Wells Fargo: Buffett Right-Hand Man Misfires Defending Bank
(Bloomberg Gadfly) -- Wells Fargo & Co. deserves a break? Are you kidding me?
On Wednesday, Berkshire Hathaway Inc.'s vice chairman Charlie Munger -- Warren Buffett's business partner -- made some tone-deaf comments about the scandal-plagued lender. Among them? That it's time for regulators to let up on the bank, and that "practically everyone" makes the types of mistakes that it did, like offering employee incentives that are "too strong in one direction" and responding slowly to bad news when it hits. His rationale seems to be that Wells Fargo and its customers will wind up better-placed than they were before the scandals broke.
While it's true that a healthier culture around incentives and a stronger risk-management framework are positive outcomes that have already led to lower employee turnover, the missteps should have never occurred in the first place. And it's hard to see how customers whose credit scores have been impaired and who have had their cars repossessed as a result of Wells Fargo's actions can end up better off -- even if the bank figures out how to adequately compensate them. Steady and stern oversight from regulators -- even if it's encouraged by politicians -- is crucial to ensuring future scandals are prevented.
Perhaps it should be expected that Munger, 94, would come to Wells Fargo's defense. After all, as the bank's biggest shareholder, Berkshire Hathaway has lost more than $3.3 billion in paper profits since Wells Fargo's stock plunged following the Federal Reserve's decision to slap it with unprecedented sanctions earlier this month that involved putting a limit on its growth.
Regulators don't take their cue from shareholders, even those of the most influential variety. For that, we should be grateful.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
Gillian Tan is a Bloomberg Gadfly columnist covering deals and private equity. She previously was a reporter for the Wall Street Journal. She is a qualified chartered accountant.
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