Berkshire May Be Required To Post Up To $8 Billion In Collateral
Some bad news for Uncle Warren. In a note by Barclays' Jay Gelb, the insurance analyst evaluates the impact of FinReg on that "other" company and concludes that as a result of Berkshire having $62 billion in notional derivative exposure, the additional collateral requirement contemplated in the current version of Financial Reform (don't worry, the corrupt idiots in Congress will strip it before all is said and done), which amounts to 10% of notional, or 100% of option proceeds, would result in $6-8 billion in collateral posting requirements imposed on "America's Company." Even for Buffett, this is not purely chump change.
But before you start worrying that the principle of return and risk apply equally to Berkshire know this: Warren is confident all is good. And if a systemic company begins failing, he will just buy a 20% preferred stake and get all the name chasers rushing in to prop it up.
At the end of the day, none of this matters even remotely. We are positive no matter what, Buffett will find a way to exempt himself from situation which would imply there is risk to himself or his firm.