Here Come The Hypocrites! (Berkshire)
by ilene - April 26th, 2010 4:12 pm
Here Come The Hypocrites! (Berkshire)
Courtesy of Karl Denninger at The Market Ticker
WASHINGTON—Democrats took a step toward their goal of overhauling financial regulation, reaching a tentative deal to set restrictions on trading in exotic financial instruments known as derivatives.
Among the considerations still in the balance: A big provision being sought by Warren Buffett in recent weeks. A key Senate committee had changed its proposed overhaul of derivatives regulation after lobbying by Mr. Buffett’s Berkshire Hathaway Inc., potentially helping the famed investor avoid a financial hit, congressional aides say.
I thought these were weapons of financial mass destruction Warren?
What’s the problem? You don’t want to be forced to recognize the economic and accounting reality of your transactions? I don’t see why that should be a problem.
Posting margin on underwater positions is a reality for everyone who trades on margin – and you do a lot of it. There’s no reason why anyone – you included – should not have to put forward margin – in cash – just like everyone else.
Yeah, I know, Berkshire is "Strong". So what? That’s not material to the point at hand, which is that when you are short a "PUT", which is effectively what you are, and the position is underwater, you should be required to post margin!
Reliance on "future economic strength" to avoid this requirement is a big part of why the system nearly blew up. You were a part of it writing those contracts, and you now want to be exempted from safety and soundness requirements on something you identified – in public – as a dangerous practice.…