- Warren Buffett called Wells Fargo's fake-accounts scandal a "total disaster" in a CNBC interview on Monday.
- The bank agreed to pay $3 billion and admitted to opening accounts without customers' permission and charging improper fees in a settlement deal last week.
- "They obviously had a very dumb incentive system ... and the big thing is they ignored it when they found out about it," the billionaire investor and Berkshire Hathaway CEO said.
- "The shareholders are paying for something that didn't do them any good whatsoever," Buffett added.
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Warren Buffett blasted Wells Fargo for its fake-accounts fiasco in a CNBC interview on Monday. The billionaire investor and Berkshire Hathaway CEO blamed the bank's incentive structure for sparking the scandal, and pilloried its leaders' failure to address the issue when it first came to light.
"They obviously had a very dumb incentive system, people started playing it in various ways, and the big thing is they ignored it when they found out about it," Buffett said.
Berkshire sold about 15% of his Wells Fargo shares last quarter, but still ended the year as the bank's biggest shareholder with a 7.8% stake - currently worth about $15 billion.
"You're gonna do dumb things in business, and we do them every day, but you absolutely have to attack a problem as soon as it occurs and you know about it," Buffett said in the CNBC interview.
Wells Fargo pressured employees to meet unrealistic sales goals, spurring them to open millions of bank accounts in customers' names without their permission, charge improper fees for auto and home loans, and sell unwanted insurance products, The New York Times said.
The bank agreed last week to pay $3 billion to resolve investigations into its sales practices. It admitted to collecting millions of dollars in fees and interest to which it wasn't entitled, harming customers' credit ratings, and unlawfully using customers' personal information in the settlement. It has already paid more than $4 billion in fines and penalties since 2016, Reuters reported.
Wells Fargo's bad sales practices "were ignored, which is a total disaster," Buffett said. He added that the fraud didn't even make money. "The shareholders are paying for something that didn't do them any good whatsoever."
"Squawk Box" co-host Becky Quick asked Buffett whether he slashed his stake in Wells Fargo because of the accounts scandal. "No, not specifically," Buffett said, breaking into a knowing smile. "I'm not recommending ... people have to make up their own minds."
Buffett offered a similar diagnosis for Wells Fargo at Berkshire's last three annual meetings, blaming the bank's scandal on poor incentives and its failure to address the matter quickly.
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