Cram It Buffett…. This Ain’t Margaritaville

WASHINGTON—Democrats took a step toward their goal of overhauling financial regulation, reaching a tentative deal to set restrictions on trading in exotic financial instruments known as derivatives.

Among the considerations still in the balance: A big provision being sought by Warren Buffett. 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 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.” The White House has been trying to kill the Berkshire provision on the grounds that it would weaken the government’s ability to regulate the enormous market for derivatives. Berkshire Hathaway argued that it shouldn’t be made to redo existing contracts and that it is already healthy enough to cover its obligations. A fracas over the measure could hurt Democrats. The Obama administration wants to avoid the home-state horse-trading that almost sank its health-care overhaul. Berkshire is based in Omaha, Neb., and has longstanding ties to the state’s Sen. Nelson. Berkshire has argued Congress doesn’t have authority to make it redo existing contracts, especially since the company is sitting on about $20 billion in cash. Mr. Buffett has said he rarely has to post collateral, which is why for Berkshire the new rules could hurt. Contracts smontracks as we have seen with this administration you don’t need no stinking contracts. Time for contract cram down Buffet..This ain’t Margaritaville…

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