Earlier this year during the DJCO Annual Meeting, Charles Munger discussed the reasons why Warren Buffett was selling Wells Fargo stock, and he was not. Here’s an excerpt from the discussion:

Julia La Roche

[ Norman Bergman ], he asks, why is Berkshire Hathaway selling shares of Wells Fargo as quickly as one can and the Daily Journal has sold 1 share? If it’s not good enough for Berkshire, shouldn’t we have the same standards?

Charles Munger

Well, I don’t think it’s required that we be actually the same on everything. We have different tax considerations. There’s no question about the fact that Wells Fargo has disappointed long-term investors like Berkshire because the old management, which is now removed, were not consciously malevolent or thieving.

But they had terrible judgment in having a culture of cross-selling with the incentives and the poorly paid employees were too great to sell stuff the customers didn’t really need. And when the evidence came in that the system wasn’t working very well because some of the employees were cheating some of the customers, well, they came down hard on the customers instead of changing the system.

That was a big error in judgment. And of course, it’s regrettable. So you could understand why Warren got disenchanted with Wells Fargo. I think I’m a little more lenient. I expect less out of bankers than he does.

You can watch the entire meeting here: