A provision of the Dodd-Frank law gives the Federal Reserve, for the first time, supervisory authority over “systemically important” financial institutions, even if they aren’t banks. That follows from the impotence that regulators felt in 2008 as they watched the black hole called AIG threaten to suck up much of the Western financial system. But who exactly qualifies as “systemically important”? That question is supposed to be decided by a council of 10 regulators headed by the Treasury Department . They’ve not yet issued a list, but a few news reports think it would include the massive GE Capital.
Now comes the October issue of Bloomberg Markets magazine (not yet online), which claims that the list will include Berkshire Hathaway, Warren Buffett’s legendary firm, which owns a lot of insurance (as well as a piece of the Washington Post Co., the parent of this site). Theoretically, this means that the Federal Reserve will annually scrutinize Berkshire’s books, and could order it, for example, to increase capital reserves if it felt things looked a little thin.
The story, though, doesn’t say for certain that Berkshire will make the systemic list. Presumably if this happens, Berkshire shareholders will have to be notified. I touched base with Carrie Kizer at Berkshire to see what the firm has to say and will update this item as warranted. For now, file it under “maybe.”