Business

MetLife to sue government over ‘too big to fail’ label

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Published Jan. 13, 2015, 9:25 a.m. ET

MetLife isn’t too big to fight back.

The largest US insurance company is taking the government to court over its recent designation as a “too big to fail” institution, making it the first company to buck the label in what could be a prolonged fight to keep regulators at bay.

Last month, the Financial Stability Oversight Council deemed MetLife “systemically important,” subjecting it to greater government oversight and higher standards. Those include holding a greater cash cushion in the event of a market crash, among other requirements.

The “too big to fail” label lumps MetLife together with JPMorgan, Goldman Sachs and other big banks, along with fellow insurance giants AIG and Prudential Financial.

The designation is “arbitrary and capricious,” MetLife’s lawyer, Eugene Scalia, wrote in the suit filed Tuesday in federal court in Washington, DC.

The FSOC has also “denied MetLife its due process rights and violated the constitutional separation of powers” as the company doesn’t meet the nonbank financial company definition laid out in the law, and reviews of its assets and activities weren’t conducted, the suit alleges.

“We had hoped to avoid litigation after we presented substantial and compelling evidence to FSOC demonstrating that MetLife is not systemically important,” MetLife CEO Steven Kandarian said in a statement. “Now we will take the next step in the process established by the Dodd-Frank Act and ask a federal judge to review FSOC’s decision.”

While Kandarian said the new status “will drive up the cost of financial protection for consumers,” he also said that the rules hadn’t been finished and the total impact on the company couldn’t be known.

The “too big to fail” tag was part of the 2010 Dodd-Frank financial reform law and was designed to allow different regulators to contribute oversight to large corporations.

FSOC, which is headed by Treasury Secretary Jack Lew, has previously rejected MetLife’s appeals.

The council said it was “confident” in its designation of MetLife, according to a statement.

“The Council, which was created under the Dodd-Frank Act, protects the financial system and hard-working Americans by identifying and mitigating potential threats to financial stability,” said Suzanne Elio, a Treasury spokeswoman.

“The Council’s decision to designate a nonbank financial company is reached only after a thorough analysis and extensive engagement with the company, both of which occurred in this case.”