16/18]

CNBC: Few Large US Companies Say They'll Use Tax Savings To Boost Wages, CNBC Survey Finds. “Despite a handful of high-profile announcements, the recent cuts in corporate taxes haven't yet had a meaningful impact on American companies' plans to boost investment or raise workers' pay, a CNBC survey of large companies found.  … Only 10 companies in the S&P 100 contacted by CNBC said they have specific plans to use some of the money saved from the corporate tax cuts to boost worker pay or invest in facilities or charitable causes.” [CNBC, 1/17/18]