By CCN.com: Warren Buffett sidekick Charlie Munger likened “bitcoin people” to the apostle who betrayed Jesus. Meanwhile, he views scandals set in motion by Wells Fargo executives as an ‘honest mistake.’ Berkshire Hathaway owns a stake in Wells Fargo.
Wells Fargo started to gain the reputation of being a bad actor as one scandal after the next unfolded. It overcharged customers for mortgages and auto loans and originated and sold mortgage loans that included false information in the years leading up to the 2008 financial crisis. It was slapped with a $1 billion fine for that.
Munger made his eyebrow-raising comments about Wells Fargo during an interview with CNBC’s Becky Quick on Monday, saying:
“I think it’s a fine company, and so they made one bad decision about an incentive plan. I regard it as an honest mistake, not as some deep moral failure. Nobody was being malevolent in the high ranks of Wells Fargo. They just had a blind spot.”
About former CEO Tim Sloan losing his job over the scandal, Munger said:
“They lost their jobs over a blind spot, but i don’t think Tim had a blind spot. I think he lost his job because life is hard. I don’t like it.”
During Berkshire Hathaway’s shareholder meeting, Munger said:
“I’ve been invited during this gathering to go to a happy hour put on by the bitcoin people. And I tried to figure out what the bitcoin people do in their happy hour and I finally figured it out: They celebrate the life and work of Judas Iscariot.”
Critics called Munger out.
Wells Fargo’s fake account scam was one of the biggest banking scandals in modern history that entailed a bank ripping off its own customers for a profit. About 3.5 million Wells Fargo accounts were affected. In 2016, it had to cough up $185 million in penalties and fines for the fraud.
At the helm of the scandal was community bank unit head Carrie Tolstedt and then CEO John Stumpf who showered her with praise. Her zeal lined her financial coffers mightily. She was set to receive a $124 million payday through a mix of shares, options, and restricted stock. After being fired instead of being allowed to retire, she had to forgo $67 million of that amount.
When the mess was revealed, Wells Fargo left Tolstedt in place. However, the employees who carried out her demands by enrolling customers in Wells Fargo products without their consent were let go. Many have since been rehired.
Fascinatingly, Munger thinks these employees were the criminals, not the execs. Quick asked him, “You don’t think there was any criminal activity?”
“Of course not. The criminal activity was the people below and that was forgivable. They were under a crazy incentives system.”
A Wells Fargo board report noted the following about Tolstedt’s management style:
“She was ‘obsessed’ with control, especially of negative information about the Community Bank, and extremely reluctant to make changes. Tolstedt resisted change to the Community Bank’s sales model even when confronted with evidence that it led to low-quality sales and improper sales practices. … Instead, she reinforced the high-pressure sales culture.”
Munger’s blind support for the big bank that has been mired in controversy for screwing over its customers is stunning. It shows how old-school financial players have dug their heels so deep into traditional finance that their reasoning on bitcoin can’t be seen as credible.
Last modified: July 2, 2020 7:37 PM UTC