Warren Buffett, whose Berkshire Hathaway (BRK.A) owns the largest share of Wells Fargo, was a strong supporter of its CEO Tim Sloan throughout the bank’s past two scandal-ridden years, which were triggered by a massive fake account incident in 2016. But Buffett’s endorsement, as it turned out, was not enough for Sloan to weather mounting criticism from Washington lawmakers, and the pressure led him to announce his early retirement (at the age of 58) late last month.
Now that Wells Fargo has realized that finding a new CEO from within probably isn’t the smartest move to signal a fresh start (Sloan was promoted internally in 2016 to clean up after the fake account scandal), the nation’s fourth largest bank is looking for an outside hire.
Several seasoned Wall Street executives have already emerged as possible candidates, including former Goldman Sachs presidents Gary Cohn and Harvey Schwartz, as well as JPMorgan CFO Marianne Lake.
But if Buffett could have a say in the appointment, he wouldn’t want anyone from Wall Street to lead the bank at all, because recruiting from Wall Street is “automatically going to draw the ire of a significant percentage” of lawmakers in Washington. “And that’s just not smart,” the 88-year-old investing guru told The Financial Times in an interview published on Sunday.
“They just have to come from someplace [outside Wells Fargo] and they shouldn’t come from Wall Street. They probably shouldn’t come from JPMorgan or Goldman Sachs,” Buffett added, referring to the names floated by analysts since Sloan’s departure.
The Wells Fargo’s banking scandal exposed in September 2016 involved millions of fake accounts created by its staff in order to meet sales quotas. While the incident drew intense scrutiny of Wells Fargo’s senior leadership from lawmakers and regulators, Buffett confirmed his optimism in the bank’s fundamental business in The Financial Times interview.
“If you look at Wells, through this whole thing they’re uncovering a whole lot of problems, but they aren’t losing any customers to speak of,” he said.
As of the end of 2018, Berkshire Hathaway owns more than 400 million Wells Fargo shares, or 10 percent of the bank, currently worth about $21 billion.
Buffett does not have a seat on Wells Fargo’s board of directors.