2001: Has state, rather than federal, regulation hindered Berkshire's insurance operations or acquisitions?

AUDIENCE MEMBER: I’m Dan Blum (PH) from Seattle, Washington.

As an insurance holding company, Berkshire Hathaway is subject to regulation by insurance departments in every state in which GEICO or your other insurance subsidiaries do business.

Has that handicapped or affected your operations in any way? And do you have any trenchant or wise observations to make about governmental regulation in that context?

WARREN BUFFETT: Yeah, we’ve really not been impeded in any way by the fact that — Berkshire Hathaway itself is not an insurance company, but it owns various insurance companies. Of course, it owns a lot of other companies, too.

But being the holding company of insurance companies, which indeed are regulated by the states in which they’re admitted, it really has not slowed down any acquisition.

They are not — whereas with the Public Utility Holding Company Act, under that statute, the authorities are directed to be concerned with the activities of the holding company. And in the banking business, to some extent, they are.

In the insurance business, there’s relatively little in the way of regulation or oversight that extends up to the holding company. So, it has not slowed us down in that business, but it’s been reported recently in the electric utility business.

There’s a statute from 1935, the Public Utility Holding Company Act, the acronym is that euphonious term, PUHCA. (Laughter)

The Public Utility Holding Company Act has a lot of rules about what the parent company could do. And that act was put on the books because the holding companies of the ’20s, most particularly ones held by — formed by — Sam Insull, but there were others.

There were many abuses, and a good many of those abuses involved what took place at the holding company. So it was quite understandable that that act was passed in the ’30s. And it achieved a pro-social purpose at the time.

I don’t think there’s anything, frankly, pro-social about limiting Berkshire’s ability to buy into other utilities. We can buy up to five percent of the stock. But we might well, in the last year or two, have bought an entire utility business if it were not — if that statute weren’t present.

So we’re handicapped by the utility holding company statute, we are not handicapped, in my view, by any state insurance statutes.

Charlie?

CHARLIE MUNGER: Nothing to add. (Laughter)