Wells Fargo (WFC - Free Report) stock surged over 2.60% on Wednesday, despite reports that Sen. Elizabeth Warren sent a critical letter to CEO Tim Sloan, questioning the embattled banking giant’s recent customer refund initiatives.
Sen. Warren called out Sloan and Wells Fargo just days after the Wall Street Journal reported that the company’s latest wave of consumer refunds were marred by missteps. An array of mistakes—large and small—were reportedly made during the company’s effort to repay customers hurt by improper fees on car loans and home mortgages.
Wells Fargo admitted last August that the company charged nearly 600,000 customers for auto insurance they didn't need and improperly charged 110,000 customers fees related to their mortgage rates. This comes on top of Wells Fargo’s massive fake account scandal that forced the bank’s previous CEO to step down in the fall of 2016.
In her Feb. 13 letter, Sen. Warren posed nearly a dozen questions and accused Wells Fargo’s current CEO of breaking his promise to customers. However, the bank also received some praise from one of its biggest investors in the wake of Sen. Warren’s letter.
Berkshire Hathaway’s BRK.A - (BRK.B - Free Report) vice chairman, Charlie Munger, supported Wells Fargo on Wednesday while he spoke at the Daily Journal Corporation’s annual meeting in Los Angeles.
“Of course, Wells Fargo had incentive systems that were too strong in the wrong direction,” Munger said at the meeting. “Of course, they were too slow in reacting to the bad news when it came. Everyone makes those mistakes, but we make fewer than others.”
Munger went on to say that it’s “time for the regulators to let up on Wells Fargo” and that long-term the bank and its customers will likely be better off. It seems clear that the Berkshire executive thinks punishments levied against the company have been more than fair.
Wells Fargo fired more than 5,000 employees in relation to its initial fraudulent account scandal and was also fined $185 million. More recently, in one of her final acts as head of the Federal Reserve, Janet Yellen and regulators notified Wells Fargo that is could not grow beyond the $1.95 trillion in total assets it ended 2017 with "until it sufficiently improves its governance and controls."
As one of Warren Buffett’s right-hand men, what Munger says can carry significant weight. But it is unclear if federal regulators will care about what he has to say, as Wells Fargo was Berkshire’s top holding as of its most recent SEC filing. Berkshire owns roughly $27.5 billion worth of Wells Fargo shares.
Wells Fargo, which is currently a Zacks Rank #3 (Hold), has seen its stock price surge over the fast few days, even before today’s climb.
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