MetLife’s ‘too-big-to-fail’ fight with feds gets off to good start
WASHINGTON — Score one for MetLife in its fight with the feds to overturn its “too-big-too-fail” label.
A federal judge in Washington on Wednesday seemed to side with the life insurance giant by suggesting that the government had it out for the company from the get-go.
MetLife is pushing back against the government’s decision to label it a “systemically important financial institution” — a Dodd-Frank designation that carries a higher regulatory burden and lumps it in with the big banks.
The company, known for using the “Peanuts” character Snoopy in its advertising, is challenging the Financial Stability Oversight Council, a panel of regulators led by Treasury Secretary Jacob Lew, that slapped it with the SIFI status in December 2014.
In the first major hearing in the case, District of Columbia federal Judge Rosemary Collyer launched into pointed questioning of the government’s position and suggested that the regulatory panel was biased against the company.
“There’s nobody neutral in the process,” Collyer said to Eric Beckenhauer, a Department of Justice lawyer representing the government. “They’re all interested.”
The FSOC, which also includes top officials from the Federal Reserve, the Securities and Exchange Commission and other agencies, was created in 2010 under the Dodd-Frank financial reform act to weed out risks that could crater the economy again.
The “too-big-to-fail” label is one tool it uses to keep closer tabs on big banks and other financial players it deems key to the stability of the markets. MetLife is the only company to sue over the designation, although others are watching the case closely.
MetLife claims it doesn’t have the same kind of risks that led to the 2008 collapse of Lehman Brothers or the taxpayer bailout of insurance giant AIG.
MetLife’s lawyer, Eugene Scalia, the son of Supreme Court Justice Antonin Scalia, argued that dealing with the FSOC was an opaque process and that it had changed the rules in the middle of the MetLife review.
After initially saying it would conduct a risk analysis, the council changed course and wanted to see how vulnerable the firm would be during a severe market downturn.
“They changed the rules of the game,” Scalia said during the hearing. The FSOC had “an unfettered imagination to plunge MetLife into financial ruin in order to meet criteria for its material distress.”
Collyer, who isn’t expected to rule on the matter until later this year, seemed sympathetic to Snoopy & Co.
“It’s assuming the worst of the worst of the worst,” the judge said.