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weiwentg (98.34)

Berkshire, derivatives and financial reform

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April 27, 2010 – Comments (2)

It appears that Berkshire Hathaway has been lobbying for an exemption from proposed laws that would standardize derivative contracts and require parties to post collateral - they argued that existing derivatives contracts should be exempted. Berkshire would have to post up to $8 billion.

 Even if the resulting law contains no exemption, I have no doubt that Berkshire would be able to come up with the collateral. Surely they could use a combination of their existing stock portfolio and cash, of which they generate bucketfuls. 

Financial policy isn't my specialty. If any company deserves an exemption from the new regulations, it would be Berkshire. I don't think that exemptions are good public policy in general, but I think Berkshire will be fine no matter how the law plays out. 

2 Comments – Post Your Own

#1) On April 27, 2010 at 12:15 PM, miteycasey (96.92) wrote:

It's the 8BILLION sitting there they can' invest that hacks them off.

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#2) On April 27, 2010 at 1:30 PM, Melaschasm (89.17) wrote:

While I do not like exemptions in general, there is value in having a medium term grandfather clause.  It is common for laws to be applicable going forward, rather than being enforced upon old decisions. 

Imagine if the government passed a tax increase that was retroactive to 2000.  Changing the rules for old derivative contracts would have a similar impact upon many companies.

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