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Quote:

ARF:

Get serious. Nobody is talking about ex-post facto law.

Oh, really?

Do you know what the term actually means?

Let's have a look:

Quote:

The intent is that in the future, all such transactions must have sufficient margin.

"In the future," right? Your words. The issue IS changing margin requirements from WHAT THEY USED TO BE to WHAT THEY WILL BE IN THE FUTURE.

Quote:

If Buffet or anyone else does not wish to comply, he merely has to get out of his positions.

At great expense, right?

Indeed, the costs are large, and will probably force Berkshire to borrow in order to do this -- remember that Berkshire just bought Burlington and actually borrowed almost $8 Billion to do so; to force a buy-back of Berkshire's derivatives out of the clear blue sky places Berkshire in a position of being in technical violation of a law THAT DID NOT EXIST when the contracts were written. And why, exactly, must Berkshire do this? To avoid being in violation of legal requirements that didn't exist at the time the contracts were written? That's retroactive law, pal. BY DEFINITION.

I quote you again:

Quote:

ARF:

Get serious. Nobody is talking about ex-post facto law.

Yes, we are.

It is EXACTLY the issue.

It is EXACTLY what we are talking about.

It is exactly, precisely, and specifically the issue.

Genesis wrote..

Nobody is saying he can't write such contracts.

They're saying that the contracts he wrote in the past will SUDDENLY be in violation of new law that did not formerly exist (although the legislation is not yet complete, so let's be clear, here, that were speculating upon what the eventual law will be).

Berkshire has a sizable amount of assets that are legitimate and valuable. The people he sold the contracts to are sophisticated investors who knew what Berkshire's balance sheet looked like, EXACTLY. Why is FREEDOM TO CONTRACT such a bane around here? The idea that Congress is going to stick its nose into derivatives which were legally written YEARS AGO by the deepest pocket on the planet to investors who are some of the sharpest knives in the drawer who based their decision upon their appraisal of a completely honest balance sheet is absurd.

It's crazy.
It's unconstitutional.
It's morally wrong.

Genesis wrote..

There is NOTHING prohibiting Congress from requiring that he prove he can perform under the original agreement.

That's incorrect: if it's ex post facto, then Congress is indeed prohibited from anything of the kind.

And, from everything I've read about this, that's exactly what Congress is trying to do.

(Again, let's be clear that the law is not fully written, and we are all essentially speculating upon what the law might eventually say. My posts here today in this thread are based upon my understanding of what is being discussed at the moment; none of us know what the final bill might look like.)

Buffett is right on this, guys.

Buffett is RIGHT AS RAIN.

2010-05-01 17:21:50


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