WASHINGTON — The nation’s chief financial agencies late Thursday ripped a federal court’s March decision, which stripped them of authority to oversee Metropolitan Life Insurance Co., as “profoundly mistaken.”
The filing, made in the U.S. Distruct Court for the District of Columbia by the Department of Justice on behalf of the Financial Stability Oversight Council, was the opening step in the government’s appeal of the March 31 decision by Judge Rosemary Collyer to throw out the designatation of MetLife as a systemically important financial institution (SIFI).
She had declared the government’s decision arbitrary and capricious, and said it had not taken into consideration the additional costs MetLife would bear as a SIFI.
The government’s brief was dramatic. “The court’s ruling leaves one of the largest, most complex, and most interconnected financial companies in the country without the regulatory oversight that Congress found essential,” the brief said. “The district court overturned the collective judgment of the heads of the nation’s financial regulatory agencies that material distress at MetLife could pose a threat to the country’s financial stability.”
Moreover, “Nothing in the district court’s analysis casts any doubt on the reasoning of the council’s 341-page decision,” the government brief added.
Amongst its arguments, the government brief held that Collyer “erred” in holding that the council was compelled to assess the costs of designation to MetLife. “The ten statutory factors that the council must consider in making a designation include neither cost nor any other effect of designation on the company,” the brief said.
In sum, the brief concluded, the Financial Stability Oversight Council “properly exercised its expert judgment in faithfully applying the governing statute and its own interpretive guidance. The designation of MetLife should be upheld.”
The issue is important because it’s a keystone of the strengthened regulatory oversight imposed by the Dodd-Frank law in the wake of the Great Recession of 2007-2010, and because the FSOC already has three other non-banks it is overseeing as a result of Dodd-Frank: American International Group Inc., Prudential Financial Inc. and GE Capital.
MetLife’s reply brief is due Aug. 15. The government is pushing for oral arguments in the case to be held in September. That’s because MetLife’s counsel, Eugene Scalia, has told the court he has a conflict with another case and won’t be able to appear at oral arguments in the previously scheduled October date.
MetLife said it would not respond until the court-mandated reply.
The Treasury Department responded to this development through a spokesman. “We continue to believe that the FSOC acted well within its legal authority in designating MetLife and are vigorously defending the council’s work on appeal,” that agency said in a statement.