Democrats Kill Financial Reform Loophole Pushed By Buffett

Monday, 26 Apr 2010 01:16 PM

By Frank McGuire and Julie Crawshaw

Share:
  Comment  |
   Contact Us  |
  Print  
|  A   A  
  Copy Shortlink
Senate Democrats reportedly have agreed to kill a provision from their derivatives bill pushed by Warren Buffett's Berkshire Hathaway Inc. that would have allowed the company to avoid a significant financial hit.

Democratic Nebraska Sen. Ben Nelson initially helped push the provision into a bill passed by the Senate Agriculture Committee last week, The Wall Street Journal reported.

The provision was rejected Monday, the Journal and CNBC reported.

The provision would have prohibited the government from requiring companies to hold collateral against their existing derivatives trades, the newspaper said. The change would have aided Berkshire, which has a $63 billion derivatives portfolio, according to Barclays Capital.

Buffett has been able to use the company's strong financial position to post little collateral against its big derivatives portfolio, freeing up capital for investing elsewhere, the Journal reported.

The provision's demise is a blow to Berkshire Hathaway, which had lobbied strongly for its inclusion, and could bring challenges from other companies who contend Congress can't force them to amend the terms of existing contracts, the Journal reported.

Buffett's push was especially notable because he has warned of the potential dangers of derivatives, branding them "financial weapons of mass destruction."

Derivatives are financial products — such as corn futures or stock options — whose values depend on the values of underlying investments. Companies use them to hedge against risks, such as interest rate swings or oil price spikes. Derivatives also became vehicles for speculation and helped trigger the financial crisis.

In his letter to investors this year, Buffett wrote that while Berkshire has "long invested in derivatives," the contracts "can be dynamite," the Journal reported.

© 2014 Moneynews. All rights reserved.

Share:
  Comment  |
   Contact Us  |
  Print  
  Copy Shortlink
Around the Web
Join the Newsmax Community
>> Register to share your comments with the community.
>> Login if you are already a member.
blog comments powered by Disqus
 
Email:
Retype Email:
Country
Zip Code:
 
Hot Topics
Follow Newsmax
Like us
on Facebook
Follow us
on Twitter
Add us
on Google Plus
Around the Web
You May Also Like

Back From Kiev, Rep. Pompeo Says Putin Wants to 'Control Ukraine'

Thursday, 24 Apr 2014 13:56 PM

Following a recent trip to Ukraine, Rep. Mike Pompeo of Kansas told Newsmax that while the final outcome of the ongoing  . . .

Obamacare Provision Allows Treatment Without Payment

Thursday, 24 Apr 2014 13:31 PM

Doctors and hospitals, not patients, will be on the hook for people who don't pay their Obamacare insurance premiums, Fo . . .

GOP Backing Off Support for Cliven Bundy After Racist Remarks

Thursday, 24 Apr 2014 11:12 AM

Republican leaders are backing off their support of Nevada cattle rancher Cliven Bundy after he made a series of inflamm . . .

Most Commented

Newsmax, Moneynews, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, NewsmaxWorld, NewsmaxHealth, are trademarks of Newsmax Media, Inc.

 
NEWSMAX.COM
America's News Page
©  Newsmax Media, Inc.
All Rights Reserved