Everything Warren Buffett: CNBC: Buffett's Berkshire Off the Hook for Derivatives Collateral: Lawmakers

Saturday, July 3, 2010

CNBC: Buffett's Berkshire Off the Hook for Derivatives Collateral: Lawmakers

Published: Friday, 2 Jul 2010 | 11:20 AM ET

By: Alex Crippen
Executive Producer

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Warren Buffett

Warren Buffett's Berkshire Hathaway, along with other companies in similar circumstances, won't have to put up any collateral for existing derivatives contracts, according to a letter written by two of the key FinReg lawmakers on Capitol Hill.

Democratic Senators Chris Dodd (Connecticut) and Blanche Lincoln (Arkansas) told House Democrats that the version of the bill now moving forward on Capitol Hill "provides legal certainty to those contracts currently in existence, providing that no contract could be terminated, renegotiated, modified, amended, or supplemented."

Dodd and Lincoln also write, "It is imperative that we provide certainty to those existing contracts for the sake of our economy and financial system."

The first report on the letter came from Erik Holm of Dow Jones Newswires, who was given a copy by Berkshire when he asked for comment on an analyst's forecast this week that the company might have to put up between $6 and $8 billion in collateral due to the new FinReg bill before Congress.

Buffett and other Berkshire executives had argued that while they have no objection to requiring collateral on future derivatives contracts, they shouldn't be forced to absorb the extra cost of posting collateral on existing contracts.

Current Berkshire stock prices: