In what was a highly unexpected move, the Warren Buffett-led company Berkshire Hathaway Inc decided to shed its investment in Wells Fargo, selling the vast majority of its stocks in the bank. Berkshire first invested in Wells Fargo, the 4th largest U.S. bank, in 1989. This decision was largely spurred by the damage to the bank’s reputation stemming from the mistreatment of customers.
In a regulatory filing on Monday, Berkshire Hathaway declared that it owned $26.4 million of shares in the American bank. Prior to the monumental sale, the Warren Buffet-led company held approximately $32 billion worth of shares. Since 1989, the company spent approximately $12.7 billion in investments in Wells Fargo.
Wells Fargo’s esteemed reputation was tarnished when it was uncovered that the bank had been convincing customers to buy car insurance that they did not need. Furthermore, the bank was charging unreasonable mortgage fees. Back in February 2020, Buffet said in an interview with CNBC that Wells Fargo’s incentive system was “dumb”, and that they did not attempt to fix this flaw upon detection.
“The big thing is they ignored it when they found out about it,” he said. “You absolutely have to attack a problem as soon as it occurs, and you know about it.” Buffett also explained that had the bank taken action then, its customers would be better off today.
