Berkshire on Cusp of Fed Oversight Under Risk Council Criteria

By Ian Katz and Cheyenne Hopkins

Warren Buffett’s Berkshire Hathaway Inc. (BRK/A) may be on the cusp of getting Federal Reserve oversight under a proposal by regulators that also increases the chances that American International Group Inc. (AIG) and MetLife Inc. (MET) will receive heightened scrutiny. Berkshire 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, 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. The swaps measurement is “forward-looking” and shows that “the market thinks you are big enough to bet on,” said Karen Shaw Petrou, managing partner of Washington-based Federal Financial Analytics Inc., a bank consulting firm. “It also gives the regulators external, market-driven information about perceptions of credit risk.”