Warren Buffett Lobbying For Favorable Terms On Derivatives In Reform Bill

06/26/2010 05:12 am ET | Updated May 25, 2011

Warren Buffett is lobbying the Senate to avoid derivatives reforms that would potentially hurt Berkshire Hathaway's $63 billion investment portfolio in the complicated financial instruments, according to the Wall Street Journal.

Buffett, who has referred to derivatives as "financial weapons of mass destruction," is leaning on Nebraska Senator Ben Nelson, among others for favorable terms, reports the WSJ:

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.

Berkshire Hathaway seeks to avoid reforms that would require investors to set aside collateral to cover the risk of potential collapse for existing derivatives. It's gain after taxes on derivatives trading in 2009 was $486 million.

Berkshire posted $8.1 billion in net profits for 2009 and $112 billion in total revenue.

WSJ reports that the White House wants to kill the language pushed by Buffett on the grounds that it would weaken the government's ability to regulate the $450 trillion derivatives market. According to the paper, the administration also sees a deal for Buffet as a potential political tool for Republicans fighting financial reform:

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 Hathaway and its subsidiaries spent more than $3.4 million on lobbying in 2009.

In recent weeks, derivatives reform has attracted more than 1500 lobbyists, bankers, and executives to the Senate Agricultural Committee, according to the New York Times. Banks have increased spending on lobbying efforts as the Senate moves closer to a vote on new financial regulations.

On Sunday, Reuters reported that Sens. Chris Dodd (D-Conn.) and Blanche Lincoln (D-Ark.) were near a deal that would force banks to spin off their desks that trade derivatives.

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