Warren Buffett: Wells Fargo made a 'huge mistake,' but it wasn't the one everybody talks about

Billionaire investor Warren Buffett said Wells Fargo (WFC) should have nipped its problems in the bud when it had the chance.

"They made a huge mistake. The huge mistake wasn't necessarily the dumb incentive system," Buffett told CNBC's "Squawk Box" in a wide-ranging interview. "The problem was they didn't do something about it until they learned about it."

Because of the company's incentive structure, several Wells employees opened fee-generating accounts for customers who never requested them. Wells later agreed to pay $190 million to settle a customer fraud lawsuit.

"I keep preaching to our guys: If you see a problem, attack it immediately," Buffett said of his employees at Berkshire Hathaway.

Buffett also shared his wisdom on Monday about how he decides which banks to invest in.

"It's the same metric I use for buying any asset," Buffett told CNBC's " Worldwide Exchange " before joining CNBC's "Squawk Box ." It's "the future cash compared to the present cash. ... A bank is no different than any other business. It's how much cash you're going to get between now and Judgment Day, discount it and compare it to other investments."

The chairman and CEO of Berkshire Hathaway (BRK-A) has been a long-time investor in banks, most noticeably in Wells Fargo (WFC). At the end of 2016, Berkshire held a 9.56 percent stake in Wells worth around $28 billion, according to FactSet.

"There's no special trick in the valuation. There can be a problem in figuring out what's inside the bank," Buffett said. "Otherwise, I'm just looking at it like it's Coca-Cola (KO) or American Express (AXP)."

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