BUFFETT: Wells Fargo committed the 'cardinal sin' - but we're sticking by them

REUTERS/Noah Berger

• Despite Wells Fargo's ongoing account fraud controversy, Warren Buffett is sticking by his investment in the firm.
• Follow Business Insider's coverage of Berkshire Hathaway's annual meeting 2018.

Warren Buffett is no fan of Wells Fargo's misdealings - but that doesn't mean he's going to dump his position in the company.

That was the message delivered by the Berkshire Hathaway chief executive officer on Saturday during the firm's annual shareholder meeting in Omaha, Nebraska. He was responding to a question from New York Times Dealbook founder and editor-at-large Andrew Ross Sorkin, who asked if the billionaire investor would ever consider fleeing Wells Fargo's "leaking boat."

"They had the wrong incentives," Buffett said, referring to the firm's ongoing account-fraud controversy. "That was and they committed the much greater error of ignoring the fact that they had a bad incentive system."

"That's the cardinal sin at Berkshire," he continued. "You can't have 337,000 employees and expect that everyone is behaving like Benjamin Franklin. When we find that something's going on, we have to do something about it. Wells Fargo didn't do it."

Buffett noted that he's previously purchased stakes in companies that were fresh off scandals, highlighting American Express - which he bought in 1964 - and Geico. Both firms came out fine, and have proved to be lucrative investments, he argued.

"The fact that you're going to have problems at some large institution is not unique," Buffett said. "All the big banks have had troubles of one sort or another. I see no reason to think Wells Fargo, going forward, is anything other than a very, very large, well-run bank that had an episode in its history it wishes it didn't have."

Follow Business Insider's coverage of Berkshire Hathaway's annual meeting 2018.