Berkshire Hathaway (BRK) CEO Warren Buffett has generally maintained a sterling reputation (as far as financiers go), but longtime observers know that he’s as good as any at taking advantage of public policy to suit his needs.
(Ever wondered why he loves the estate tax so much? Maybe because it makes it easier for him to buy family-owned businesses?)
Anyway, WSJ reports that while the Democrats are making real progress on derivatives reform, the bill could contain a big pro-Berkshire loophole.
And of course, the loophole was placed by Nebraska Senator Ben Nelson.
Here’s the nut of it:
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.
Apparently The White House is strongly opposed to the loophole.
Berkshire aside, the big story is that derivatives reform is definitely going to make it into the bill. Some combination of added daylight (clearinghouses or exchanges, etc.) and as noted, higher required collateral are in the cards.
Don’t miss: The six key battle-lines of financial reform >
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