By now, you’ve probably caught wind of the huge Wells Fargo scandal that went public this year. The company, for about 5 years, had employees creating unauthorized deposit accounts and credit card applications that totaled more than $2.6 million in fees for Wells Fargo.
It has been said that employees were doing this in order to meet high quotas set by managers and recently retired CEO, John Stumpf, who’s mantra was “eight is great” for each Wells Fargo customer. Wells Fargo, after being sued by the city of Los Angeles, paid $185 million in order to settle the suit.
“We are eliminating product sales goals because we want to make certain our customers have full confidence that our retail bankers are always focused on the best interests of the customers,” Stumpf announced, one week prior to his (pushed for) retirement. The company also let go about 5,300 employees.
With all of that being said, you would think that CEO of Berkshire Hathaway, Warren Buffett, would have quickly lost interest in Wells Fargo due to his high standards for reputation. But, to date, Buffett hasn’t sold any of his Wells Fargo stock.
Instead, it looks like Buffett is showcasing his forgiving side. He commented that Stumpf was a “decent man” who “made a hell of a mistake.”
More than that, Buffett seems to be fully backing the new CEO for Wells Fargo, Tim Sloan. Buffett has said that Sloan is a very smart choice, so long as he takes the time to restore trust to the public— something Wells Fargo has been working at nonstop, with a public apology tour and a redesigned website dedicated to commitment.
Buffett also likes to remind investors that Wells Fargo is nowhere near the only company he’s invested in that has had problems; Clayton Homes is often criticized for its mortgage strategies. But, with both cases, Buffett feels that the pros outweigh the cons.
Even after the scandal, the basis for investing in Wells Fargo still remains intact. Consistently, Wells Fargo is more profitable than its competition.