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PRBLX finally dumps WFC

2

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  • All good questions. I know for myself what are the levels of egregiousness, or I think and say I do, but they would not be others', perhaps. I left Parnassus over WFC, and Herro (Oakmark) as well, when he denounced global warming a year or two ago. And now I don't know what to think summers will be like globally in 2 and 5 and 7 years, much less 10-20-30 years and beyond.
  • FYI The Linkster suggest you take the advice of Barry Ritholtz. "Vote on the first Tuesday in November, go to church on Sunday, but always bring a cool unemotional detachment to investing on Monday."
    Regards,
    Ted
    http://ritholtz.com/2018/07/religion-and-politics/



  • yeah, wonder if he buys gun stocks the week after a massacre, always a good investment
  • edited July 2018
    My reason for dumping PRBLX years ago was because WFC clearly had major issues with the 'G'(overnance) in the Parnassus ESG investing framework, yet the fund kept the #1 holding for years as the various scandals piled up. Although I could care less about ESG ratings frankly[1] ... and gods know I own enough 'sin' stocks anyway. Rather, I like the composition of PRBLX and think it's a great blended fund that marches to its own drummer[2]... but it needed to dump WFC to live up to its self-proclaimed ESG mandate, imo. (or change their mandate)

    I'm recently back in PRBLX for my Roth IRA, btw.

    [1] It's why I bought VMVFX early on. I could care less about 'minimum volatility' in the name but upon closer inspection the fund is a nifty world stock fund that has (to me) a great allocation and fits nicely into what I wanted in my portfolio.

    [2] It's also why I like PRGTX. It's a tech fund but it holds few if any of the 'usual suspects' in the space (ie, the FANGS, etc.) and does its own thing.

  • I think @hank raises a crucial question:

    "When one starts excluding from their investment portfolios stocks of companies with whom they have basic moral / ethical disagreements, where does it stop?"

    It is such a slippery slope and the individual investor has few means to avoid it. I'd like to do good works and discourage bad ones, but I am relying on a fund manager (or maybe a fund company like Calvert) to set up a screen and then implement it. Very hard for me to judge how well they do it and if it makes a difference. Energy exploration may harm someone's backyard, but I'm not going to heat my MI house without natural gas. Maybe I admire Dick's Sporting Goods stand on guns, but what do I know about how the company treats its employees? I'm appalled at Amazon's treatment of warehouse workers, yet I'm not ready to give up my Prime membership.
  • edited July 2018
    Sorry in advance for playing devil's advocate, but does anyone here who remembers 2008 really think that WFC's behavior is so much worse than any other major bank? Or if you go back further in history, what bank or insurer really has completely clean hands ethically? Back in 2008 WFC was presented as heroic for not getting overinvolved with subprime. Today they're the bad guy. Excuse my cynicism, but I actually think now is the time to own Wells Fargo, even from an ethical perspective. The reason is since they got caught more than once for behaving egregiously they are actively trying to improve their reputation. This sort of pattern of bad behavior by the leading financial institutions in capitalism is cyclical and actually I think an indicator of where we are in the broader economic cycle. Inevitably banks start behaving crappily the futher we get into a bull market as regulators and investors turn a blind eye and the competition for ever expanding profits, revenues and share prices increases. But once the banks get caught--with their proverbial hands in the cookie jars--they are chastened for a while and start behaving better, especially after regulators step in. Then the cycle starts all over again. So Wells Fargo is the latest bad actor to be caught and is now finally chastened and trying to improve. Meanwhile, another shoe will drop at some other financial institution soon and people will hate on that bank instead. Some socially conscious funds of particularly an Islamic bent don't own any banks or money lenders at all. If one is concerned about them behaving badly, that might be the best option. Because inevitably they all usually end up ripping people off in some fashion or another.

  • As I said, I don't trust the financial sector very much and have *very* little exposure to them for that very reason.
  • @LB,

    >> does anyone here who remembers 2008 really think that WFC's behavior is so much worse than any other major bank?

    I do
  • edited July 2018
    @davidrmoran

    Two strolls down memory lane:

    https://rollingstone.com/politics/politics-news/the-great-american-bubble-machine-195229/

    https://som.yale.edu/blog/the-nazi-corporate-connection-facing-the-ethical-challenges-of-business-head-on

    Since unlike our Supreme Court I don't believe corporations are people, there is an interesting question as to how long a company's image should be tarnished for its misdeeds, especially when different people are in charge or different policies are in place than when the company behaved badly. An excerpt from the article on the really bad historical actors a long time ago:
    Business played an essential role in Nazi Germany and the Holocaust. IG Farben (Bayer's predecessor) supplied the patent for deadly chemicals used to exterminate millions of Jews. Financial institutions like Allianz and Deutsche Bank meticulously transferred Jewish assets to German hands. Technology developed by IBM tracked and managed the "evacuation" of Jews across Europe. The hair of Jews who were gassed and burned to ash was sold in bulk to textile manufacturers.
    This paragraph actually understates what Allianz did by the way. It was actually far worse:
    https://nytimes.com/1998/05/18/world/insurers-swindled-jews-nazi-files-show.html

    Yet I wouldn't necessarily hold that against Allianz funds or Pimco today. The question I think with analyzing companies for socially responsible criteria is what are they doing now and going forward? But maybe you are right in that it's too soon to forgive WFC and they need to prove themselves truly reformed.
  • wow, you hit the godwin rule so early!

    there has been truly new news since this, no?

    plus this from not so long ago:

    https://www.nytimes.com/2018/02/02/business/wells-fargo-federal-reserve.html

    I pose the question to you of how to punish any institutions ever, any of whom can say It's all different now, bad actors gone, we are good to go, we have changed, we saw the light, yada yada

    Warren said only two months ago that WFC was good to go, one bad action only

    I believe I have read recent news about bad actions wrt the wealth management group, but I try not to keep up w WFC.

    What counts for culture, inertia, proof of change, hard and costly remediations, firings and punishments, yeah, good question these days.
  • edited July 2018
    @davidrmoran Goldman Sachs link about the crash right above those Nazi examples and I am not comparing anyone to Hitler. So not quite Godwin.:-) I am merely trying to show what the worst example of corporate behavior can be and asking how long before consumers/investors can forgive and move on if the company changes. I largely forgive these companies for their involvement, although I do think they should make restituion to families if they haven't. Still, neither Allianz nor Deutsche Bank nor IBM in any way really resemble those companies back then in their corporate behavior today. So, in some sense it's the opposite of Godwin. I'm saying they are now OK.

    Regarding how to punish, for one, stop treating corporations as "people" and hold executives and boards actually accountible by throwing them in jail and fining them immense sums. Also, no more white collar country club jails for these people either. Hardcore old fashioned jail. Also, fine the companies immense sums and insist they clean house of those commiting the bad behavior with no cushy bonuses for departing execs. Finally, regulators should insist upon proof of structural changes to end the bad behavior. WFC's behavior was in some part due to a bad incentive system. Getting rid of those incentives is legitimately a step in the right direction.

    To me what the Federal Reserve did to WFC is a good sign that the company will behave better in the future. I am actually more skeptical than you in assuming that other financial institutions aren't really better behaved than WFC. WFC just got caught and having been caught, they will now behave better than their peers until they prove themselves again, regulators relax and then they will start behaving badly again--a cycle of misconduct.
  • I think I posted that famous taibbi link here when it came out 8y ago

    sure, that ultra-fatuous shira beery piece is by definition godwin, can't not be

    the wfc sales culture was not (imo) like anything I have read about in moderately deep delving of boa and the rest including gs, more like something enron

    yes, jail time and ginormous fines

    I see little deeply unjust in unfair inertia, reputation destruction, shunning, all that good stuff
  • Another parallel to WFC is VW, which deliberately cheated on emissions tests for its diesel engines to skirt regulations and sell more cars. The cheating at VW started at the top and was very intentional. I own a VW Golf (although not a diesel), and it’s been a fantastic car. All things else being equal, I would like to buy a Golf Sportwagen for my next car but can’t get past the whole emissions scandal. I worked most of my career in environmental protection and what VW did was unconscionable to me. I plan to keep my VW another year or so, but will probably replace it with a Honda, even though I like the VW better. My wife and I have owned a number of Hondas over the years, and my Golf has been just as reliable and it’s much more fun to drive. Resale value sucks, however, compared to Honda — a situation that hasn’t been helped by the scandal.
  • edited July 2018
    @davidrmoran Beery's piece was a blog post, not really an intensely researched article, but the connection with many still-in-existence companies and the Holocaust is very real, so I don't find her thoughts on the subject fatuous at all. The question again is at what point has a company that behaved badly proven that it has truly reformed.? Is this less fatuous for you? https://nytimes.com/1999/11/16/world/germany-adds-555-million-to-offer-in-nazi-slave-cases.html
    One can do a similar analysis with the U.S. slave trade by the way:
    https://abcnews.go.com/Business/story?id=89884&page=1
    I also can't agree with you that what Wells Fargo has done is remotely comparable with what Enron did. Yet the question remains: What will WFC need to do to prove itself again so that it can go back to behaving badly like every other bank? And I still believe because of this when the next major systemic banking scandal emerges WFC will end up looking better than its peers because of this current scandal.

    This in no way reflects on analysis of PRBLX. The fund waited far too long to dump WFC and should have when the news of the first account scandal broke. But now that all of these penalties have been imposed and the company is actively trying to right itself, does it make sense to dump the stock? The timing of the sale seems more done out of embarrassment than any real logic.
  • @LB,
    This sounds like looking for an excuse to buy WFC.

    Perhaps 'easy' is a better characterization for Beery's blog.

    As for US slavery, you can join the debate of what to do about Boston's Faneuil Hall's name. To this privileged white guy (and Brandeis grad, so no need to finger-wag about Nazis), it sure seems moral-calories-not-particularly-well-spent. Disagree about 'remotely'. Whatever. Interesting to see you are anticipating worse bank behavior for the future, unless I am misreading you.

    @Tarwheel, +1 about VW. Talk about warranting sustained backlash.
  • edited August 2018
    True, but you don't have to look too far to find they've all had dirt on their hands at one point:

    https://rollingstone.com/politics/politics-news/bank-of-america-too-crooked-to-fail-232177/

    https://nytimes.com/2017/03/30/business/dealbook/new-firms-catching-up-to-banks-in-foreclosure-rankings.html

    The question is which is the cleanest now and which is the dirtiest and which will be the cleanest tomorrow and five years from now and which will be the dirtiest? This will weigh on these banks not just from an ethical perspective, but on their future returns. The other question to ask is which ESG mutual fund will be the first to pick up on potential malfeasance? Since this is a MF site and you are obviously unhappy with PRBLX, which ESG fund do you think will do a better job at catching and reacting to this sort of thing? I guess what I'm thinking is that PRBLX is at least trying to do the right thing. The fact that it failed to do so in a timely fashion is a black eye, but I wonder which ESG funds get it right on financial stocks?
  • edited August 2018
    Just in case other readers infer that your retrospective pointings and cites are not stretched equivalence, here's the lede from the Observer:

    Wells Fargo is facing fresh outrage over its latest revelation of harm to customers, after the bank admitted last week that its error contributed to hundreds of people losing their homes to foreclosure.
    In the disclosure, made in a filing with the Securities and Exchange Commission on Friday, Wells said its error caused more than 600 people in foreclosure to be incorrectly denied, or not offered, modifications to make home loans more affordable. Of that group, about 400 ultimately lost their homes, according to the bank, which apologized for the mistake.

    Bf is mine, to make clear it's not foreclosures like other institutions.

    But the rest of the short piece is worth reading.

    I would like to understand the $12.8k settlement process. Not seeing the correlation w the $8M setaside, though that seems paltry too.

    And yes, yes, yes, and yes again, other banks were bad too.
  • I think this discussion should, at some point, get to the essential nature of capitalism.. yes, I know it is reportedly better than any other system and no,, we are not talking about the evils of godless socialism. The truth is that when the bottom line is the bottom line and corporations live and die each quarter these things are common. You know the old saw,if you don't cheat you aren't trying hard enough. Disclosure,,,, PRBLX was my core holding for years and I have tons of brokered WF CD's in my portfolio.
  • msf
    edited August 2018
    Phony accounts:
    Wells Fargo isn't the only bank where heavy sales pressure led employees to open fake accounts.

    A federal review triggered by the Wells Fargo scandal found that "weaknesses" at other banks led employees to open accounts without proof of customer consent — just like Wells Fargo did — according to the Office of the Comptroller of the Currency.

    ... Citigroup (C), US Bank and Bank of America declined to comment.
    https://money.cnn.com/2018/06/06/news/companies/wells-fargo-fake-accounts-banks-occ/index.html

    Emission tests fraud:
    Collusion Between Germany's Biggest Carmakers

    The diesel scandal is not a failure on the part of individual companies, but rather the result of collusion among German automakers that lasted for years. Audi, BMW, Daimler, Volkswagen and Porsche coordinated their activities in more than a thousand meetings.
    http://www.spiegel.de/international/germany/the-cartel-collusion-between-germany-s-biggest-carmakers-a-1159471.html
    The motor industry was embroiled in a new diesel emissions scandal last night [June 11, 2018] after 774,000 Mercedes-Benz vehicles were found to contain cheating software.
    https://www.thetimes.co.uk/article/mercedes-faces-mass-recall-for-cheating-diesel-software-l0378ctf3
    The raids on Tuesday, in which about 100 investigators targeted BMW offices in Munich and an engine factory in Austria, suggested that all of Germany’s top domestic automakers may have evaded emissions rules, although perhaps not to the same degree as Volkswagen.
    https://www.nytimes.com/2018/03/20/business/energy-environment/bmw-diesel-emissions.html
    Ford became the latest company to become embroiled in the issue, with drivers in a U.S. lawsuit claiming some 500,000 Super Duty pickup trucks were rigged to beat emissions tests.
    https://www.washingtonpost.com/business/why-carmaker-cheating-probes-stay-in-high-gear-quicktake-qanda/2018/01/10/318b6d5a-f632-11e7-9af7-a50bc3300042_story.html?utm_term=.da98430847ad

    It's not so easy to pick and choose less bad from bad.

    With respect to the 400 or so WF foreclosures - these were the result of an "automated miscalculation of attorneys’ fees that were included for purposes of determining whether a customer qualified for a mortgage loan modification." (From WF filing.) That's ineptitude, not malice. Not that the government didn't facilitate this:
    No Republican sign-off was necessary for Obama’s Home Affordable Modification Program (HAMP). The Treasury Department alone decided to run it through mortgage companies that had financial incentives to foreclose rather than modify loans. Treasury never saw the program as a relief vehicle, but a way to “foam the runway” for the banks, allowing them to absorb inevitable foreclosures more slowly.
    Obama Failed to Mitigate America's Foreclosure Crisis
    https://www.theatlantic.com/politics/archive/2016/12/obamas-failure-to-mitigate-americas-foreclosure-crisis/510485/

    As to how long to hold the companies responsible (I agree with sending the execs to prison), how about at least as long as the effects of their acts endure? Which can be a mighty long time. We still don't know the extent of long term effects of all the fraudulent foreclosures.

    Food for thought when considering duration: How Redlining’s Racist Effects Lasted for Decades
    https://www.nytimes.com/2017/08/24/upshot/how-redlinings-racist-effects-lasted-for-decades.html
  • ah, ineptitude, got it

    all righty then, and gov-facilitated to boot

    gonna follow Ted and buy WFC tomorrow, I guess

  • For the record a few weeks ago I re-entered PRBLX as a core holding in my Roth IRA.
  • WF failed to offer mortgage modifications to 625 homeowners because of an error in computing attorneys' fees. Sure we can consider this as evidence of how bad WF was in processing modifications, regardless of whether the causes were intent or plain ineptitude or a combination of both.

    So then add those 625 to the 800,000 other homeowners who "could have qualified under the administration's mortgage modification program if the banks had done a better job ." Remember, the recent WF disclosure pertains to old errors, some dating all the way back to 2010.

    That eight hundred thousand figure comes from a Sept. 2012 study done by people "from the Federal Reserve Bank of Chicago, the government's Office of the Comptroller of the Currency (OCC), Ohio State University, Columbia Business School, and the University of Chicago."

    Not surprisingly, while the study doesn't name names, it clearly lays most of the blame at the feet of the TBTF banks:
    A “few large servicers [have offered] modifications at half the rate of others,” the authors say The largest mortgage servicers are Bank of America, JPMorgan Chase, Wells Fargo and Citi.
    https://www.propublica.org/article/foreclosure-fail-study-pins-blame-on-big-banks

    So were the TBTF banks all just as bad, or does one stand out among them? Turns out that one was much worse that the others.

    Wait for it ... wait for it ...



    Bank of America in particular (the largest of all the servicers when HAMP launched) has been far slower to modify loans than even the other large servicers, as other analyses we've cited have shown.
    Ibid.
  • I think Facebook is a far bigger problem for ESG funds and actually worse in its societal impact than Wells Fargo: https://bankrate.com/investing/esg-socially-responsible-investing-funds-should-they-hold-facebook-fb/
    ESG has long favored tech stocks as being environmentally friendly, ignoring the risks to the "s" or social part of the equation. The problem is there are a number of banks one can sub in for Wells Fargo if you think it's worse than the others. What do you sub for Facebook? Twitter? Even worse.
  • Ah, poor WFC, then, unfairly singled out in headlines.

    BoA the most fines too, as of Feb:

    https://www.marketwatch.com/story/banks-have-been-fined-a-staggering-243-billion-since-the-financial-crisis-2018-02-20

    MF liked its chances last Dec:

    https://www.fool.com/investing/2017/11/30/better-buy-wells-fargo-company-vs-bank-of-america.aspx

    BoA up ~~10% since then, WFC up ~5%, if my calcs are good.

    Should check whether Parnassus still holds BAC.
  • @Davidrmoran By the way, would you be opposed to an ESG fund that holds stocks you find ethically reprehensible but is filing shareholder resolutions with those companies to try to improve them? If this tactic of engagement rather than exclusion doesn't bother you, you might want to check out Walden Asset Management:https://morningstar.com/funds/XNAS/WSBFX/quote.html
    Walden was the one by the way that filed a resolution with Vanguard funds to get them to publish policies about climate change's impact to their portfolios and how they would vote on environmental proposals: waldenassetmgmt.com/wp-content/uploads/2017/10/StatementVanguardAug2017.pdf
    The truth is, none of these ESG funds are perfect, but some trend in the right direction.
  • It's droll that I seem to have some purity rep here. Or perhaps it's just alleged unfairness toward WFC.

    Barney gave an interview recently:

    http://nymag.com/daily/intelligencer/2018/08/barney-frank-on-his-regrets-from-the-great-recession.html
  • I'm not saying you have a purity rep. I'm trying to help you with another option, but boy have you been in a pissy mood lately.
  • "Ah, poor WFC, then, unfairly singled out in headlines."

    Hard to tell what you're communicating here. Is it that you find WF isn't worse than the others, it's just that if one doesn't read past the headlines one might get this mistaken impression?

    For example, you said that the 400 foreclosures were "accidental foreclosures". What was accidental (if that is the right word) was the failure to offer modifications. The foreclosures themselves appear proper. Assuming you got the term from headlines, that is indeed an example of misleading headlines regarding WF.

    Your next cite serves as another example. Here, the headline doesn't name any bank at all. Perhaps that's because WF isn't one of the highlighted banks in the article? (WF is just one of the unnamed "number of other big money-center banks have been fined over $10 billion.")

    Sizzle sells, and right now WF is sizzling. Hence the headlines.

    "MF liked its chances last Dec"
    Do you mean Motley Fool or Matt Frankel (not that it matters)?

    "Should check whether Parnassus still holds BAC."
    Still?

    At least as of the last annual report (Dec 31, 2017), all that any Parnassus fund held with BAC were some CDs indirectly via CDARS. (No change in the June 30, 2018 semi-annual.) I also spot checked PARNX, PRBLX (the subject of this thread), and PARWX quarterly going back to 12/2016 without finding BAC. I could always have missed something.

    One can look up all the holdings for each fund, by month, here:
    https://www.parnassus.com/parnassus-mutual-funds/#parnassus/fund-holdings?fd=PARNX&hdt=2018-06-30

    What (former) Parnassus BAC holding are you referring to?
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