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Amit Chokshi, CFA
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I managed my own hedge fund and managed accounts from 2007 - Q3 2012. I launched Kinnaras Capital in 2007 and managed a private investment partnership and separately managed accounts under the firm until July 2012. I was considering winding my firm down after 2012 when a seed deal I had been... More
My company:
Kinnaras Capital Managemen LLC
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kinnaras.com
  • Ben Nelson: Save Buffett and Nelson, Screw Everyone Else 0 comments
    Apr 29, 2010 10:12 AM | about stocks: BRK.A, BRK.B
    If the health care debate demonstrated anything, it's that Senator Ben Nelson votes based on his bank account.  Irrespective of one's views on the healthcare debate, Nelson's comments should have always (but unfortunately weren't) been exposed as pathetically tainted by his insurance and health care industry tries.  For example, Nelson received $2MM from the health care and insurance industry in recent campaigns.  Nelson's deputy chief of staff was a former health care lobbyist.  He ranks fourth among Senators in receiving contributions from the insurance industry over their lifetime.  More importantly, the three Senators ahead of him have all run for President which would automatically make their contributions across all industries larger; so adjusted for that aspect, Nelson is actually the largest recipient of insurance industry contributions.  According to OpenSecrets.org, the top five industries for Nelson's campaign contributions are Insurance, Lawyers, Securities/Investments, Lobbyists, and Health Professionals.  Nelson sold himself to health care interests that pad his bank account and now, with key financial reform necessary, decided to protect Warren Buffett and Nelson's investment in Berkshire Hathaway ("BRK") rather than work to develop legislation that would protect all Americans.

    The world is mired in a nasty financially induced economic crisis mainly because a number of highly educated, wealthy individuals that are responsible for policy decisions could not see, or ignored, a multi trillion dollar real estate bubble.  A key contributor of the fallout of this financial crisis was lack of derivatives legislation and more importantly a lack of appreciation of the risks associated with those derivatives.  Without any significant regulation and real monitoring of these derivatives, problems such as the current sovereign debt crisis facing Europe could yield results similar to the financial crisis of 2008.  As Yves Smith points out in her blog Naked Capitalism, "In the subprime crisis, many pundits and the Fed itself thought the losses would be contained, unaware that for every $1 in BBB subprime bonds, another $10 in CDS had been written, and that many of these exposures sat with highly levered firms, namely insurers and dealers, who were not able to take much in the way of losses."

    Now enter Ben Nelson.  While a number of legislators believe that derivatives legislation, and at the very least the opportunity to have an open, exploratory debate is important, Nelson is once again voting based solely on his own financial interests and the behest of one of his key campaign contributors.  According to OpenSecrets.org, Warren Buffett's BRK was Nelson's second largest campaign contributor.  As an insurance conglomerate, BRK has roughly $63B in derivatives contracts.  The proposed legislation would require that those that engage in derivatives set aside more capital to protect themselves from losses to avoid issues similar to those mentioned by Yves Smith above.  Based on current proposals, BRK would need to set aside roughly $8B in additional capital.

    Buffett apparently was not happy with this and lobbied Nelson for an exemption for existing derivatives contracts which Nelson had no problem complying with.  This is because aside from the campaign contributions from BRK, Nelson and his wife own up to $6MM in BRK stock.  The fact that Nelson is perpetually prostituting himself for his corporate constituents at the expense of the general population is beyond shameful given the track record a laissez-faire approach with derivatives has yielded.  The exemption that BRK has lobbied for is an awful idea as derivatives contracts exploded in terms of issuance in recent years.  As a result it's much more likely that the derivatives contracts that would exacerbate the next crisis have already been underwritten.  Yet somehow, Nelson can find himself pushing for this exemption that would leave essentially the entire world at risk for another crisis exacerbated by derivatives.  And if that crisis occurs and financial institutions are undercapitalized relative to the losses sustained from those derivatives, the general populace will wonder why their tax dollars are used once again to engineer a bailout of these institutions and protect the multimillion dollar interests held in these institutions by people such as Ben Nelson.

    Disclosure: None
    Stocks: BRK.A, BRK.B
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