Warren Buffett expressed his disappointment with the fake accounts scandal at Wells Fargo during an interview on Monday morning.
Buffett noted that the incentive plans that led some retail employees to open up to 2 million accounts under customers’ names without their knowledge were not the problem, but rather the way executives responded when they found out about the account openings.
“A huge mistake was made at Wells,” said Buffett. “Not in cooking up the incentive plans — cross selling is fine, I mean, you want to have incentives for people to do it — but you don’t want to have it lead to crazy behaviour, which it did.”
Buffett had previously been silent about the scandal, saying in September that he did not want to comment until after the election.
“John Stumpf is a perfectly decent guy in my opinion,” Buffett told CNBC. “I’d have him as a trustee in my will and I wouldn’t worry for a second. But somehow, when he saw the evidence, he didn’t do something about it. Now, maybe he thought somebody else was going to do something about it.”
Additionally, the relatively small fine total — regulators punished Wells with a $US185 million fine — shouldn’t be an indicator that the accounts scandal wasn’t serious according to Buffett.
“I think they saw that, wrongly, in the light of $US5 billion fine that was put on for mortgage practices at some other banks and $US3 billion fines, so they saw the problem as sized by the size of the fine,” said Buffett. “And it wasn’t at all. I mean, any time you have people making up accounts and doing all the things they were doing, it isn’t the size of the fine that measures the customer impact and how your reputation will suffer. It is what you were doing, and it was wrong.”
The bank has seen new account openings crater since the scandal came to light, but the bank has not significantly lost existing customers following the news.
Here are Buffett’s full comments via CNBC:
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