Warren Buffett is lobbying the U.S. Senate to avoid derivatives reforms that would require, among other things, financial institutions to put up collateral to cover potential losses.
According to the WSJ, Buffett, who has referred to derivatives as “financial weapons of mass destruction,” is leaning on Nebraska Senator Ben Nelson to help him with an exemption that would potentially help Berkshire Hathaway’s (BRKa) (BRKb) $63 billion derivatives portfolio avoid a financial hit.
“The provision, sought by [Buffett] and pushed by Nebraska Sen. Ben Nelson in the Senate Agriculture Committee, would largely exempt existing derivatives contracts from the proposed rules”, the Journal said. Previously, the legislation could have allowed regulators to require that companies such as Nebraska-based Berkshire, the investment group led by Mr. Buffett, put aside large sums to cover potential losses.
The Journal also noted that that the White House wants to kill the language in the provision pushed by Buffett on the grounds that it would weaken the govt’s ability to regulate the $450 trillion derivatives market which allows investors to speculate on the future price of a good, such as oil or mortgages, without buying the underlying investment.
The new legislation could require that derivatives trade more like stocks or bonds—on exchanges, instead of in private deals, the paper said.
Update: The WSJ reports that Agriculture committee members have agreed to kill the derivatives provision pushed by Berkshire Hathaway.