Berkshire Hathaway's Charlie Munger believes Wells Fargo will survive its embarrassing cross-selling scandal, though he acknowledged the company was too slow to correct what it did wrong.
During a wide-ranging talk, the vice chairman of the industrial conglomerate said he hasn't lost faith in Wells Fargo, which had to pay a $185 million fine relating to the creation of accounts for millions of customers without their knowledge.
Berkshire is the largest shareholder in Wells, with a 9.6 percent stake worth $27.8 billion.
"Wells Fargo had a glitch," Munger said. "The truth of the matter is they made a business judgment that was wrong. They got so caught up in cross-selling and incentive systems (that) some people reacted badly and did things they shouldn't."
The cross-selling issue turned into a fiasco for the nation's third-largest bank by assets, due also in part to its lack of disclosure until the fine became public.
Since then, Wells has kicked off a full-press campaign to repair its image and has instituted multiple measures, including the elimination of sales goals, to ensure the problem doesn't happen again.
"I don't think anything's fundamentally wrong in the long haul for Wells Fargo. They made a mistake," Munger said. "And it was an easy mistake to make. I don't regard setting incentives aggressively as a mistake. I think the mistake was, when the bad news came, they didn't recognize it directly."
Wells Fargo shares got pummeled in the wake of the scandal, falling more than 12 percent in the month after the news broke. However, the stock rebounded and has soared 34 percent since its early October trough.
"They'll be better for it," Munger said of the scandal. "One thing about doing something dumb is that you're unlikely to do it again."
