"Is Sen. Ben Nelson Looking For A New ‘Cornhusker Kickback’ In Wall Street Reform?"
Yesterday afternoon, as expected, Senate Republicans voted en masse to block debate on Sen. Chris Dodd’s (D-CT) bill to regulate Wall Street. Surprisingly, however, Sen. Ben Nelson (D-NE) also voted no. Nelson had been “quiet” about the bill in recent weeks, but his “decision to vote no will give Republicans ammunition to charge that opposition to the bill as it now stands is bipartisan.”
So why did Nelson help block the measure while 65 percent of Americans support Wall Street reform? Speculation immediately turned to Nelson’s relationship with one of his most important constituents, billionaire investor Warren Buffet and his Nebraska-based company Berkshire Hathaway. Just hours before the vote, Senate Democrats killed a provision “sought by Berkshire and pushed by” Nelson that would have potentially saved the investment firm $8 billion, the Wall Street Journal reports:
Senate Democrats agreed Monday to kill a provision from their derivatives bill pushed by Warren Buffett’s Berkshire Hathaway Inc., a change one analyst predicted could force the Nebraska company to set aside up to $8 billion.
The Senate Agriculture Committee inserted language into its derivatives bill last week at the request of Sen. Ben Nelson (D., Neb.) that would have exempted any existing derivatives contracts from new collateral requirements—the money set aside to cover potential losses.
Berkshire has $63 billion in derivatives contracts, and Mr. Buffett has boasted he holds very little collateral against these products. […]
The provision would have helped all companies with existing contracts. Capitol Hill aides said, however, that Berkshire pushed forcefully for the change because of its large book of derivatives.
The White House and Treasury Department had strongly opposed the change sought by Berkshire, “on the grounds that it would weaken the government’s ability to regulate the enormous market for derivatives.”
Berkshire officials “have long supported” Nelson, giving him more money over his political career than those of any other company. A Nelson spokesperson admitted before the vote that Berkshire had lobbied Nelson, but said the senator had always believed the new rules should not apply retroactively. After the vote, Nelson said his opposition was due to concern about how the bill would affect small businesses, such as dentists and auto dealers, saying, “I want to make sure this deals with Wall Street and not Main Street.” An aide said “Berkshire Hathaway was not was a factor.”
But Dodd said the removal of the Buffett carve-out was likely responsible for Nelon’s opposition:
Asked about Nelson’s vote, Dodd said he couldn’t accommodate the Nebraskan’s push to exempt some companies from having to back up their derivative investments with additional collateral. […]
Dodd, who was seen conversing with Nelson and Senate Majority Leader Harry Reid (D-Nev.) before the vote, said the conversation revolved around the derivatives exemption.
“Dentists and auto dealers didn’t come up,” he said when asked.
A Senate aide agreed, “definitively” saying that Nelson switched his voted after Democrats dropped the Buffett carve-out. “He was on board until today and the only thing that changed was the removal of that provision,” the aide said.
“Has Nelson forgotten how the Cornhusker Kickback saga played out? That it became a huge embarrassment for him personally, for his party, and for his state?” Matt Yglesias asks. “It’s groundhog day here,” Dodd said laughing.