Buffett's Derivatives Deal Gets Nixed

(Berkshire Hathaway story updated for latest reports)

OMAHA, Neb. (TheStreet) -- President Obama invokes the name of Berkshire Hathaway's (BRK.B) Warren Buffett every time he wants to bolster confidence in the markets, and now Buffett wants something in return: an exemption from the derivatives legislation working its way through Congress.

It doesn't look like Buffett will get his wish from Washington.

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The Wall Street Journal reported on Sunday night that Berkshire Hathaway has been working the corridors of Capitol Hill to dilute the proposed derivatives legislation with a "grandfather" clause for the grandfather of the capital markets.

By Monday morning, the WSJ was reporting that Democratic senators were not going to give special treatment to Buffett. The Senate reportedly had nixed the exemption from derivatives legislation that Buffett wanted. Democratic Sen. Ben Nelson of Buffett's home state of Nebraska had been helping to push for the exemption.

Berkshire Hathaway wanted the legislation to exempt holders of existing derivatives contracts from having to hold collateral on the contracts, a grandfather clause, so to speak. Berkshire argued that it can cover its own derivatives obligations given the health of its balance sheet.

Berkshire Hathaway holds $63 billion in derivatives, according to data from Barclays Capital.

It's yet another example of the fine line that Buffett and Berkshire Hathaway walk when it comes to the issue of Wall Street and derivatives.

Buffett routinely derides Wall Street practices, yet has now been embroiled in the attacks on Goldman Sachs(GS) due to his $5 billion investment in the firm. Buffett also was unfortunately linked to more Goldman Sachs shenanigans last week when allegations surfaced that a Goldman director had passed on insider information to a hedge fund manager right before Buffett made his $5 billion investment in Goldman.