Berkshire Hathaway Inc. (NYSE:BRK.A) may be on the verge of Federal reserve oversight under a new proposal by regulators that increases the chances that American International Group Inc. (NYSE:AIG) and MetLife, Inc.(NYSE:MET) will receive heightened scrutiny.
Berkshire Hathaway had $29.7 billion in credit-default swaps linked to its debt as of Oct. 28, putting it just under a $30 billion threshold proposed last month by the Financial Stability Oversight Council. AIG, now majority-owned by the U.S., had $45.3 billion in swaps written against it, and MetLife, the New York-based insurer, had $32.9 billion.
The council led by Treasury Secretary Timothy Geithner, is responsible for deciding which non-bank financial firms are systemically important and require Fed oversight, plans to evaluate those that have $50 billion or more in assets and meet any one of five other criteria, including the credit-default swap threshold. Berkshire, AIG and MetLife all meet the asset minimum, and all have credit-default swaps to contend with.
The council, which also includes fed Chairman Ben Bernanke, will consider which firms are significant enough that their failure would pose a significant risk to the broader financial system in the United States. The panel stated in its Oct. 11 proposal, that the criteria would have “captured” Bear Stearns Cos., Lehman Brothers Holdings Inc. (LEHMQ), Countrywide Financial Corp. and IndyMac Bancorp Inc. (IDMCQ) had the criteria been in place and used during the 2008 financial crisis.
Warren Buffett, now 81, built Berkshire Hathaway into a multi billion dollar business over the course of four decades. Berkshire reported on Nov. 4 that third-quarter profit fell 24% to $2.28 billion as its derivative bets declined in value.
Shares of Berkshire Hathaway were trading 115,806.00 at the close of trading last Friday.
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