Sen. Elizabeth Warren, the Democrat of Massachusetts who is the self-appointed scourge of the financial industry, wants the former CEO of Wells Fargo, John Stumpf, to “return every nickel” he made while leading a bank that was creating phony accounts for its customers without their permission.
Stumpf has already resigned and agreed to forfeit $41 million in stock grants. The “every nickel” standard Warren seeks to apply would mean he would surrender another $100 million or $200 million.
Stumpf, though, is small fry compared to the big fish of the Wells Fargo story, who turns out to be none other than Warren Buffett, the chairman of Berkshire Hathaway who is the favorite billionaire of President Obama and Hillary Clinton.
In Buffett’s Feb. 27, 2016, letter to shareholders, he valued Berkshire Hathaway’s position in Wells Fargo at $27.18 billion, representing a $14.45 billion profit over the $12.73 billion that Berkshire spent to accumulate the position.
In a Feb. 29, 2016, interview on CNBC, Buffett said Stumpf had done “a fabulous job” and that Buffett himself would “have a hunger strike in front of the directors” of Wells Fargo if they went along with the CEO’s idea of retiring in two years at age 65. “It’s a very well-run bank,” Buffett said on CNBC in February.
This was only the most recent in 25 years worth of examples of Buffett touting Wells Fargo. In his March 1991 Berkshire shareholder letter, Buffett described Wells Fargo as “superbly-managed.” In his March 7, 1995, shareholder letter, Buffett described Wells Fargo as “Berkshire Bank.”
In his Feb. 28, 2006, letter to Berkshire shareholders, Buffett reported, “we substantially increased our holdings in Wells Fargo, a company that Dick Kovacevich runs brilliantly.” It was in 2005 that, according to The New York Times, employees at Wells Fargo started making internal complaints about the sham accounts.
On Feb. 25, 2012, Buffett told Berkshire shareholders that he’d spent another $1 billion buying more of Wells Fargo, describing the holding as among a few “partnership interests in wonderful businesses.” On Feb. 28, 2014, Buffett told Berkshire shareholders that Berkshire had bought even more Wells Fargo stock, calling it a “wonderful company” and comparing it to the Hope diamond.
In Buffett’s letter to Berkshire shareholders in 2015, he reported that “four horses pulling a Wells Fargo stagecoach” would appear in Omaha, Neb., for the Berkshire Hathaway annual shareholder meeting. It was a physical symbol of how closely Buffett and Berkshire were publicly and proudly identified with the bank that is by far its largest public stock position.
Buffett didn’t buy Wells Fargo stock for only Berkshire Hathaway; he also bought some for his personal account — more than 2 million shares, or about $100 million worth, depending on the stock price, according to a recent disclosure. How Buffett handles the potential conflicts of owning shares personally and also for Berkshire is another matter that might be of interest to Sen. Warren. Buffett and Berkshire together were by far the bank’s largest shareholders, with a combined stake exceeding 10 percent.
Meanwhile, Buffett has been actively engaged in partisan politics on the Democratic side. One of Hillary Clinton’s first moves after the Democratic National Convention was to show up in Omaha for a campaign rally featuring Buffett. In 2011, President Obama actually gave Buffett a medal — the presidential medal of freedom, praising him for having “demonstrated that integrity isn’t just a good trait, it is good for business.” Buffett has been a reliable proponent of tax increases that would have no material effect on him but would make things more expensive for his competitors.
Until and unless you hear Obama, Clinton and Warren criticizing Buffett as much or more as they castigate Stumpf, recognize their bank-bashing for what it is: political posturing and selective outrage, rather than principled, rules-based oversight.
Ira Stoll is editor of FutureOfCapitalism.com and author of “JFK: Conservative.” His column appears Sunday.