Monday, April 26, 2010

Warren Buffett Pressing Hard to Get Current Derivatives Contracts Exempt from Financial Reform Bill

As I continue to state, the big problem with creating new financial regulations is that it creates power centers where the big boys can play to create legislation that is to their advantage.

None other than Warren Buffett has waded into the current regulation reform pool to move things in a direction that will benefit his firm, Berkshire Hathaway. WSJ reports:
A key Senate committee had changed its proposed overhaul of derivatives regulation after lobbying by Mr. Buffett's Berkshire Hathaway Inc., potentially helping the famed investor avoid a financial hit, congressional aides say...

The fate of Berkshire's effort to influence the legislation remains uncertain. Senate officials said Sunday night that most of the details of the agreement haven't yet been finalized.

The provision, sought by Berkshire and pushed by Nebraska Sen. Ben Nelson in the Senate Agriculture Committee, would largely exempt existing derivatives contracts from the proposed rules. Previously, the legislation could have allowed regulators to require that companies such as Nebraska-based Berkshire put aside large sums to cover potential losses. The change thus would aid Berkshire, which has a $63 billion derivatives portfolio, according to Barclays Capital.

Mr. Buffett's push is especially notable because he has warned of the potential dangers of derivatives, famously branding them "financial weapons of mass destruction."
Buffett actually has a legitimate point here, but the further point is that it takes a problem for a whale like Buffett to get legislation like this changed. If this kind of legislation simply impacted you instead of Buffett, there is no chance you would be able to get it changed.

Whales rule when power centers are created.

1 comment:

  1. Guess Buffett is just a pig like all the rest. You shouldn't be in this but I can and if a law can help me I will "buy" Senator to help me. He should loose some credibility with this shenanigan.