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The Downside of Wells Fargo's Enormous Share Buyback

By David Hanson and Matt Koppenheffer - Mar 27, 2014 at 6:23PM

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Wells Fargo just got the go-ahead to buy back a mountain of shares. Is this the right move for the bank?

In the results of the Federal Reserve's Comprehensive Capital Analysis and Review, or CCAR, round of banking stress tests this year, Wells Fargo ( WFC -1.67% ) came out very strong, unsurprisingly. What was surprising however was that based on the results, the Fed cleared the bank to initiate a share repurchase program for 350 million shares, or approximately $17 billion dollars worth of shares. While on the surface, this is an enormous amount of money being returned to shareholders which should definitely please investors, there may be reason to view this move with mixed emotions.

In this segment of Thursday's Where the Money Is, Motley Fool banking analysts Matt Koppenheffer and David Hanson take a look at Wells Fargo and its new share repurchase program, and the strategy behind the move.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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